The private equity industry won over the pandemic uncertainty and economic downturn as it revisited its strategies and changed its culture quickly. The dry powder surplus helped them a lot in overcoming the severity of the pandemic. The PE industry diverted their focus and stabilized their portfolios -both existing and new through selective investments.
This USPEC’s infographic on ‘Private Equity Industry Bounces Back’ explains the secret behind the success amid the challenging situation and predicts the trends for the year 2021. From the news:
• Blackstone’s private equity portfolio had fully retraced its 21.6 percent decline the firm experienced in the first quarter of 2020 owing to the pandemic. Overall, Blackstone navigated the effects of the coronavirus effectively with an uplift of 12.8 percent in Q2.
• Carlyle collected USD 12.4 billion in the H1 2020 and scored several exits in Q2. The stock doubled in June’s IPOs. It gained global credit and investment solutions.
• Ares Management has a strong pipeline of opportunities while having the largest fundraising quarter ever. Its flagship corporate PE fund held a USD 3.7 billion close.
• In the case of Space companies, 2020 created the largest record for infrastructure investment with USD 5.5 billion investment.
• Several deals are closed in select industries such as eCommerce, pharmaceuticals, online education, and food-tech.
• PE bounced back in the UK in Q2 2020. 889 deals got closed last year, Big Four auditor KPMG reports.
During the year 2020, some of the key strategies the PE industry followed include:
• Shifted leveraged buyout business
• Opted to buy minority stakes
• Invested money in public companies
• Adopted to serial acquisitions
• Transited from venture capital funding to traditional buyout phase
• NYSE and NASDAQ waived their ’20 percent rules’
The private equity firms are highly influenced and have a positive outlook for the year 2021. A few of the predictions based on the available indicators include:
1. The PE fundraising may surpass USD 330 billion as institutional investors increase allocations to alternatives and General partners are offering additional strategies.
2. Due to dry powder surplus, low interests, and demand for high-yield debt, 20 percent of buyouts may be priced above 20x EBTIDA.
3. Moreover, the PE industry is becoming comfortable with the Special-purpose Acquisition Company [SPAC] resulting in PE-backed companies entering US public markets.
4. We can find more Limited partners owing to strip sales, securitization, and portfolio IPOs.
5. The pricing in the GP stakes will remain competitive.
6. The fundraising will become strong in the US and
7. The deal value might hit the highest level on record.
In brief, PE firms proved resilience and moving ahead with success. They were prepared all time with or without a recession – the lessons learned from the 2008 recession. There was no looking back since then for the PE firms.
To conclude, the industry is more promising. It is bright and filled with opportunities for aspiring finance candidates.
If you are ready to sail with the storm with success, then, why not opt for a private equity career in 2021?