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Alternative Market Briefing

Middle-market private equity sponsors successfully respond to the pandemic

Wednesday, September 22, 2021

Laxman Pai, Opalesque Asia:

The middle-market private equity sponsors have made a remarkably smooth transition during the COVID-19 pandemic and the swift and decisive adjustments in a highly uncertain environment could result in a record-setting year, said a study.

According to the research by New York Life Investments Alternatives, an investment advisor, and Coalition Greenwich, a consulting and research firm, the pandemic has had a profound impact on the middle-market private equity industry and has triggered lasting changes across sponsors' core areas such as investing, deal sourcing, transaction financing, exit strategies and fundraising.

For 60% of the middle-market private equity sponsors participating in the study, new deals represented the most common driver of capital deployment in 2020, with add-on investments a distant second, it said.

The report said that The global pandemic forced sponsors to sharpen their skills and tighten procedures, with almost 30% of sponsors surveyed reporting that the crisis and subsequent rebound prompted them to tighten their discipline on valuations.

Sponsors surveyed ranked relationship history and covenant flexibility as the attributes they see as most important in financing partners in uncertain market environments.

Meanwhile, more than a third of sponsors surveyed report the pandemic delayed exits and extended holding periods. Sponsors report delays ranging from a few months to two years to provide portfol......................

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