May 2023 Records USD 3.5 Bn in PE/VC Investments, Real Estate Stays Among the Top-Funded Sectors PE/VC investments in May 2023 totaled USD 3.5 billion, 44% less than in May 2022 and 52% less than in April 2023. Deal volume fell by 42% year-over-year in May 2023.

The IVCA-EY monthly PE/VC roundup reported that investments worth USD 3.5 billion were made in 71 deals in May 2023, including 10 large deals totaling USD 2.7 billion.

20 transactions worth USD 1.8 billion were recognised as exits in the month of May.

Growth investments accounted for the majority of deal value in May 2023, totaling USD 1.9 billion across 17 transactions, a 4% year-over-year reduction from May 2022 when USD 2 billion was invested across 19 deals. Pureplay PE/VC investments fell by 42% in volume and by 52% in value on a year-over-year basis, totaling USD 2 billion across 62 deals.

A 66% decrease from May 2022 levels, startup investments totaled USD 529 million across 41 agreements.

The top industry in May 2023 was real estate, which saw PE/VC investments worth USD 1.2 billion over seven agreements (12 deals totaling USD 1.1 billion in May 2022). With USD 864 million invested across 15 deals, the technology industry was the second-largest sector, a 159% increase from May 2022.

On the back of a few big exits, PE/VC exits grew by about 3 times in May 2023 compared to the same month last year. The highest exits were strategic, totaling USD 638 million over four transactions.

The PE/VC investment trends in the real estate sector

According to the report’s forecasts, PE/VC investments in the real estate industry should surpass the 2022 record by the end of the year and are already only 15% behind the record set last year.

The commercial sector continues to dominate PE/VC investments in the real estate industry, making up more than 50% of total investments. But as the digital economy and ecommerce have expanded, new industries like data centres and logistics parks have gained favour with PE/VC investors. Over the previous five years, investment in these sectors has increased more than 20 times, from USD 92 million in 2018 to USD 2 billion in 2023.

Reputable Indian real estate developers are building hyperscale data centres in collaboration with international operators and PE investors. Predictable cash flows are primarily what pique the interest of private equity in data centres. The data centre market saw the largest PE deal in the real estate sector in 2023, valued at USD 2 billion.

With almost USD 42 billion invested, 2022 was a record year for private equity investment in data centres worldwide, according to PitchBook.

Additionally, it is driving the creation of funds specifically intended for data centre investment. Kotak recently unveiled a fund for data centres worth USD 800 million.

Exists

May 2023 saw 20 exits totaling USD 1.8 billion, up from USD 511 million over 23 deals in May 2022 and USD 1.6 billion across 15 deals in April 2023. A few sizable transactions supported exits in May 2023, notably the USD 488 million sale by KKR to Indigrid of its renewable energy platform Virescent and the USD 450 million sale by Blackstone to Apax of its 30% investment in IBS software.

The largest exits, totaling USD 638 million across four acquisitions, were strategic departures. Secondary exits, totaling USD 514 million across six deals, came in second.

Fundraises

The total amount of funds launched in May 2023 was USD 2.2 billion, up from USD 745 million in May 2022. The largest fundraising effort in May 2023 was led by Multiples PE, which raised USD 650 million for its fourth fund focused specifically on India with a USD 1 billion closing goal.