KPMG recently issued research showing a 12% drop in private market deal volume in the U.K. in the first half of 2023, but the reason for the slower activity may not be what most allocators or market pundits would expect.
Myles Milston, CEO of Globacap, a firm founded in 2017 that provides “point-and-click” access to private markets for investors, said the recent report highlights market shifts and yet in the case of private equity buyouts the emerging picture is still far from doom and gloom.
“While a challenging macro environment has contributed to a fall in private equity buyouts, the market has held up better than IPO activity which has dropped off by nearly a third,” he said.
The KPMG report found that there were 327 mid-market deals worth £32 billion ($41 billion) in the first half of the year. By comparison the first half of 2022 saw 689 deals worth £70 billion. And while the deal volume is down, KPMG execs pointed out that the level of activity is on par with pre-COVID levels.
KPMG said that while deals are still getting done, they are generally taking longer to complete. The factors impacting activity include the higher price of debt, geopolitical uncertainty and risking inflation and interest rates.
Milston sees private markets remaining a more attractive alternative to going public largely because of the level of sophistication of the technology available to facilitate and manage private transactions. For instance, in 2022, Instinet launched its DealMatch platform for institutional investors in Europe to automate the deal making process. It was built using Globacap’s technology in order to enable ‘frictionless’ asset creation and transferability.
Globacap hosts 15 whitelabels for global institutions including the JSE and Instinet and an ecosystem that has managed over 70 private placements and completed over $350 million in secondary transactions of private assets, with automated settlement, and currently administers $14 billion of private securities.
“The shift from public to private markets and the more rapid acceleration of private markets is still in progress,” he added. “This is because private markets offer funding at scale, while secondary liquidity has eroded one of the core advantages of being public. The sophistication of the technology available to facilitate and manage private transactions has also increased, closing the efficiency gap to public markets.”
