CMI REPORT: EFFECT OF THE COVID CRISIS ON THE PRIVATE EQUITY FUNDS ACTIVITY IN SPAIN.
- The Private Equity funds reaction to Covid19 has varied depending on their pre- crisis portfolio structure
During the 2nd and 3rd weeks of May, CMI surveyed 20 private equity firms to learn how they viewed the health crisis and how it affected their activity as well as portfolio companies. CMI complemented the survey with 4 in depth interviews with GED, TresMares Capital, Acon Partners and Moira Capital to discuss and interpret the data, as well as gather their insight into the near future.
Considering the situation of the portfolio companies we could say: “The urgent overtakes the important”. Liquidity and restarting activity in the near future have been top of mind amongst operating partners while there’s little concern with regard to medium term growth and financing issues. This reinforces the widespread assumption that the economy is set for a V or more likely, a U shaped recovery.
Will the current situation lead to new build-up opportunities? It is clear to us that most funds are going to be on the lookout for build up opportunities. Just 5% of PE firms surveyed don’t think the current situation will lead to worth considering build up opportunities (see graph below).
Analyzing the role of debt, CMI could notice this is an evolving issue. Although an overwhelming 78% of funds surveyed said that the prevalence of debt funds and leveraged transactions would diminish in 2020, the 3 weeks between the survey launch and the day we held the conversations with the funds have called for more nuance.
And of course, we couldn´t forget the purchase ratios. The majority of the industry is expecting a reduction in purchase prices across the board although, about one fourth think it will depend on the company’s sector and specific situation.
IN A NUTSHELL The Private Equity funds reaction to Covid19 has varied depending on their pre- crisis portfolio structure and on how the companies they’ve invested in have been affected. A resilient portfolio of companies allows for a more gradual approach to change in investment and fundraising strategies. While on the other hand, funds with high stakes in industries largely affected by the crisis have had to adopt a “first responder” role; helping their portfolio companies to improve their access to cash and save costs.
Founded in 1986, since 2012 CMI is the leading consulting expert for investment funds in France. Headquartered in Paris, CMI has recently opened an office in Madrid specialized in Strategic Due Diligence. CMI’s pragmatic approach combines strong field research and analytical capabilities. If you have any questions or comments with regard to this document or would like to know more about our approach and methodology.