Andres Saenz, EY Global Private Equity Leader, shares his observations regarding the evolution of private equity and the role it will play in a post-COVID world.

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The initial impact of COVID-19 on the private equity complex echoed what was seen in businesses across all sectors, with workplace safety, remote ways of working, investor and employee communication, liquidity and supply chain being top of mind to triage. In addition, deal markets (with the exception of credit funds) practically shut down overnight.

PE firms are well-positioned for an economic downturn and have been preparing for this type of event in recent years. With over US$750b in dry powder in what is now a favorable buyer’s market, PE is looking to be as active as possible, as soon as possible.

A few impediments to deals have included the inability to travel, a lack of available financing, and valuation disconnect between buyers and sellers in pricing assets. Despite these challenges, firms have become creative around investments in public equities as well as credit opportunities. Barring a resurgence of COVID-19, we anticipate buyers and sellers to converge sooner on valuations and in addition to pursuing opportunities in corporate carve-outs.

PE-backed companies have a real advantage in this volatile environment: not only do funds have greater access to capital, they also have a mix of operating resources, expertise and advisor relationships ready to deploy across the portfolio.

As PE navigates through COVID-19 and prepares for a momentous shift, a few trends will accelerate, including:

• Investing up and down the capital stack
• Defining digital transformation and enablement
• Refining their value proposition to attract incoming talent
• Hiring talent with the right skill sets
• Elevation of D&I and a broader focus on social responsibility
• Widening the aperture and representation of stakeholders
• Pivoting strategy towards long-term value