Private Equity – 2022 Outlook

2021 was a record breaking year in Private Equity, with an associated boost to M&A deal activity. Low interest rates, ample dry powder, and short and larger rounds of fundraising, helped to sustain a period of accelerated deal making with the number of PE exits surpassing 2020 levels.

2021 was a record breaking year in Private Equity, with an associated boost to M&A deal activity. Low interest rates, ample dry powder, and short and larger rounds of fundraising, helped to sustain a period of accelerated deal making with the number of PE exits surpassing 2020 levels.

Below are the key trends which are expected to continue into 2022:

Strong Buyout and Exit Activity

In 2021 Global PE deal volume reached $1.2 trillion, which is a 111% increase from 2020 volume levels. This represents 20% of the global M&A deal volume. Private equity firms also exited their investments at a record pace in 2021, with 3,895 exits with a total deal value of approximately $665 billion, surpassing 2020’s 2,594 exits which totaled $521 billion.


The big 5 listed PE firms; Apollo Global Management, Ares Management, Blackstone, The Carlyle Group, and KKR had a lucrative 2021. The investors broke records in all key metrics including assets under management, fundraising, fee revenue, total profits, capital deployed. Another strong year is expected as there is a larger pool of unspent capital which needs to be deployed in increasingly more diverse and innovative investments to maintain high returns.

UK and Europe

In the UK, PE activity was back to levels not seen since the global financial crisis. In Europe, deal volume is relatively consistent with prior years, bar the dip due to Covid, however deal value reached the highest level since 2007. Mega deals and Public to Private deals were a key driver in the rise in buyout activity, with exits being boosted by IPO’s and Carveouts (six of the biggest 10 exits of the year being listings). According to PitchBook, deal flow in 2022 is unlikely to surpass the record high seen last year, which totaled nearly €755 billion (about $856 billion) invested across almost 7,200 deals, but it will nonetheless be supported by both large amounts of dry powder and robust debt markets.

Fundraising Boom Continues

PE fundraising rose to a record high at $940 billion in 2021. This fundraising momentum is forecast to continue into 2022, as major investors are planning additional capital raises resulting in record sized funds and unprecedented levels of capital deployment.


Blue-chip names had particular success in 2021 e.g. Hellman & Friedman, KKR, and Bain Capital. Accel-KKR, a leading Tech focused PE firm, has just announced a $1.35bn raise for their new fund, as well as Morgan Stanley who have raised $2bn for it’s North Haven Capital Partners VII fund.

UK and Europe

A lot of the money raised is destined for the UK, which is seen as the second most attractive country to invest in after the US. Across Europe, despite PE fundraising taking a slight dip in 2021, with approximately €90 billion raised vs €93 billion the previous year, LPs are expected to remain positive about their PE allocation. As seen in recent years, much of this new capital is expected to go to fewer funds with a strong track record. Last year, more than 41% of the total capital raised came from only four mega-funds, according to Pitchbook. LPs will also focus their investment allocation towards those PE firms offering greater diversity.


Challenging Economic and Trading Environment

An expected rise in interest rates will mean PE firms need to lock in acquisitions sooner to take advantage of lower rates. In addition to this, supply chain slowdowns, talent shortages, and geopolitical issues, mean PE firms will need to be able to accurately model risk and adapt accordingly.


Major investment banks have forecasted a strong run of interest rate hikes for 2022 after hotter than expected inflation data ramped up pressure on the Federal Reserve to take stronger action against soaring prices.

UK and Europe

Prices have already soared all over the region. Inflation in the Eurozone rose to 5% at the end of 2021, a record high. In the UK, inflation hit 5.4%, the highest in 30 years. The Bank of England has raised interest rates for a second time in 2022 so far, and the expectation is that there will be multiple rate rises to combat inflation. By contrast, the ECB gave no indication it would hike rates this year despite record inflation in the 19 countries that use the euro.


Unabated Appetite for Tech and Healthcare

2021 continued the sharp upward trend of recent years in the increasing mix of private equity activity represented by tech transactions. Private equity backed a record volume of tech deals in 2021, announcing over $400 billion in U.S. tech deals, compared with $196 billion in 2020 and $146 billion in 2019. This has been fueled by digital adoption trends accelerated by the Covid-19 pandemic that show no signs of slowing down. Deal multiples continued to be very strong, especially in TMT and Pharma/Life sciences where record multiples are being paid. Other industries that we can expect strong PE interest in are Healthcare and Retail. Tech will continue to be a sector of interest for PE due to the reliable recurring-revenue models and consistent returns, particularly promised by SaaS businesses. However, when it comes to retail, PE firms may need to rethink their traditional strategy, due to high valuations and a low appetite for credit risk.


SPAC Popularity Wanes

One exit path for private equity investors that narrowed in 2021 was the SPAC market. SPAC IPOs priced at a staggering pace in the first quarter of 2021, with 298 SPAC IPOs raising nearly $88 billion during the quarter, exceeding the $83 billion raised by 248 SPAC IPOs in all of 2020, followed by a significant downturn in the SPAC market during the remainder of 2021. Data suggests that companies that have gone public via SPAC since February 2021 have since lost 25% of their value. The SEC are looking to place more regulations on SPAC IPO’s, whereas the UK has been trying to become more SPAC friendly.


Revival of Club Deals

Private equity “club deals” which had fallen out of favor following the 2008 financial crisis, could be undergoing a revival as private equity firms look for opportunities to deploy significant capital in transactions involving large targets. Investors appetite to share transactions with other sponsors is likely driven by the practical limitations of fund concentration limits. For the participants other than the lead bidder, participation provides another avenue to deploy significant amounts of capital. Note also the increasing participation of activist investors in many deals.


2021 witnessed the largest buyout involving a consortium of private equity firms since the financial crisis, the $34 billion acquisition of Medline by Blackstone, Carlyle and Hellman & Friedman.


Debt Markets Remain Borrower Friendly

High-yield debt markets remained highly advantageous for borrowers throughout 2021 and acted as a key driver of private equity activity. Even though the Federal Reserve and the Bank of England have signaled multiple rate increases may be on the horizon, so far in 2022, markets continue to be a source of strength for borrowers. One ongoing trend is the rise of “Direct Lenders”, who have become an increasingly important option in LBO financings. Debt covenant packages also continue to rapidly change. PE firms can look at accelerating deals before interest rates rise or consider financing acquisitions with more equity.

Continued EESG Growth

As in the public markets, EESG continued to gain momentum in the private equity space as investors and asset managers increasingly recognise EESG as a lever for value creation (in addition to being a tool for mitigating risk) and seek to integrate EESG considerations within fund processes. A number of private equity firms have launched impact funds dedicated to EESG focused investments, and recent surveys indicate that investors are willing to allocate increasing amounts of capital to sustainable investments, particularly investments that support the move to a low-carbon economy.

Change in Fee Structures

2021 was a year of significant change for publicly traded private equity funds, with some of the industry’s biggest names restructuring their finances to respond to a public market valuing private equity management fees at a premium. In what could become the default model for funds going public in 2022, performance-based fees remain largely in the hands of insiders, while management fees go to public shareholders.

Increase in Regulatory Oversight, and Tax Changes on the Horizon


Under the Biden administration, new leadership at the Federal Trade Commission and the Department of Justice’s Antitrust Division have led the way for a new, more aggressive and more uncertain period of merger enforcement. The combined effect of this increased scrutiny is likely to affect private equity activity in 2022, complicating efforts to close pending transactions and potentially inhibiting transactions that parties may otherwise have pursued. Further clouding the regulatory outlook, private equity has become a target of the SEC as part of its broader efforts to decrease the public-private disclosure gap and expand the agency’s oversight of private markets. President Biden’s tax agenda has raised the specter of a number of potential tax changes affecting private equity.


Although there are dark clouds appearing (geopolitical issues in Europe and a fragile global economy), the fundamentals remain in place for a strong 2022. Private equity dealmakers will continue to innovate, and seek investment opportunities of increasing scale, diversity, and complexity. Deal makers and advisors will invariably benefit as they help PE firms plan and execute their investment strategies, as well as helping to manage risk in their existing portfolios.

PE investors face several potential headwinds including value creation, inflation and talent shortages. Buyout multiples are up due to more capital chasing similar assets, and higher multiples have put pressure on the industry to keep generating high returns. Many firms are shifting their focus to value creation in order to improve EBITDA of portfolio companies.


Harvard Business School

PitchBook’s 2021 Annual European PE Breakdown