Financial Investors Group
How is 2023 unfolding for the private deals markets?
18 Apr 2023
The private deals market in 2023 is dealing with the impact of inflation and interest rate hikes by central banks across the world. Inflation is leading to higher costs for businesses and eroding the purchasing power of consumers, impacting the growth of businesses. This scenario is impacting the flow of capital in the private deals market as investors brace for more uncertainty, thus making it more difficult for companies to secure funding in this challenging macro environment.
Despite these challenges, it is important to note that the private deals market has proven to be resilient in the face of economic turbulence in the past. With careful planning and risk management, investors, and private dealmakers can navigate the impact of rising interest rates and currency fluctuations and continue to make attractive returns in the private deals market.
With a number of trends and challenges that are likely to impact the market in the months ahead, here's a closer look at how the private deals market is unfolding in 2023.
Impact investing taking shape in India
One of the biggest trends in the private deals market this year is the growing interest in impact investing. The sector focuses on addressing the capital needs of businesses focused on advancing India’s critical challenges particularly those working towards United Nations Sustainable Development Goals (SDGs). As the milestone to milestone for progress on the SDGs draws near, impact investing is becoming a compelling opportunity for both private equity as well as venture capital. Many investors are looking for ways to use their capital to make a positive impact on society and the environment. This has led to a growing number of private deals that are focused on businesses that have a positive social impact, such as companies in agriculture, clean energy, electric vehicle ecosystem development, and financial inclusion for MSMEs.
Rise in PE investments in the Indian healthcare space
The surge in investment and M&A activity in the last few years is expected to continue driven by favorable regulatory push, pick-up in medical tourism, increasing consolidation, and technology adoption. Tier 1 cities are meaningfully underpenetrated in healthcare delivery and are poised for robust growth addressing the demand-supply gap of ~25% for quality beds in these markets. With the demand-supply gap for quality beds in Tier 1 cities expected to increase significantly over the next five years, one can expect platforms to be built to address the entire customer journey and larger hospitals to get funded to drive growth through the inorganic route as well as greenfield expansion.
One of the key challenges facing the private deals market in 2023 is the increased competition for deal flow. With so many investors looking to capitalize on the current market trends, it is becoming increasingly difficult for investors to secure the best deals. Record levels of dry powder accumulated from years of easy money are making it hard for dealmakers to source deals cheaply. This has led to increased pressure on private dealmakers to differentiate themselves and offers unique value to potential investors.
Another challenge facing the private deals market this year is the need to navigate the complex regulatory landscape. With regulators around the world continuing to tighten rules and regulations for private investments, it is becoming increasingly difficult for private dealmakers to navigate the regulatory landscape and secure the necessary approvals for their deals. This is likely to impact the pace of deal-making in the private deals market in 2023. Large PE firms have been steadily building operational capabilities leveraging domain experts who ensure value creation through operations.
Despite these challenges, there are also many reasons to be optimistic about the private deals market in 2023. Many investors are looking to allocate more capital to private deals in order to diversify their portfolios and take advantage of the attractive returns that the private deals market can offer. In conclusion, 2023 is shaping up to be an interesting year for the private deals market despite the global slowdown, with a number of trends and challenges that are likely to impact the market in the months ahead. Notwithstanding the challenges, there are also many reasons to be optimistic about the private deals market, including the growing interest in impact investing, and the continued focus on healthcare. With these trends in mind, it is likely that the private deals market will continue to evolve and grow in the years ahead.

Author: Shivaraj Jayakumar Manager– Financial Investors Group, Praxis Global Alliance

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