Banking, Financial Services and Insurance sector saw maximum exits in 2022 due to several buyout deals. The sector witnessed total PE/VC exits worth USD 3150 million in 2022.
Exits fell sharply in 2022 with every route in decline ( approximately 53 per cent lower than all-time high USD 41.3 billion in 2021) as GPs faced less than favorable market conditions. Poor performance of listed internet companies and less than favorable market conditions in 2022 led to a lull in exit activity, revealed a recent report by 1Lattice (Prev PGA Labs).
There was a sharp fall in exit activity driven by the absence of large strategic and secondary deals compared to 2021. Post-Covid rally in PE/VC exits came to a halt as strategic and secondary exits declined by more than 60 per cent in 2022.
M&A Deal volumes
Amid global funding winter and a dull IPO activity in 2022, strategic M&A reached all-time highs driven by strong corporate balance sheets. M&A deal value has increased by more than 90 per cent in 2022. While corporates are acquiring new growth engines, internet firms are entering new segments & acquiring new capabilities.
Strategic M&A reached all-time highs driven by strong corporate balance sheets. Buoyant dealmaking — USD 107 billion in 2022 vs USD 56 billion in 2021 was recorded, as corporates looked to acquire new growth engines and enter new segment, said the report.
Faced with unfavorable market conditions in 2022, many companies held off on public market exits. In 2022, number of IPOs in India grew to 149 with a 53 per cent drop in amount raised compared to 2021.
PE/VC backed companies filing DRHPs have substantially declined in 2022 driven by bearish sentiments in public markets. Out of 148 DRHPs filed in 2022, only 11 per cent were backed by PE/VC investors. Out of 17 DRHPs filed in 2022 by PE/VC backed companies, 35 per cent were from manufacturing and 18 per cent were from BFSI, said the report.
Sector-wise fundraise and dealmaking
Consumer app & platforms, SaaS/AI and BFSI were the top funded sectors contributing to approximately 49 per cent of the total investment value in 2022, revealed the 1Lattice report.
Consumer app & platforms recorded USD 7.8 billion invested across 317 deals while Media & entertainment and Fintech saw a lot of traction in 2022.
Investments in Consumer app & platforms have decreased from USD 13.5 billion in 2021 to USD 7.8 billion in 2022. Late-stage deals contributed to approximately 44 per cent of the total investment in 2022.
While dealmaking slowed down across all stages, late-stage and buyout investments declined by more than 50 per cent as macro forces took their toll. Average deal size dropped by more than 50 per cent in 2022 after climbing steadily every year since 2018 to a record high in 2021 of USD 66 million, the report further added.
Investment in large deals (over USD 500 million) dropped to approximately USD 8 billion in 2022 from USD 32 billion in 2021 as investors shy away from mega deals. 23 Indian companies were added to the unicorn club in 2022 surpassing the UK to become the third largest startup ecosystem.
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