Private equity-owned firms have certain structural advantages that are said to make them better at coping with crises than non-private equity-owned firms. These may include sponsors who can provide access to capital and impart expert business advice.
So, after much talk of ‘peak private equity’, sky-high valuations and growing heaps of ‘dry powder’ – which may have deterred some investors from the sector in recent years – many may hope the pandemic provides an entry point. The crisis has seen private equity deal-making slow to a ten-year low, particularly in Europe.
But as our article also notes, what often happens in a private-markets correction like this is that buyers are quick to want to pay less, but sellers are not as quick to accept less. The bid-ask spread widens and the chance of buyers and sellers meeting each other becomes smaller. This situation may be made worse by social distancing, which is holding up the speed of negotiations.
Private equity’s entry point may be getting nearer for some investors, but it could remain elusive for a while longer.
Nick Fitzpatrick Group Editor, Funds Europe
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