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Plus: Private capital's crystal ball, the dried-up supply chain, M&A across the pond & more
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The Weekend Pitch
January 29, 2023
Presented by Stout
(Chloe Ladwig/PitchBook News)
In a packed hot yoga class last Friday morning in downtown Seattle, the woman next to me launched into a forearm stand, her legs dangling in the air above my head. With nowhere to move but the far edge of my mat, I willed her to avoid toppling onto me. After a minute or two, the instructor cued our descent; my neighbor floated her legs back to the mat with ease and met the rest of us in downward dog.

Like a yogi's inversion, the act of portfolio balancing requires years of experience and strategy to look effortless and produce the intended result. Amid inflation, rising interest rates, geopolitical turmoil and the buzzy denominator effect, this balancing act requires even more fortitude to avoid a hard landing, especially if asset values tumble in the new year.

This is The Weekend Pitch. I'm Jessica Hamlin, and you can reach me at jessica.hamlin@pitchbook.com or on Twitter @jessicaAhamlin.

In 2022, steep losses in the public markets shrank the value of the public portion of institutional portfolios, and as private markets continued to see strong returns, private market allocations suddenly comprised a much larger piece of the pie.

In the wake of these threats to institutional portfolio balance, some investors are turning to the secondaries market to steady the teetering through LP-led transactions. Institutions are crawling back into equilibrium, and there are infinite ways this could play out.

Let's explore three ways LPs could find their balance.
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A message from Stout  
Fairness considerations in a downturn
Economic downturns often impact the available strategic alternatives of investment funds and companies looking to exit an investment or raise capital. When markets recede in a downturn, valuations contract, capital costs rise, and financing and exit alternatives become more limited. This article discusses several types of transactions that tend to become more prevalent in this environment and addresses a number of the fairness considerations that accompany them.

Click here to learn more
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Trivia
M&A remained resilient in 2022 despite strong economic headwinds, marking its second-best year on record. Still, PitchBook analysts noted a decline in M&A value. By what percent did M&A value drop last year?

 A) 5.8%
 B) 10.5%
 C) 2.1%
 D) 13.7%

Find your answer at the bottom of The Weekend Pitch!
 

Private capital's crystal ball
(New Africa/Shutterstock)
What if you had three tries to get it right? In our analyst note What the Future Holds for Private Capital, we outline the good, bad and most-mediocre-case scenarios of AUM growth in closed-end fund vehicles in each private market asset class. Best-case scenario means total global private capital AUM hits about $16.1 trillion over the next five years. Worst case? It doesn't reach above $11.2 trillion.
 

The dried-up supply chain
(fogcatcher/Shutterstock)
There's a supply chain hiccup almost no one is talking about: the disconnect between how much capital startups are asking for and what is actually being supplied. What happens when dry powder stays dry? Our analyst note explores the reasoning behind the growing gap and what it signals about the future dealmaking environment.
 

M&A across the pond
(emerge/Shutterstock)
North American and European investors have never shied away from overseas opportunities. While this cross-border relationship has typically favored the US, 2022 flipped that script.

European companies snagged about $101 billion more from North American acquirers than their counterparts across the pond did from European investors. Learn more about cross-border acquisitions and all other things mergers and acquisitions in our 2022 Annual Global M&A Report.
 

Quote/Unquote
"Google has engaged in exclusionary conduct that has severely weakened, if not destroyed, competition in the adtech industry."

—Attorney General Merrick Garland, speaking at a news conference about the Justice Department's antitrust lawsuit against Google parent Alphabet.
 

Stay tuned
Keep an eye out for these insights and research reports coming out this week.
  • Q4 2022 Information Security Report

  • 2022 Global Fund Performance Report

  • January 2023 Global Markets Snapshot
 

Recommended Reads
Wind turbines taller than the Statue of Liberty are falling over. [Bloomberg Businessweek]

How will Satya Nadella handle Microsoft's ChatGPT moment? [The Economist]

Student. Athlete. Mogul? [The New York Times]

Get used to expensive eggs. [The Atlantic]
 

Trivia
(Ferbies/Shutterstock)
Answer: D)

Compared with 2021, M&A value declined 13.7% to $4.7 trillion. Learn more in our 2022 Annual Global M&A Report.

This edition of The Weekend Pitch was written by Jessica Hamlin, Emily Burleson and Jacob Robbins. It was edited by James Thorne and John Moore.

Were you forwarded The Weekend Pitch? Sign up at pitchbook.com/subscribe.
 
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