March 18, 2020

Sitting on record amounts of cash, PE eyes opportunities to grab distressed investments.

As the market becomes increasingly bearish and cities across the United States brace for the impact of a potential quarantine due to the COVID-19 pandemic, business owners are left with many distressing questions. How long will this last? How badly will the cash flow be impacted? Will we be able to pay our bills? Will we survive?

There is no doubt some businesses will be forced to shut their doors before all is said and done, but for others, a different door will open. Private Equity was sitting on a record $2.5 trillion in dry powder at the beginning of 2020, they’ve just been waiting for the right opportunity to deploy the cash. It’s entirely possible that for many businesses, PE might just save the day.

Many PE firms have been building substantial funds for distressed debt over the past few years, holding out for a downturn while the economy surged. Dry powder among such distressed debt funds hit a record $77 billion in 2019.

Distressed asset investment was a hot topic at last month’s SuperReturn conference in Berlin, as investor panic began to set in and industry insiders debated whether the coronavirus outbreak may be a trigger point for a global recession.

According to an article last month in Reuters, one private equity executive specializing in distressed assets who was attending the conference told the publication, “I signed up and expected to have meeting requests from six or seven others with a similar profile – instead I had 50.”

Last week, an article from Euromoney speculated that there will be a premium on stability over growth in the near term, but it’s likely many investors are already watching the carnage closely for sleepers who have strong potential, but will need an influx of PE cash to survive and thrive. Companies with complex international supply chains however, may be waiting a while until we have more clarity about how the future will unfold.

What’s the takeaway here? The rules of engagement haven’t changed, but the abundance of opportunity for PE seems sure to rise, especially when it comes to those distressed assets.

So how do we capitalize? With $2.5 trillion in dry powder sitting on the table, winning will be a matter of getting reliable due diligence done as quickly as humanly possible. This will likely be an extremely competitive market as we roll into late Q2 and Q3, and the demands on the buy side and sell side will undoubtedly be very, very high.

This, of course, is an area where our team can bring a competitive advantage. Buyers today are looking for significant amounts of data and insights, including trends, profitability and data-backed areas of opportunity within the potential acquisition.

On the sell side, we know fulfilling the innumerable reporting and data preparation requests can be difficult without the right tools. Our team can be your extra arms and legs. We’ve been through the M&A process countless times, and we know what it takes to get you better intelligence faster. Through our sister companies, EBM Software and MGMT3D, we’ve blended cutting-edge software automation and unparalleled human experience to deliver outstanding results that instill buyer confidence with unbelievable speed.

Supporting the buy side, our team gives you an unquestionable edge, leveraging our unique combination of people, processes and systems to get you the critical intel on a potential acquisition while your competition is still getting their feet set at the starting line. With proprietary software and an experienced team of analysts to help you quickly drill down into the data of the company in question, we help you spot risks and opportunities, gain a deeper understanding of the business and perform any ad hoc requests.

These are strange and difficult times, but over the edge of the horizon, exciting new opportunities may be dawning. It’s up to us now to be ready for them.

What do you think about the potential opportunities for private equity coming from these bearish market conditions? Do you think this is the opportunity many PE firms  have been waiting for with their large dry powder reserves? We’d love to hear your thoughts. Sound off on social media now and join the conversation.