Global investors continue to look for business opportunities
- Almost three quarters of respondents say they are still looking for opportunities
- A quarter says it will not change its strategy in response to COVID-19
- About 74% expect portfolio companies' revenues to drop 10% in the next 12 months
- Only 39% expect the business world to return to normal in
The majority of global investors continue to look for business opportunities, despite the expected revenue breakdown in their 'portfolio companies' and a return to normal only in 2021. The conclusions are from a global survey of how COVID-19 had an impact on venture capital firms and investor forecasts and strategies conducted by Mazars, an international auditing and consulting firm.
The survey 'Covid-19 and the world of private equity', which reveals concerns and measures the perception of optimism about the future, was carried out by more than 150 investors in Europe, America and Asia. adaptation to the new working environment.
“The results of the survey reveal that investors are open to the business, but that times are still challenging. While withdrawals appear to be postponed, many of the existing funds are highly liquid and continue to look for new businesses and 'bolt-ons' for platform companies ”, comments Stéphane Pithois, Mazars Global Head of Corporate Finance.
“As the business world slowly returns to work, it’s reassuring to see a clear sense of optimism and resilience in venture capital funds”, he adds.
Reduction in revenue forecasts
The study reveals that 50% of respondents (global investors) expect a decline of between 11% and 25% in the revenues of companies that are part of their portfolio in the next 12 months and almost a quarter (22%) anticipates a fall between the 26% and 50% during the same period. Larger funds are generally the most optimistic, with almost half responding that they expect a drop of less than 10%, perhaps pointing out that commercial optimism is a matter of scale.
Almost 88% of global investors and venture capital firms surveyed say it is possible to complete business from home, but 74% admit that doing so poses a greater challenge. The correlation between the type or size of the fund and the expected impact on the ability to close the deal is small, indicating that the funds existing in the market have adapted well to the new work environment.
Focus on the next 12 months
Close to 45% of respondents say that new opportunities and acquisitions in platform companies and bolt-ons will be their focus next year, while 24% say there will be no changes in their strategy in response to COVID-19. And 79% of respondents say that the exit timing for their portfolio companies will be delayed.
Anticipating 'business as usual'
When asked about the prospect of returning to normality, only one in five of the respondents (22%) points to the third quarter of 2020, while 14% predicts this to happen in the fourth quarter and 61% was more cautious, claiming to expect improvements in 2021. Only 4% say normal business conditions will return this quarter. According to 82% of respondents, the recovery will take the shape of a “U”, the “V” shape according to 10% and, according to 8%, it will follow a different path.
Mixed response to government measures
Only half of those questioned (51%) think that their government responded adequately to the situation. However, almost a third (31%) say it is too early to assess this situation.
Despite the financial impact of the pandemic, 44% say they have yet to see opportunities in the crisis, which is probably an indicator of how government initiatives are helping to prevent businesses from looking for short-term insolvency measures. Two-thirds of respondents (66%) say they would be interested in crisis opportunities, indicating that investors are willing to look beyond their usual criteria in the current environment or have encouraged their portfolio companies to be opportunistic in their acquisition strategy.
“Looking ahead, there is likely to be more competition for quality assets and a possible slowdown in terms of business flow. Investors who are able to differentiate and move quickly will position themselves to gain the advantage ”, adds Stéphane Pithois on the results of the study.
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About the 'Covid-19 and the world of private equity' survey:
The majority of participants in the study are leveraged buyout funds and growth capital funds, which represent 74% of the total (154) of respondents and the majority of responses are from European investors, with some responses from Asia and America. The value of most of the funds is between 51 million and 500 million euros. The most common fund varies between 51 million and 200 million euros and the second most common between 201 million and 500 million euros. The two figures correspond to 68% of the total respondents. The survey was carried out between April and May.
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