For private equity managers, 2022 looks like another great year. The financial analysts at S&P Global report that deals increased from 17,618 to 24,722 between 2020 and 2021, a staggering growth of 40%. Those seeking a career in private equity have never had a better opportunity. Here are five key trends we can expect for 2022:
1. Corporate Restructuring
The 2022 economy will further destabilize North American businesses, prompting major shifts to occur in leadership and corporate values. For private equity managers with experience in acquiring other businesses, this trend presents unprecedented possibilities.
Naturally, this will require private equity firms to understand the uniqueness of the corporations that they acquire and be able to give guidance to carve-outs where existing leadership is seeking a new direction.
2. Continued Emphasis On Fundraising
There appears to be no slowing in the influx of money into the private equity sector. Fundraising will continue to take center stage in the coming year, which means that private equity funds will require the right management personnel to properly allocate funds, handle special tax situations, and deal with other considerations.
This influx will also require financial professionals to set realistic fundraising goals to achieve steady, manageable growth. If fundraising continues, the amount of financial inflow could rapidly outpace the industry’s ability to find avenues for these funds.
3. Increased Focus On ESG Criteria
On November 3, 2021, the International Financial Reporting Standards (IFRS) announced the formation of the International Sustainability Standards Board (ISSB). This international organization will establish and monitor standards for companies that pursue ESG (Environmental Social Governance) benchmarks.
Private equity firms will therefore need the right expertise to comply with evolving industry standards, ensuring that they place a greater priority on economic transparency and ecological concern.
But because ESG criteria are still relatively new, it’s expected that private equity managers will have to stay on top of industry regulations, as change is likely in the near future.
4. Lots Of Dry Powder To Work With
Increased fundraising means that there is now more money than private equity managers know how to spend. Preqin, a financial analytics company, estimates that private equity firms are sitting on $1.7 trillion in “dry powder,” which refers to money that hasn’t yet been spent on deals.
This much available capital indicates an urgent need for high-volume deals. The industry needs managers who are able to find the right deals and execute them to leverage these assets.
5. A Lack Of Qualified Personnel
Perhaps most significantly, the industry faces a staffing shortage. While financial professionals are not hard to find, it’s hard for private equity firms to locate and retain workers with the specific skill set that the industry requires.
What’s more, those with technical skills on their resumes often lack the soft skills necessary for work in the private equity industry.
This deficit means that industry employment practices will likely evolve as more firms offer increased compensation packages and other critical benefits in order to attract and retain top talent.
Great Opportunities For The Right Personnel
The year 2022 represents continued opportunities for the right financial personnel. Private equity managers can leverage these trends to achieve greater success in the coming year. However, changing expectations around such things as ESG criteria likewise represent a need for vigilance and an openness to change.
