Valuations expected to drop

According to a new report, which surveyed private equity firms, the majority of respondents expect valuations to drop during the next six months.

DealCloud’s Spring 2022 DealCloud Dealmaker Pulse Survey report found 77% of respondents expect valuation and pricing multiples to drop during the next six months compared to the last 12 months. Broken down, 57% of large PE houses felt this way, alongside 42% of mid-market GPs and 32% of boutique firms.

Respondents said they believe this is due to increased competition and current market multiples.

When considering pricing and valuation obstacles, DealCloud found more than half (52%) of those surveyed said they are most concerned about increased or overlooked risks impacting valuations and pricing multiples moving forward. A further 27% cited the speed of capital to market, while 18% of respondents identified the need for larger or more capital to deploy.

Risk management

When asked about risk management, DealCloud found 55% of respondents said they’ve seen a greater emphasis on risk management and mitigation from investors in recent months.

Technology

Thinking about the types of technology solutions used by GPs, the majority of respondents said they use CRM and deal management solutions (83%) as well as market data subscriptions (75%). Around a third of survey participants said they use LP and fundraising portals (36%), as well as portfolio monitoring (financial and ESG) (35%).

In comparison, only 29% of those surveyed said they use deal and fundraising marketplaces.

Recruitment

DealCloud found less than half (47%) of mid-market firm respondents said recruiting outside talent is one of their firm’s greatest HR challenges. A similar percentage (44%) also cited staff challenges at portfolio companies.

DealCloud’s Spring 2022 DealCloud Dealmaker Pulse Survey report surveyed 84 private equity professionals. Broken down, this included finance/operations/IT (6%), investor relations/marketing (10%), partner/executive committee (32%) and investment/deal team members (52%).