Invest Europe in collaboration with Arthur D. Little conducted the Pan-European private equity survey and assessed the impact of COVID-19 on the private equity and venture capital industry.
The survey captured the views of more than 350 general and limited partners on industry actions during the COVID crisis and future expectations. Also, it covered GP's and LP's future perspectives on portfolio management, investment focus, capital allocation, agreements, and investor relations.
The COVID-19 caused the majority of fund-raising processes to slow down and 18.7% of fundraising processes have fully stopped (including those being restarted later). The survey has shown that team experience, investment strategy, past performance, and sector knowledge are the top differentiating factors for private equity firms. However, LPs value all-important differentiating factors higher than GPs. LPs consider ESG, Operating partner team experience, and PE firm governance relatively high differentiating factors while GPs do not.
Roughly a third of GPs will target new geographies, and/or new sectors, and/or target size covered with their investments with future funds. Most GPs expect stronger investment opportunities in 2020.
Spin-offs from Corporates are expected to increase, especially in the PE midcap and large-cap fields, but also secondary markets. GPs expect interesting opportunities but are at the same time expecting fewer exits in the market. Also, a lower amount of exits are expected especially in the small and midcap segments. GPs’ main near-term focus will be on operational development of / support to portfolio companies, while the exit of portfolio companies in the activity expected to be in the least focus.
Four key topics emerge as the most important improvement initiatives. Cost reduction is the most important for all fund sizes, and particularly for mega buy-out funds. Digitalization is not as important for the different types of VC funds in comparison to the larger fund categories. Organic growth is more emphasized by larger funds, namely Large and Mega buyout. Similarly, Organic growth and Liquidity financing are stressed by larger funds as well. Geographical expansions and sustainability are considered the least important, given the current Covid-19 context.
GPs mainly invested in Germany (23%), Netherlands (15.7), UK (14.9%), Belgium (14.2%), and Switzerland (14.2%).
Please download Invest Europe's 2020 Pan-European Private Equity – Full Report