21 September 2023
Jasper Van Heesch, director and private equity senior analyst at RSM UK, said: ‘The decision by both the Bank of England and the Federal Reserve this week to keep interest rates unchanged is welcome news for the private equity sector. It’s unlikely to trigger an upward spike in deal flow, but we expect it will steady the ship and help stem the decline of deals we’ve been seeing in the UK and US for the last 12 months.
‘Signals of confidence, such as the weakening of key economic headwinds, are increasing confidence by mid-market business leaders and is what sellers and buyers have been looking for to push the button on deals. But we are not out of the woods yet, with oil prices rising, consumers remaining under pressure, flat GDP growth and the continually shifting geopolitical landscape, all continuing to create uncertainty. As a result, we are not expecting highly buoyant private capital markets going into 2024.
‘When economic headwinds ease further, this will be particularly welcome to the mid-market centric, especially emerging funds that have been struggling to raise capital while watching numerous mega cap funds successfully raise. The headwinds have delayed exits across the board, but smaller funds were particularly hit hard when it came to fund raising as they didn’t always have the track record of success. But as exits increase, this barrier to raising capital could ease for the mid-market.’