Even nearly two years after the outbreak of the COVID-19 pandemic, we find ourselves in an exceptional situation when it comes to the economy. We are torn between hope for a rapid recovery following the unprecedented economic slump of 2020 and growing concerns about the long-term consequences of the pandemic. Supply chain bottlenecks and rising inflation, in particular, are causing a noticeable slowdown in the economic recovery. The private equity market is proving to be robust and stable in this challenging environment. In terms of investments, the first half of the year reached a record high of 6.5 billion EUR—the second-highest first half on record. Fundraising also achieved a strong result of 3.3 billion EUR. Private equity is a reliable partner for both portfolio companies and investors.
The VC Sector
The continued cooling of sentiment therefore came as no surprise given the economic and political conditions. Fortunately, the gloomier sentiment among VCs has not translated quite as abruptly into their investment activity. Investments remained robust in the first half of the year. Thanks to the successful fundraising years of 2020 and 2021, firms still have substantial funds at their disposal to help existing portfolio companies navigate the current difficult period and to capitalize on the opportunities currently available. This is supported by the high quality of the deal flow and the lower entry valuations. The exit situation, however, is a cause for concern. Successful sales at attractive valuations are likely to be difficult in the current environment.
The Private Equity Sector
The private equity market cannot be decoupled from the broader economic environment. This applies even more to the late-stage segment than to the venture capital segment. A recession is now clearly priced in. Competition for the most attractive companies in the current environment is likely to intensify. At the same time, it will be important to steer existing portfolio companies through the crisis. In the long term, the difficult exit environment and the fundraising situation are likely to prove particularly burdensome.
Outlook for 2023
“Dare to Make More Progress”—that is the headline of our new government’s coalition agreement. I think this is a very apt slogan for the tasks now facing our country. Many pivotal decisions are pending that cannot be delayed any longer. This also concerns the international competitiveness of our business location. Improving digital infrastructure, decarbonization, and securing business succession are just a few examples.
Without solid financing and reliable partners, these goals cannot be achieved. Equity capital has proven its worth here—both in financing new innovative ideas, tapping into new growth potential, and successfully supporting the transformation process in the economy. In this transformation process, a tool like DUB Premium is also a strong partner, and I am convinced that there is still a great deal of potential here. In this regard, I am optimistic about the market in the new year.
