Private Equity Exits Report: Q1 2023

Key Findings

Fewer Sponsor-Backed Exits: Exit activity for private equity (PE) funds fell globally for the seventh consecutive quarter in Q1 2023, with 217 exits recorded. This represents a -55% decrease compared to Q1 2022 and a -49% decrease compared to Q1 2019. In contrast, buyout activity remains robust with 1,461 deals in Q1 2023, though it's a -23% decrease from Q1 2022, it's still up by +107% when compared to Q1 2019.

Valuations Disconnected: Lower valuations in public markets are driving buyout activity, particularly take-private deals. However, difficulty in agreeing on valuations in private markets is resulting in fewer deals for sponsor-backed companies, thereby affecting exit activity.

Exits Larger Than Buyouts: Exit sizes are not shrinking, and the average PE exit is larger than the average buyout, with Q1 figures standing at $227 million and $90 million respectively. This suggests that PE funds prefer holding on to portfolio companies for longer, rather than selling at a discounted valuation. The average PE exit in Q1 2023 was 2.5 times larger than the average PE buyout.

Technology, Healthcare Fueling Exits: The sector with the most PE exit activity in Q1 2023 was technology, accounting for 29% of exits across all sectors and 39% of all PE buyouts. However, in terms of dollar-value, healthcare was the largest sector for PE exits, accounting for $28.4 billion across 26 deals in Q1. The high healthcare valuations can be attributed to the COVID-19 health crisis, which led to increased PE investments, and many funds are now seeking to exit these holdings.