For private equity players, the exit landscape has turned barren after last year's deluge.

US PE exit value dropped to an estimated $90.1 billion in the first three months of 2022, marking a 57.5% decrease from the previous quarter, according to PitchBook's Q1 2022 US PE Breakdown. The decline was in stark contrast to the stunning run of last year, which logged four consecutive quarters of over $151 billion in exit value. Additionally, Q1's exit count fell to an estimated 276, down 57.2% from last quarter and below the typical figures of first quarters in recent years.

Sponsor-to-sponsor deals became the favored exit option in Q1 as the IPO boom cooled and PE investors began to rethink their exit models. Meanwhile, cash-flush PE investors are trying to take advantage of favorable conditions by scooping up deals.
 
 


Several factors contributed to the IPO slowdown, including prolonged inflationary headwinds, projected interest rate hikes, geopolitical conflicts, and the subsequent volatility of capital markets, said Jinny Choi, a PitchBook private equity analyst.

"We will see public listings come back eventually as PE firms readjust and understand the market volatility over the rest of the year, but likely at valuations lower than what we previously saw in 2021," Choi said.

Sponsor-to-sponsor deals, in which portfolio companies are sold between PE firms, showed continued strength despite a dropoff in other exit routes. Such deals made up 64% of all US exit value in Q1, while public listings accounted for only 0.6% of the total.

In what was perhaps the most high-profile exit completed during Q1, Veritas Capital and Elliott Management sold healthcare tech company Athenahealth to PE heavyweights Bain Capital and Hellman & Friedman for $17 billion after roughly four years of ownership. Other mega-exits included Francisco Partners' sale of Quest Software for $5.4 billion.

Median US exit value was $330 million in Q1, which could suggest a return to the levels seen before last year's exit frenzy, Choi said.

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