Dear Colleague:

When we started writing this report late last year, the focus was clear: The secular trend of accelerating private market activity had exploded in 2021. The industry set records in many areas, including deal and exit values. Fund-raising was robust, and buyout returns, buoyed by rising equity markets and strong GDP growth, remained attractive. Non-buyout private investing in areas like growth equity also showed dramatic increases. 

Then the ground shifted, as it often does.

While we believe the outlook remains strong in 2022, several important factors will weigh on investors’ minds as they think about doing deals. Covid-19–related issues have increased inflation to levels not seen in the US and other markets in 40 years. Russia’s invasion of Ukraine has dialed up global disruption, causing uncertainty around supply chains, energy prices, and other economic factors, as well as untold human suffering, fear, and panic.  

There’s no way to know how these global disruptions will play out, but the reaction from the Federal Reserve and other central bankers will shape current and future dealmaking. One thing is for certain: There are now inflation playbooks developing across the GP and LP landscape as investors race to protect margins and future returns. Please see “Private Equity’s Inflation Challenge” for a full discussion of inflation’s impact on investment markets.

In this, Bain’s 13th Global Private Equity Report, we examine the industry’s strengths, its challenges, and the evolutionary path that lies ahead. In addition to the critical statistics that characterize PE industry performance, please look for our assessments of investing in growth equity, the continued rise of Asia, and the new news on ESG—specifically how investors are making it work for them.

Given the pivotal importance of technology in private markets, we take a deep dive into the ongoing growth of software investing and look at the new and increasing importance of a well-defined sector strategy. We also dig into how technology due diligence can help investors make better decisions while de-risking assets prior to closing.

I have no doubt that 2022 will continue to be a busy and exciting time for the PE industry. Investors will continue to grapple with how to repeatably create alpha in changing conditions with more competition. We at Bain look forward to continuing the discussion with our friends across the industry’s ecosystem.