Is the era of mega valuations over?

A gap is growing between company valuations in the public and private markets. But experts are split over how this will impact investment strategies.

by Éilis Cronin

Trying to predict the UK’s future economic outlook is becoming increasingly tricky, what with inflation, a cost-of-living crisis and a Russian-Ukrainian conflict muddying the waters. But there is one area that is powering economic growth - private equity. 

In 2021 alone, around 19 listed companies went private through private equity firms - a new record. Mid-market private equity investment was also at its highest level ever last year.

Out of sync

But there is something that could impact today’s investment strategies and that is an overvaluation in the private market compared to the public market. Valuations have skyrocketed in the private market but the public market has yet to match this, said Paula Groves, general partner at venture capitalist Impact X at MT’s Going for Growth Investment conference on 7 June. She warned that many capital allocators are becoming increasingly concerned that the two sectors are out of sync with each other, and are now starting to reduce the amount of money they invest.

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