PitchBook, the premier data provider for the private and public equity markets, today released its 2Q 2020 US Private Equity Breakdown, which found the velocity of US PE investment activity further diminished in Q2 2020 as dealmakers felt the impact of the coronavirus pandemic. In fact, many GPs sought to pull out of previously agreed upon deals, sometimes invoking the material adverse change (MAC) clause. Of the deals that were completed, a high proportion were add-ons and subsequently smaller than platform deals on average causing add-ons to have comprised the highest percentage of LBOs on record. On the exits front, activity collapsed to an even greater extent than deal activity as PE firms sharply marked down portfolio companies and chose to hold investments rather than sell. After a rebound in public markets, exit value was assisted by a couple outsized IPOs while sales to strategics or other financial sponsors lagged. PE fundraising momentum will likely remain healthy, despite a slowdown from 2019’s record-setting pace, with several mega-funds closing in the quarter. The department of labor also issued clarification on rules around including PE funds in diversified funds – such as target date funds – within 401(k)s. But any changes to target date funds are likely to take years and the PE will only account for a minor share, meaning access to retail accounts may not be the spark that some GPs had been hoping for.
“Following the first full quarter where global economies experienced the impacts of the COVID-19 pandemic, many PE firms are in triage mode and trying to determine which portfolio companies to save, rather than looking to sell,” said Wylie Fernyhough, senior PE analyst at PitchBook. “There are still a lot of uncertainties as to what the coming quarters will hold, but PE fundraising remained healthy through the first half of the year. A couple mega-funds launched in Q2, exhibiting confidence that LPs will find success despite the challenges brought on by the coronavirus, but the same cannot be said for nascent managers.”
Read More: Strider Announces John Mullen, Former Assistant Director of CIA, Joins Company as Advisor
