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Alternative Market Briefing

Coronavirus crisis: PE industry mulls more realism and longer holding periods

Friday, July 03, 2020

Laxman Pai, Opalesque Asia:

More realism, longer holding periods and an advantage for investors with a long-term focus - these are the main changes that investment managers in the German private equity market expect as a result of the coronavirus crisis.

The PE transaction activity is not expected to increase in the near future: deal flow - the pipeline of potential transactions for investors - has deteriorated materially, said a survey.

The survey conducted by FINANCE magazine about trends in the German private equity market, on behalf of Deutsche Beteiligungs AG (DBAG) revealed that for the first time in five years, investors perceive it as below average.

"This goes hand in hand with the fact that competition amongst private equity investors is also considered to be at its lowest level since the beginning of the regular survey in 2015," it said.

Portfolio meltdowns occur only in exceptional cases: only one in ten investment managers surveyed reported that either all or at least three-quarters of their portfolio companies were severely impaired by the pandemic. However, a further 30 percent stated that between one and three-quarters of the portfolio companies were suffering significantly from the crisis.

Accordingly, one in four private equity houses reported that at least 25 percent of their portfolio companies were facing liquidity shortages and therefore needed external capital injections. "Nobody could have predicted a crisis of this mag......................

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