Private equity against economic pandemic crisis
According to private equity investors, the hardest-hit sectors include vehicle manufacturing and accessories, machinery and equipment, transportation, logistics and tourism, and textiles and apparel. According to the private equity firms surveyed, the industries that stand to benefit most from the Corona pandemic are pharmaceuticals, food and beverages, telecommunications, and retail and e‑commerce.
Private equity investors have deep pockets and staying power. In 2019 alone, more than EUR 5 billion in fresh capital was raised by funds in Germany (just under EUR 100 billion in Europe as a whole), plus funds from a large number of family offices. The global “dry powder” of PE funds is over $2 trillion. Thus, prudent private equity investors with a long-term view can make a significant value contribution to stabilizing the economy in this situation. I am all the more pleased that more than half of the funds we surveyed want to continue to invest actively.
More than 85% of respondents expect GDP to decline as a result of the pandemic, with 72% even forecasting an economic downturn of more than 1.0%.
70% of participants see a strong impact on ongoing M&A processes. At the same time, as many as 65% of participants expect there to be only a short-term decline in M&A transactions.
In terms of investment behavior, the market is split into two camps: 50% want to seize the opportunity and invest. The other half wants to put the transactions on hold for the time being. In response to the new market environment, 60% of investors want to make their contractual mechanisms (purchase price determination, working capital, etc.) more variable. The majority of participants want to avoid sectors that are at risk from the economy for the time being as well as pay attention to supply chain security in new engagements. More rigorous scrutiny of supply chain security is what investors with mid-sized funds are most looking for. Other investment policy implications cited by survey participants include reduced availability of debt in acquisition financing, ze
Our conclusion: at least half of the investors active in the DACH region see the opportunity in the crisis and will continue to invest heavily. — The results also show how differently the funds seem to be dealing with the current starting situation. There will certainly be good opportunity in deal flow for individual funds. In addition, there should be an opportunity to once again remind the broader public of the useful role of private equity.
About the Institute for Mergers, Acquisitions and Alliances (IMAA)
The Institute for Mergers, Acquisitions and Alliances (IMAA) is a nonprofit mergers and acquisitions think tank that conducts research and provides educational certificate programs, workshops, resources and expertise in the field of M&A. Founded in 2004, the Institute consists of faculty and trainers from around the world who contribute to research, resource content and programs. As a leading academic institution for M&A and a globally active institute, the programs offer a wealth of experience and know-how and are the most comprehensive educational offering worldwide. M&A certificate programs are the only broadly recognized international training programs, and their content is relevant to both developed and emerging markets. IMAA participants and Institute members represent more than 70 countries, including students and young professionals to board-level executives and government officials.
About Proventis Partners
Proventis Partners is a partner-led M&A consultancy whose clients are mostly corporate groups, medium-sized family businesses and private equity funds. With 30 M&A consultants, Proventis Partners is one of the largest independent M&A consultancies in the DACH region, with offices in Hamburg, Cologne, Munich and Zurich. The partners’ industry focus is on Industrials, Business Services, Consumer & Retail, TMT, Healthcare and Energy, in which the partners can look back on a total of more than 300 successfully completed transactions with a cumulative transaction value of 10 billion euros.