Private equity fund performance has been unprecedented in recent years, with returns generally outpacing public markets. However, current economic conditions have posed considerable challenges for the industry.

Factors such as high inflation, the ongoing supply chain crisis, ballooning interest rates, and the war in Ukraine have all contributed to a decrease in deal volume and lower overall equity valuations for sellers.

Those lower valuations, coupled with the high cost of debt, have made private equity M&A transactions less appealing to private equity firms. Although many firms have plentiful cash reserves and will likely put them to use in M&A where possible, difficulties in raising funds from investors may make even that alternative more challenging. In these challenging times, it is crucial that every investor have an expansive view of all aspects of a target — the tumultuous market alone is risk enough.