The outlook for interest rates and markets in 2023 is still uncertain but economists and some early indicators are pointing to an improved outlook in Q4. 

Supply chains, war in Eastern Europe and the hangover effects of Covid lockdowns globally have driven inflation across the board and central banks are again raising interest rates faster than we have seen in decades. 

For private companies, the increased volatility presents challenges and opportunities. As we look to the new financial year ahead there is a growing expectation inflation will peak, and begin to fall, over the next 6 months. 

This volatility has ended the decade-long technology boom that has now seen company valuations fall and is being felt by the thousands of technology workers who have been laid off. 

For private companies who are facing these challenges, the private markets continue to look attractive. There are several reasons why private companies are turning to private equity in greater numbers. 

IPOs are off the table 

Economic uncertainty as well as the deflating of the tech bubble has seen many of the promising IPO class for 2023 shelve those plans for the time being. 

Investors now expect companies to back their sky-high revenue targets with a sustainable profit and this is having an impact on the post-covid-era valuations. 

With this IPO liquidity channel closed, private companies will now need to look elsewhere, including private equity, to reach their funding goals and continue their growth trajectories. 

Higher interest rates increase investment risks & the cost of debt  

On the back of the fastest interest rate rises in decades, private companies now face stiffer challenges when raising capital than they did just 12 months ago.  

With the cost of capital rising sharply, it is not so easy for companies to take on sustainable debt to reach their growth targets. 

Instead, companies will need to consider raising equity, from venture capital, PE or private wholesale or sophisticated investors, to ensure continued growth. 

Is now the time to seek private investment? 

While uncertainty remains strong, there is optimism that the quick response from central banks may avoid the worst scenarios associated with a  prolonged global recession.  

If interest rates peak later this year then those companies that secured funding will be positioned well for the economic rebound in 2024 and beyond. 

It is now a common tale that the global financial crisis was the catalyst for the emergence of many of the household names that now dominate the technology indexes of the public markets. Businesses could use this period of economic uncertainty and volatility to test their resilience and set themselves up to be the success stories of the next global recovery. 

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