Report

2021 US Middle-Market Private Equity Report

January 28, 2022
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Record 2021 and Outlook for 2022

Private equity performance in 2021 smashed all previous records and successfully capitalized on what has turned out to be near ideal market conditions. While many industry segments benefited from private equity’s appetite to close deals in 2021, the overall impact varied industry to industry.

Highlights from The Report

While the trends in the industrial segment continued to remain flat, in part due to the lingering effects of COVID-19, there are reasons to be optimistic, particularly with the passage of the Bipartisan Infrastructure Investment and Jobs Act. Technology, not surprisingly, was a darling for private equity investment. The sector is situated to remain a profitable and fundamental part of the economy due to its ability to thrive during periods of economic uncertainty.

Healthcare saw a significant uptick in deal activity over 2020, a large portion of which consisted of add-on deals in the healthcare services sector, including orthopedics, behavioral health, dentistry and vision.

Fundraising trends are shifting to “mega- funds” that are raising capital in record amounts. While SPACs may have received less attention in the media in 2021, blank check companies made significant gains—listing in record numbers and raising billions of dollars—poised to compete with private equity funds in the M&A market.

What’s Next for Private Equity?

With record levels of dry powder and a relatively strong economy, there is reason to believe the robust dealmaking will continue into 2022. However, it remains to be seen how the private equity industry will respond to emerging economic conditions, including inflation, ongoing supply chain issues, labor shortages, and the prospect of a rising interest rate environment. Utilization of digitalization to optimize and accelerate portfolio company value will be key to producing realized internal rates of returns that remain higher than those available to investors in the public equity markets.

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