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After the storm: Private equity after COVID-19

07 December 2020

In the 3rd quarter of 2020, IHS Markit teamed up with Mergermarket to learn about the challenges private equity firms will face going into 2021 due to the effects of COVID-19. We interviewed 30 private equity executives and measured sentiment with a mix of quantitative and qualitative questions about their plans.

Our findings suggest an overall shift toward managing risk while diversifying portfolios - in other words, remaining cautious and simultaneously expanding. Based on these results, we assess a multilateral need for fresh strategies and technology.

  • 37% of respondents told us that they'd focus on managing downside risk over the next year. There are various interpretations as to what this will look like: on the one hand, companies must support their portfolio companies through the pandemic; on the other hand, ongoing risks like ESG will become a priority for these firms.
  • 23% of our respondents, meanwhile, expressed that their strategies would not change.
  • 20% said they'd focus on bolt-on acquisitions to fit with their current portfolio companies.

These breakdowns represent practicality, but they also highlight an unwavering risk appetite that has not succumbed to the externalities of COVID-19.

Diversification is a growing trend.

  • 37% of respondents indicated that they plan to diversify their asset classes over the next year, with 20% of those individuals expressing complete certainty in their intent to do so.
  • In addition, we found that 65% of firms looking to diversify viewed distressed debt as their top segment choice. Underpinning this finding is a growing demand among investors for distressed opportunities; fund managers are answering the call.

The results of our joint survey support what we at IHS Markit know to be true: when firms expand and grow, their needs grow with them. PE firms have shown their ambition in the face of hardship - but to execute on their new goals and compete with others in the space, they will have to keep their technology fresh.

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IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.


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