Global private equity and venture capital exit transactions waned further in the third quarter as macroeconomic headwinds continue to hit financial markets and concerns of a prolonged recession loom.

Private equity exit routes including IPOs, secondary and trade sales totaled $12.78 billion during the third quarter of 2022, down from $22.70 billion quarter over quarter and $63.95 billion year over year, data from S&P Global Market Intelligence showed.

As of Sept. 30, total private equity exits came to $66.77 billion for the year, or about 27.8% of the $239.94 billion of total exit deals in 2021.

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Secondary sales

Secondary sales dominated the exit route during the three months to Sept. 30, amounting to $9.61 billion in deals, maintaining the pace from the second quarter. In comparison, trade sales and IPOs dwindled to $3.14 billion and $30 million, respectively, from $12.54 billion and $140 million in the previous quarter.

In the biggest private exit in 2022 to date, Thoma Bravo LP acquired internet and software services provider Anaplan Inc. from a group of investors including Meritech Capital Partners, Founders Circle Capital LLC, Granite Ventures LLC, Harmony Partners LLC, JS Capital Management LLC, Threshold Ventures Management Co. LLC and Top Tier Capital Partners LLC. The all-cash transaction, valued at approximately $10.4 billion, closed in June.

Five other secondary transactions made it to the 10 biggest exits in 2022. The remainder is all trade sales.

As the current market conditions render an IPO exit nearly impossible, fund managers and allocators have turned to the secondary market for liquidity.

"Historically, LPs [limited partners] used the secondary markets to sell stakes and get liquidity or rotate their exposure to industry, sector or fund manager. In the current environment, it appears that GPs [general partners] (both PE & VC firms) are also interested to support cash flows and address investor needs via secondary sales," Krishna Prasad, Apex Group Ltd.'s head of US, said via email.

The slowdown in the rate of exit transactions is expected to continue due to economic uncertainty, decreased leverage/increased cost of debt and overall market volatility, which have put pressure on exit multiples, said Les Cheek, head of global financial sponsors with Baird's Global Investment Banking Business.

"Exit multiples came back quickly after the 2020 pandemic shutdown, but there is more caution a quick bounce back may not repeat, considering concerns of a deeper, more prolonged recession," Cheek said in an emailed statement.