Private finance still available but at lower valuations
Private companies are doing everything they can to avoid down rounds, raising new equity at lower valuations than past deals, but can’t hold the line for much longer.
As equities fall into bear markets, valuations of once high-flying technology companies collapse and the new-issue market for initial public offerings goes into hibernation, there is one place where companies can still raise large amounts of money.
Jason Hutchings, head of the natural resources group and of the private markets financing team in EMEA at UBS, says: “We are optimistic about where the private placement markets go from here. Investors in private equity are being more discerning and doing a lot more due diligence. But there is a lot of cash still looking to go to work and a great deal of interest to issue.”
The business Hutchings runs does primary and secondary private placements, with primary usually being Series B, C and D raises. The team works closely with family offices and ultra-high net-worth investors that UBS serves through the private bank to match investors against private companies seeking capital.
We are now seeing more queries from companies hoping to raise debt to put off a new equity raise that establishes a lower valuation
Hutchings says of the business: “We have seen around $50 billion deployed so far this year at almost the same rate as in 2021, which was a breakthrough year with nearly $120 billion of private capital raised in Europe.”