• Resilience

Resilience

Private equity firms and portfolio companies will be looking to accelerate digital transformation in the wake of COVID-19. Work from home strategies, increasing digital capabilities and finding new ways of pursuing, structuring, and executing deals are among the tasks at hand.

Identifying ways to increase the resilience of human capital, supply chain, and change management will be complemented by financial initiatives. Some PE firms are, for example, looking at buying up their portfolio companies’ debt at current, attractive prices.

Simultaneously, PE firms will seek to use some of their available cash reserves to recession-proof portfolios and fortify business resilience at the portfolio company level. Portfolio company resilience may also be increased through further acquisitions. As a result of the crisis, large companies may need to identify carve-outs and divest non-core assets, creating new bolt-on acquisition opportunities. Simultaneously, there is an increase in available high-quality distressed companies.

In the short term, deals are likely to be delayed, but transaction due diligence teams will be able to carry out continuous prospecting and target evaluation. Every deal situation is and will be different – also from a financial, tax and auditory standpoint, as national-level rules and regulations across the globe are in a state of flux. Existing issues, such as advance assurances, may also take longer to resolve.

Forward-looking plans, both at the fund level and at all portfolio companies, should include prioritisation of health and safety, supply chain optimisation, and third-party risk mitigation. At the same time, the ‘new normal’ means that the approach to modelling and strategizing needs to factor in potential disruptions that may not always be foreseeable.

BDO assists PE firms increase resilience, both internally and among portfolio companies. With us, you have the best possible partner to help overcome current challenges and realise your business’ full, future potential.