Menu Search

Private equity expects more restructurings and fewer investment opportunities

Frankfurt/Main, 17 January 2020 – The private equity sector is worried about the performance of its portfolios in the face of an impending recession and expects more restructuring work for 2020. This is according to a recent survey conducted amongst investment managers at more than 50 private equity firms active in Germany. The firms are polled every six months by FINANCE magazine about trends in the German private equity market, on behalf of Deutsche Beteiligungs AG. The survey also showed that a more sombre economic environment is weighing on the deal flow. The question now is: is the sector better prepared this time than it was in 2009?

In summer, the threat of trade conflicts, the chaos of Brexit and the already muted economic outlook seemed to have little effect upon the private equity sector. Six months later, sentiment amongst investment managers has changed considerably; an overwhelming majority of 80 per cent of the respondents fear that the industrial recession and weaker growth will impair the performance of private equity portfolios in 2020. Ten per cent even expect a “strong” impairment. The numbers leave little room for optimism, as only ten percent of investment managers believe that their own portfolio will not be impacted negatively by the recession.

As a consequence of these expectations, private equity firms expect more restructurings in the new year. 70 per cent of the portfolio managers surveyed foresee more restructuring work for 2020 vis-à-vis 2019, while eight per cent expect significantly more restructurings. Not a single private equity firm surveyed believes that restructurings will decrease. Torsten Grede, Spokesman of the Board of Management of Deutsche Beteiligungs AG, said: “In such an environment, expertise is more important than ever – long-standing fund managers are crisis-tested. It is important that various performance scenarios for a company and its market are considered as early as the acquisition stage and are then taken into account in the financing.”