Private Equity Trends Post COVID-19

Ephor’s Guidance

Our Professionals having been advisors, and investors to technology-enabled service businesses, and outsourcing business models (BPO) for nearly two decades, therefore we keenly know and understand the many vicissitudes disruptive times like this have on you and your company. Over our nearly 20 years we have guided over 40 company’s through many economic, government, and business cycles and challenges.

Our leader, Garry E. Meier, over the past decade has been an advisor to the US Senate Small Business Committee therefore he has been intimately involved in the contents of the recent FFCRA & CARES Acts. Below we outlined and provided resources and information for you and your business as you navigate the COVID-19 situation.

Private Equity Trends

• It is forecasted that 14-15% of Private Equity Sponsored Companies will fail specifically in embattled industries

• It is obvious that the amount of Private Equity Transactions will be Minimal and available to only the best Business Models

  • For more information see our “Useful Founder Friendly Capital” white paper.

• Private Equity will experience significant bankruptcy’s due to flawed and non-scalable business models

• Exit Options will be limited to strategic buyers and financial engineering alternatives

  • For more information see our “Private Equity as an Exit Option for SMB’s” or “Foudner & Shareholder Liquidity & Exit Options” white paper

• Small Private Equity Firms will see higher failure rates due to their inability to manage and repair distressed portfolio companies

• Private Equity Limited partner investors will continue to seek direct investment opportunities due to the cost of Private Capital Distribution

  • For more information see our “Private Capital & Private Equity Trends”

• As credit deterioration accelerates reserve requirements will become burdensome

• We expect significant declines in deal flow in both equity and participation and credit participation

• While Private Equity has approximately $740 billion to invest. Private Equity will be forced to provide additional cash infusions into distressed portfolio companies, the number of PIPE transaction will increase significantly, and LBO capital structures will require larger equity backstops

• Short-term softening or deflection of revenue streams particularly with high fixed cost businesses will deprive EBITDA, therefore, leverage rations will be enhanced increasing execution and credit risk profiles.

  • For addition information on how to improve your business performance see our “Post COVID-19: Playbook for Small Business Success”

• Over the next 3 to 5 years the amount of Private Equity capital raised will drop approximately 75% resulting in nearly 50% of the existing PE funds failing during the Post-Pandemic period. Only the best managed funds with solid portfolio concepts will be the survivors.

Source: PitchBook - US Private Equity During Economic Turmoil