Middle-Market Investors Respond to Coronavirus Upheaval
Private equity firms describe how they're working with portfolio companies and how they expect the pandemic to impact dealmaking over the coming months.
The economic disruption caused by the coronavirus outbreak has prompted private capital investors to react quickly over the last few weeks to support their portfolio companies, confer with lenders and gauge the status of pending deals after an unprecedented correction in public markets.
To find out how they’re navigating the economic crisis, Middle Market Growth asked nine middle-market private equity firms from across the U.S. about how they’re working with their businesses, what deal flow looks like, their outlook for financial markets, and how today’s investment climate compares with the early days of the Great Recession. Below is a link to each of their responses.
On some topics, there was consensus. Nearly everyone cited the health and safety of employees as their top priority, and they all said they’re in close contact with management teams to address business challenges. No surprises there.
Other questions prompted a more mixed response. Some firms reported new deal flow drying up entirely; others said that, as of last week, they’re still seeing plenty of opportunities.
The challenges that have emerged from this crisis vary for each firm. One firm we spoke with, CREO Capital Partners, invests exclusively in food businesses, a segment that’s booming as consumers stock up on shelf-stable products. Even as demand skyrockets, CREO has had to work with lawmakers to ensure its factories can remain up and running. Another firm, Enhanced Healthcare Partners, has had to work quickly to ensure the safety of clinicians at its health care businesses, including finding ways to procure protective gear amid a nationwide shortage of masks and hospital gowns.
One thing that everyone we spoke with agreed on was that it’s still too soon to determine the extent of the pandemic’s impact on dealmaking and the financial system. The phrases “pause button” and “too soon to tell” came up regularly. In comparing today’s investment climate to the early days of the Great Recession, several pointed to nonbank lenders and their potential to shore up liquidity today, even as banks pull back.
Still, there’s a shadow that hangs over the economy. The coronavirus continues to spread and the number of cases in the U.S. is rising every day. Until it’s contained and there’s an end in sight for the public health crisis, there’s no way to know when a recovery will begin nor how fast it will be.
Here’s how nine firms are responding to the crisis:
Let us know how your firm is reacting. Reach us at editor@acg.org.
Kathryn Mulligan is the editor-in-chief of Middle Market Growth.
