@Bain & Company’s report for the middle of the year shows a scene where macro uncertainties have significantly dampened investments, exits, and fund-raising. The capital flywheel, once smoothly turning, now finds itself jammed. Deals and exits that don’t move forward are now common, causing waves in the industry.
There’s a growing need to give more money back to limited partners, especially with a huge $3.7 trillion in dry powder waiting to be used. The number of assets that haven’t been sold yet has hit a high of $2.8 trillion. This number is much bigger than what we saw during the big financial crisis.
Yet, in the midst of these challenges, there’s a silver lining. Public markets have shown resilience. And the IPO window is slowly opening: major lenders are making strides in offloading leveraged buyout debt. On top of this, there’s a big focus on making the most of working capital. As @PE Hub points out, 2023 has made working capital critical. For leaders in private equity, the message is clear: having cash is key, and making the most of working capital is how to get it.
The flywheel might be stuck, but it can be moved. Now is the time for thinking, looking at investments again, and finding new ways to get cash. As the saying goes, “When things get hard, the strong keep going.” In this situation, waiting won’t help. In this climate, waiting is not an option. It’s time to act, to pivot, and to find ways to set the capital flywheel in motion once again, with a keen eye on working capital optimisation.
