Private capital headed for the exits in the first quarter of this year, with approximately 63 percent of initial public offering proceeds flowing to companies backed by private equity or venture capital, according to EY. The high representation by PE looking for liquidity coincided with an overall decline in listings, especially after looming rate increases and geopolitical risk roiled markets in February.

Some pullback from 2021 records was always expected, but the magnitude highlights an increasingly talked about risk among dealmakers—public valuation markdowns could soon migrate to private assets.

“A decrease in IPO activity was not unexpected when compared with Q1 2021 as the latter was the most active quarter in the last 21 years,” notes EY global IPO leader Paul Go.

Middle-market private equity firms increasingly see market turbulence as an opportunity to secure reasonable valuations in sectors otherwise valued frothily. Firms are still pursuing targets in their typical geographic, Ebitda, and sector strike zones, but are showing less willingness to stretch on valuation.

That could spell business as usual for now, as PE continues to jockey for targets to leverage technology across their portfolios. But should volatility continue, the raging M&A market may finally find one risk too many.

Brandon Zero