Majority of global investors seek deals despite Covid-19 but predict falling revenues and no return to normal until 2021
Nearly three-quarters of respondents say they are seeking opportunities as usual
- A quarter state they will not change their strategy in response to Covid-19
- Some 74% expect portfolio companies’ revenue to fall more than 10% in the next 12 months
- Just 39% think the wider business world will return to normal in 2020
9 June 2020: Mazars, the international audit and advisory firm, shares global survey findings on how Covid-19 has impacted private equity firms’ and investors’ forecasts and strategies.
Presented in the report ‘Covid-19 and the world of private equity’, the findings reveal investors are seeking new deal opportunities despite expected falls in revenue as experienced by their portfolio companies and no wider ‘return to normal’ until 2021.
Covering more than 150 investors in Europe, the Americas and Asia, the survey sheds light on private equity and investor concerns and gauges their sense of optimism for the future.
Stéphane Pithois, Global Head of Corporate Finance, Mazars, says, “The survey findings confirm investors are open for business, but these are still testing times. While it appears exits will be delayed, many existing funds are highly liquid, and they continue to look for new platform deals and ‘bolt-ons’ for their portfolio companies. As the world of business cautiously gets back to work, it is reassuring to observe a clear sense of optimism and resilience from private equity funds.”
Falling revenue forecasts
The survey finds 50% of respondents expect a drop in revenue for their portfolio companies between 11%-25% over the next 12 months and nearly a quarter (22%) expect a drop between 26%-50% over the same period. Larger funds are generally more optimistic, with nearly half of the large fund respondents expecting a fall of less than 10%, perhaps signalling commercial optimism comes with scale.
Working from home
Some 88% of investors and private equity firms surveyed say it is possible to complete deals in a ‘working from home’ environment, but 74% of them admit it is more challenging to do so. There is little correlation between fund type or size and expected impact on the ability to complete deals from home, suggesting that funds across the market have adapted well to the new working environment.
Focus for the next 12 months
Some 45% of respondents stated new platform opportunities and acquisitions and ‘bolt-ons’ will be their focus over the next year, while 24% state there will be no change in their strategy in response to Covid-19. And 79% of respondents said that exit timing for their portfolio companies will be delayed.
Anticipating business as usual
When asked: ‘When do you think everything will return to business as usual?’ only 1 in 5 respondents (21%) say Q3 2020, while 14% predict Q4 2020 and 61% come out more cautious, saying 2021. Just 4% say normal business condition will return in Q2 2020. Recovery will be ‘U shaped’ according to 82% of survey respondents, ‘V shaped’ according to 10% and take a different recovery route, according to 8%.
Mixed response to government measures
Just over half of those surveyed (51%) think their government has responded well to the situation, however, almost a third (31%) consider it too early to tell.
Distressed opportunities
Despite the financial impact of the pandemic, 44% say they are yet to see an increase in distressed opportunities, which is most likely an indication that the government initiatives are helping to prevent businesses from seeking insolvency measures in the short term. Two-thirds of respondents (66%) say they would be interested in distressed opportunities, indicating that investors are willing to look outside their normal criteria in the current environment or will encourage their portfolio companies to be opportunistic in their acquisition strategy.
Commenting further on the findings, Stéphane Pithois adds, “Looking ahead, there is likely to be increased competition for high quality assets and a possible slowdown in terms of deal flow. Those investors that can differentiate and move quickly stand to gain the advantage.”
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Contact at Mazars
Lorraine Hackett, Global Brand & Communications Director, Mazars
Lorraine.Hackett@mazars.co.uk / 07881 283 962
About the survey
The majority of the survey participants are leveraged buyout funds and growth capital funds, making up a combined 74% of the total (154) respondents. Most responses came from investors across Europe, with some responses also from Asia and the Americas. The majority of funds are between €51m and €500m in size. The most common fund size respondent is €51m-€200m with the second most common €201m-€500m. These two fund sizes account for 68% of all respondents. The survey was carried out in April and May 2020.
About Mazars
Mazars is an internationally integrated partnership, specialising in audit, accountancy, advisory, tax and legal services1. Operating in 91 countries and territories around the world, we draw on the expertise of 40,400 professionals – 24,400 in the Mazars integrated partnership and 16,000 via the Mazars North America Alliance - to assist clients of all sizes at every stage in their development.
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(1) Where permitted under applicable country laws