2022 Q4 BluWave Activity Index Report Reveals How Private Equity Industry Is Planning for Expected Recession
BluWave, the business builders' network for private equity grade needs, today released its 2022 Q4 BluWave PE Industry Insights Report. The report presents actionable data to help leaders navigate the new economic normal, captured through analyzing the activity of more than 500 leading private equity firms and their portfolio companies across due diligence and value creation since 2018.
As economic growth and deal flow has slowed, there have been fundamental changes in private equity activity:
- Value creation is at a record high: PE activity has shifted from a 60/40 mix of value creation to due diligence in 2018 to 70/30, indicative of how private equity firms are proactively surrounding their portfolio companies with resources for safety and success during a recession.
- Human Capital dominates as the number one area of focus: Talent continues to be the biggest trend in private equity representing 41% of all initiatives. Companies are bringing in executives with strategic and operational improvement experience and adding talent at deeper levels within organizational structures for longer term value creation.
- PE has embraced transforming companies rather than simply optimizing them, requiring wholly new capabilities driven by COVID and longer term value creation plans.
"In 2023, a softening economy will change the market ? and the most astute leaders will be equipped to enable their companies to thrive and not just survive with the right actions," said Sean Mooney, Founder and CEO of BluWave. "Top business builders are maximizing liquidity, increasing operational effectiveness, and seeking opportunities in the face of risk," Mooney said.
Key highlights of the report's annual analysis also found in the area of due diligence, businesses are increasingly looking for support in:
- Strategy remains essential: the private equity industry is spending significant time understanding market conditions, customer dynamics, and identifying growth avenues that will present during a transitioning economic period.
- IT diligence activity grows: In a rapidly digitizing and more complex technological world, private equity firms are looking to further digitize, better understand cybersecurity risks, and improve their portfolio companies' capabilities and defenses.
In value creation, private equity firms are indexing on resources such as:
- Specialized recruiters to fill key roles: PE firms continue to make both strategic hires with longer term plans in mind as well as bringing in more operationally focused executives who can help portfolio companies navigate turbulent times. Top business builders are working with BluWave to utilize specialist recruiters with specific expertise.
- Interim leadership to guide the ship in transition: Increasing hiring times and growing needs for performance improvement expertise are driving strong demand for private equity-grade interim executives within BluWave's network.
- Growth through recession: Usage of sales and marketing resources grew by 20% year-over-year in 2022 as PE firms support portfolio companies with growth resources as the economy softens.
The data supports BluWave's financial experts' predictions for 2023:
- Venture capital bubble bursting will open up opportunities for private equity: Nearly $1 trillion was invested in VC in the U.S. between 2017 and 2021, and about one third of that investment occurred in 2021. Many VC-backed companies were invested in with little due diligence and are burning significant cash at a time when few companies can afford to. For PE tech investors, this will open new acquisition opportunities.
- Private equity will hire more chief marketing officers: In 2023, many PE firms will invest in more marketing for themselves. Capital is no longer a differentiator, so firms must therefore be able to more clearly communicate their unique capabilities via marketing.
- AI and analytics will be more accessible: Tools that were previously only for the Fortune 500 are now accessible to virtually every business. Businesses that prioritize data quality, clearly define key metrics, and adopt emerging analytics and AI tools will be best positioned to succeed.
To request a copy of the full report, please visit: https://www.bluwave.net/insights-report/
BluWave is the business builders' network for private equity grade needs. Founded by a private equity partner as a transformative solution, BluWave combines technology, data, AI and human ingenuity to expertly connect businesses with proven operators across due diligence, value creation, and prep for sale. The BluWave Vettedtm network is an invite-only ecosystem of best-in-class individuals and service providing firms. Based in Nashville, Tennessee, BluWave ranks as one of America's fastest growing companies and today serves more than 500 leading private equity firms and thousands of proactive businesses. Visit BluWave to learn more.
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