Private equity funds increasingly optimistic and vast majority actively seeking new opportunities in 2021, says Mazars’ global survey

Submitted 15/03/2021 - 9:50am

The private equity investor market remains generally optimistic, and is focused on new opportunities and comfortable completing deals from home, according to the vast majority (90 per cent) of respondents to a new global survey by international audit, tax and advisory firm Mazars.

'Covid-19 and the world of private equity: optimism in an uncertain environment’ reveals that respondents predict revenues to fall less severely over the next 12 months than previously expected, a U-shaped recovery and shorter delays to their exit strategies than earlier predicted.
 
Conducted in December 2020, survey respondents are from the private equity and private debt landscape primarily in Europe as well as Asia, North America and South America. The survey follows Mazars’ June 2020 report on the same topic.
 
Stéphane Pithois, Global Head of M&A, Mazars, says: “The second edition of our survey confirms and reinforces the sense of optimism for which the private equity community is known. In an uncertain environment, investors have proven resilient and are seeking new opportunities in the immediate term, while expertly settling into remote working conditions. If the political environment remains more settled and capital continues to be made available, then we can expect private equity to actively remain on the lookout for investment opportunities.”
 
Some 91 per cent of respondents say they are "very much open for business" and looking for opportunities to invest in new businesses and scale platforms with bolt on acquisitions. That compares with 74 per cent in June.
 
Asked what best describes their fund’s strategy for the next 12 months, 39 per cent of respondents say "focus on originating new platform opportunities". That is 19 points higher than the June findings. As for the number of funds that say they will be focusing on managing the downside in existing portfolios, it stands at just 10 per cent in December 2020 compared to 24 per cent in June 2020.
 
Despite expectations that revenues will fall over the next 12 months, respondents view the decline as less severe than previously reported. Some 30 per cent of respondents expect a fall in revenue of 11 per cent-25 per cent, compared to 50 per cent of respondents in the June 2020 survey. In addition, 40 per cent of respondents say they expect a decline in revenue of just 0 per cent-10 per cent, compared to 17 per cent of respondents in the first survey.
 
Respondents, overall, are far more optimistic about the market than they were in June: only 4 per cent of respondents report a level of optimism of three or below according to the survey criteria, compared to 29 per cent previously. Similarly, 15 per cent of respondents report a level of optimism in excess of eight, compared to just 5 per cent in June.
 
There are more distressed opportunities in the market, according to the latest findings. Some 70 per cent of respondents report seeing them – of those that see them 41 per cent say they are of interest, 29 per cent say they are not. This compares to 54 per cent of respondents in June saying they had come across distressed opportunities.
 
While the majority (63 per cent) of respondents still anticipate a U-shaped recovery (compared to 82 per cent in June) the number of respondents expecting a V-shaped recovery has increased significantly from 10 per cent to 27 per cent. This increase in optimism is likely to be a result of vaccinations starting in Q1 2021, alongside government measures to support businesses in the meantime.
 
The most common ‘other’ response aside from U or V was a K-shaped recovery, which occurs when different parts of the economy recover at different rates following a recession.
 
Investors are slightly more comfortable working from home now than they were in June; 89 per cent of investors say it is possible to complete deals remotely, compared to 88 per cent in the earlier survey. More than a third (37 per cent) of respondents now see completing deals from home as "business as usual", which is 23 points higher than the June findings. Just 11 per cent say it is "not possible" to complete deals from home, which is one point lower than in June. 
 
Just over half of respondents (51 per cent) expect to delay their exit strategies in the next 6-12 months and beyond. That is 28 points lower than June, when 79 per cent of respondents said their exit timings would be delayed. This further indicates an increased level of optimism emerging in the second half of 2020.
 
A majority (65 per cent) believe their government has responded well to the pandemic (vs 51 per cent previously). However, a significant proportion (20 per cent) still consider it too early to tell (vs 31 per cent in previously). The percentage of participants that feel their government has not responded well fell from 20 per cent to 15 per cent in the latest survey.
 

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