Global investors continue to look for business opportunities

• Almost three quarters of respondents say they are still looking for opportunities
• A quarter say they will not change their strategy in response to COVID-19
• About 74% expects portfolio company revenues to fall by 10% over the next 12 months
• Only 39% expects the business world to return to normal in 

Most global investors are still looking for business opportunities, despite the expectation of falling revenues in their 'portfolio companies' and a return to normal only in 2021. The conclusions are from a global survey of how COVID-19 has impacted venture capital firms and investors' forecasts and strategies carried out by Mazars, an international auditing and consulting firm.

The survey 'Covid-19 and the world of private equity'The survey, which reveals concerns and measures perceptions of optimism about the future, was carried out among more than 150 investors in Europe, America and Asia. It also reveals that the majority believe that working from home makes it possible to conduct business, indicating a good adaptation to the new working environment.

"The results of the survey show that investors are open for business, but that times are still challenging. While it appears that exits will be delayed, many existing funds have high liquidity and are still looking for new deals and bolt-ons for platform companies." comments Stéphane Pithois, Global Head of Corporate Finance at Mazars.

"As the business world slowly gets back to work, it's reassuring to see a clear sense of optimism and resilience from venture capital funds." he adds.

Reduced revenue forecasts

The study reveals that 50% of respondents (global investors) expect a fall of between 11% and 25% in the revenues of their portfolio companies over the next 12 months and almost a quarter (22%) anticipate a fall of between 26% and 50% over the same period. Larger funds are generally the most optimistic, with almost half responding that they expect a drop of less than 10%, perhaps signaling that commercial optimism is a matter of scale.

Working remotely

Almost 88% of the global investors and venture capital firms surveyed say it is possible to finish deals working from home, but 74% admit that doing so is more challenging. The correlation between the type or size of fund and the expected impact on the ability to complete deals is small, indicating that existing funds in the market have adapted well to the new working environment.

Focus on the next 12 months

Nearly 451pc of respondents say that new opportunities and acquisitions in platform companies and bolt-ons will be their focus next year, while 241pc say there will be no changes to their strategy in response to COVID-19. And 79% of respondents say that the timing of exits for their portfolio companies will be delayed.

Anticipating 'business as usual'

When asked about the prospect of a return to normality, only one in five respondents (22%) pointed to the third quarter of 2020, while 14% expected this to happen in the fourth quarter and 61% were more cautious, saying they expected improvements in 2021. Only 4% say that normal business conditions will return this quarter. According to 82% of respondents, the recovery will be "U" shaped, "V" shaped according to 10% and, according to 8%, it will follow a different trajectory.

Mixed response to government measures

Only half of those questioned (51%) think that their government has responded adequately to the situation. However, almost a third (31%) say it is too early to assess this situation.

Opportunities in the crisis

Despite the financial impact of the pandemic, 44% say they have not yet seen opportunities in the crisis, which is probably an indicator of how government initiatives are helping to prevent businesses from seeking 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 greater competition for quality assets and a possible slowdown in terms of deal flow. Investors who can differentiate themselves and move quickly will be positioned to gain the advantage." adds Stéphane Pithois on the results of the study.

 

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On the 'Covid-19 and the world of private equity' inquiry:

The majority of participants in the study are leveraged buyout funds and growth capital funds, which account for 74% of the total (154) respondents and the majority of responses are from European investors, with some responses coming from Asia and America. The value of most of the funds is between 51 million and 500 million euros. The most common fund is between 51 million and 200 million euros and the second most common is between 201 million and 500 million euros. The two figures correspond to 68% of all respondents. The survey was carried out between April and May.

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