Covid-19 hits private equity

The number of global transactions involving private equity has fallen sharply in the first four months of this year due to the turbulence associated with the spread of coronavirus. Only in April, the number of new acquisitions made by the funds was 60 percent lower than in January and was only a third of the monthly average over the past five years, according to Bain & Company analysis. The funds also severely limited the sale of their assets and focused on stabilizing the financial situation in portfolio companies.

However, according to Bain & Company experts, when the situation calms down a bit, the funds will return to the market for both buyers and sellers. They had already accumulated significant investment funds before the outbreak of the epidemic. Their total value at the end of April was $2.6 trillion – that is, it was at the highest level in history. In addition, as experience of previous crises shows, funds invested in the relatively early recession bring higher returns than investments made during the economic recovery

“Most private equity funds focused their attention on saving portfolio companies or using the crisis to strengthen their market position,” said Jacek Poświata, managing partner of Bain & Company Poland / CEE. 

“Similarly in Poland, where the number of transactions has also decreased, although at the same time we can see that the appetite for new acquisitions is not decreasing. The current situation is absolutely unprecedented, so it is not surprising that investors prefer to wait a moment to see how the crisis will affect individual industries and company valuations,” he added.

(WBJ)