Posted by Iain Butler, Partner
Private equity and Covid-19: the drive towards recovery
There has been a lot for private equity (PE) funders to deal with in the wake of the Covid-19 pandemic. Understandably short-term focus has been on supporting existing portfolio companies, but the expertise and resilience of PE funders (and their advisers) combined with a strong appetite to do deals means that PE-backed buy-outs and bolt-on acquisitions are likely to have a central role in the drive towards recovery.
It’s no secret that M&A deal volumes are down significantly in the first half of 2020 and that the lower (sub-£30m) mid-market faces a variety of new challenges as it starts to adjust to the new ‘deal doing’ landscape..
That said, we expect deals will remain attractive and asset valuations strong in robust sectors such as health & social care, life sciences and technology & innovation. Market consolidation remains a key theme and, with strategic support and investment, we expect to see opportunities for bolt-on acquisitions by PE backed portfolio companies.
PE funders may also take advantage of pricing adjustments in other sectors later in 2020 and there will inevitably be opportunities for special situations funds arising out of the Covid-19 pandemic.
We are undoubtedly facing testing times – difficult economic conditions and political uncertainty has knocked confidence and there are lots of new challenges, including the availability of finance.
But over the last few months PE funders have quickly moved to support existing portfolio companies, providing the financial skills, guidance and expertise necessary to navigate the crisis and demonstrating the ‘added value’ PE can provide amidst uncertainty.
We expect that levels of M&A activity will pick up during 2020 – based on market trends, with available capital to deploy and professional advisers to support, we are confident that PE deals will be a key feature.
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