Acuity Knowledge Partners Survey Reveals Optimistic Outlook for Private Equity and Venture Capital, Despite Rising Competition

Valuations, fundraising and macroeconomic factors concern survey respondents, but firms around the globe see a positive investment landscape for 2022

Acuity Knowledge Partners (Acuity), a leading provider of bespoke research, analytics, staffing and technology solutions to the financial services sector, today released findings from its global Private Equity (PE) and Venture Capital (VC) survey.

Respondents representing over 80 firms spanning North America, Europe and Asia, reported on their outlooks, concerns and business plans for 2022. Three-quarters of these respondents have senior roles at their firms, with 87% having over five years of experience in the industry and over half relying on a decade or more of industry knowledge to prepare their responses.

Firms overwhelmingly agreed that competition for funds has increased in recent months, but that fundraising conditions should improve in 2022. Respondents indicated that, amid the positive fundraising environment, funds available to deploy are likely to increase, with more than half of respondents expecting levels of dry powder to remain high for some time.

“To cope with increasing competition PE and VC firms have had to adapt their business models,” said Robert King, CEO of Acuity. “Our unique market survey notes that PE and VC firms remain optimistic both about fundraising and the deployment of those funds while also acknowledging that innovation is required in this increasingly competitive sphere. We also note that firms wish to maintain flexible operations and cost structures and that the trend of PE and VC firms using outsourcing as part of their operational strategy continues.”

Key Findings from PE and VC Firms:

• The PE and VC sector remains strongly optimistic about fundraising. Despite many respondents (74%) experiencing increasing competition for funds recently, almost the same number (72%) still believe the quality of fundraising opportunities should improve in 2022; 21% expect it to remain the same. Regionally, UK- and Europe-based firms are more optimistic about fundraising. Over 80% of respondents from these regions expect an increase in fundraising, while only about 70% of respondents from the US and Asia expect growth.
  
  
  
  
• In general, the PE and VC sector expects valuation levels to remain elevated. About 90% of respondents expect valuation levels to increase or stay at current levels. While respondents did not indicate that high valuations impacted exit decisions, 58% rate high valuations as a major concern. In an environment of soaring valuations, finding targets with the right valuation is difficult; almost all respondents agree with this. The level of difficultly seems moderate to difficult, with 81% of the respondents rating it between 5 and 8 or more on a scale of 1 to 10.
  
  
  
  
• PE and VC firms are augmenting their teams with outside support. Nearly half of the firms currently not using this business model are likely to outsource or are open to outsourcing. Notably, 90% of associates and 89% of vice presidents surveyed are open to outsourcing, which is greater than the level of support seen in senior management. This is atypical in comparison to other sectors where the decision to outsource is generally made by senior management. Overall, the acceptance of outsourcing is high across designations.

Sumit Chhabra, Managing Director, Global Head of Private Equity and Venture Capital, Acuity Knowledge Partners added, “The survey results confirm that PE and VC firms are seeing increased growth in reach and size as we emerge from the global pandemic. As the PE and VC sector is expected to expand, target companies seeking funding, as well as investors with investible cash, are getting more attracted to the sector.”

“Competition will continue to drive diversification, with large firms leading the charge,” Chhabra continued. “We expect to see growing demand for ESG and continued focus on technology, media & telecom (TMT) and healthcare sectors. Overall, our teams at Acuity echo the positive outlook and optimism survey respondents hold for 2022.”

To read the full survey report, Click here.

About Acuity Knowledge Partners

Acuity Knowledge Partners is a leading research, analytics and business intelligence consultant to the financial services sector. The company’s network of analysts and industry experts, combined with advanced data and technology, supports over 400 financial institutions and consulting companies worldwide to operate more efficiently and unlock their human capital, driving revenues higher and transforming operations. It specialises in investment banking, investment research, private equity & consulting and commercial lending. Acuity is headquartered in London and operates from nine locations worldwide. In 2019, the company was established as a separate business from Moody’s Corporation through its acquisition from Equistone Partners.

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