Dealmaking by private equity firms hit its lowest in four years, under pressure from high interest rates, recession fears, and a weak outlook for corporate earnings, although some analysts predict stored-up funding will drive a near-term rebound.
Since the start of the year, buyout firms have been unable to secure cheap debt and have had to draw on their own funds, marking a departure from traditional leveraged buyouts. This has complicated the financing environment for companies and startups that typically get bought or rely on funding from private equity firms, when banks have also slowed down corporate lending, analysts said.
"Later-stage startups were wired to grow at all costs prior to the downturn. Many of these companies have cut down on their cash burn rates. The few that get funding get it at much lower valuations than pre-downturn," Shooshani said.U.S. deal volumes more than halved to $162.5 billion from last year, while activity in Europe and Asia fell 70 per cent and 80 per cent to $77.3 billion and $19.1 billion respectively, Dealogic data showed.
Private equity funds have raised $325 billion so far this year, compared with $459 billion during the same period last year, data from Preqin shows.
Source: News Formal (newsformal.com)
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