Hi
@julia l,
Apologies for taking a little while to get to this! I hope that your question is still live. It sounds like you have some sensible thoughts on this already, so I would not panic.
I think your question might be best directed on
this thread.
@BK has provided some awesome stuff on PE in general on here, so they
might be able to provide further insights.
@Rob93 (apologies for tagging you again Rob!) is also knowledgeable about PE (judging from his posts elsewhere). I believe he has some previous industry experience too(?)!
Just taking a look online, here are some interesting looking articles/links:
Looking ahead too:
I hope some of those might prove useful 🙌 🚀
Hi I was wondering if someone could explain the trends in private acquisitions during Covid-19. I have a few in mind, such as tech companies being more valuable and other factors that are trending such as cyber security/ data protections, emplyoment issues, MAC clauses etc...
Am i going along the right lines?
Thank you!
All of the points mentioned are good ones, I think it's also helpful to think in terms of macro trends which are kind of incidental to covid. Focusing mostly on PE but some of this is relevant to strategic M&A as well.
One is that the amount of available cash in private markets is astronomical, >$1tn globally, might be closer to $2tn now - for the types of investors PE firms draw capital from, private market returns are likely to become even more attractive if public equities continue to become more volatile.
Flipside to this is that rising interest rates will put strain on highly-leveraged PE portfolio companies and eat into returns, cutting in the opposite direction - also higher interest rates mean debt, which is safer than equity, has a relatively more attractive return.
Imho PE acquisition valuations are often unsustainably high right now, and given that the PE business model hinges on flipping companies within 3-7 years at a ~40%-100% profit things could become a little shaky if confidence dips.
With debt getting more expensive, I'd expect strategic M&A by public corporates to become increasingly sensitive to their public equity valuations - if I'm a plc buying a company, paying for it using my own shares as consideration can be very attractive. If my share price is in the doldrums, though, it's much LESS attractive because it's more dilutive to existing shareholders. With high interest rates, taking debt to make acquisitions might become increasingly hard to justify for plcs. If public markets are under strain, the field will be more open for PE buyers.
Also in public markets, lots of corporates are mulling over streamlining their businesses and disposing of underperforming business lines. This will produce abundant opportunities for PE houses and other corporates for whom another man's trash is their treasure.
SPACs, though public in their own right, are an important emerging feature of private M&A - lots of litigation and regulatory attention in the US is damping that market, which really got far too big far too fast, but I'm a firm believer that SPACs are here to stay and serve a valuable role in the ECM and M&A environments. FCA recently softened the listing rules to attract SPACs to London and the UAE is launching the first Arabian Peninsula regulatory framework for SPACs. More SPACs means more competition for an already limited pool of assets, but potentially very attractive exit opportunities for private investors
