Regardless of the depressing news on the Covid 19 and the difficulties of confinement, our thinking inevitably turns to tomorrow, whether it is at the end of April or June, the question, that we will be asking is: what will this “new world” be made of, how will I practice my profession, what is going to change.
But before projecting ourselves forward, a few thoughts inspired by the traditional Bain Global Private Equity Report 2020
A comment in passing, it is no longer so global as that, out of the 10 lessons I have pointed out, 7 are related exclusively to LBOs.
On what is not specific to LBOs, it should be noted that:
For the LBO
In Private Equity Magazine of January, I gave my views on the challenges of the PE for the next 15 years: « In summary one could say that PE professionals will increasingly have to create value outside of multiple arbitrage and simple leverage, as we may well experience a recessionary environment and receive increasing criticism on the old recipe of financial engineering as a model for returns. »
It is quite obvious that the funds which handled debt and the increase of multiples will be confronted with a situation that the profession knew well in 2009/2010 where it was necessary to refinance and negotiate with lenders and mezzanine funds to keep the company in the portfolio. Unlike what many observers expected or even wished, the crushing of LBOs against a “wall of money” hasn’t occurred as accidents have been rare.
We can therefore count on the fact that the seasoned profession will manage but might have some difficulties to quickly reinvent the business model based on cheap credit.