The rapidly evolving impacts of COVID-19 are being felt across society—in the healthcare system, employment, politics, and the economy. This is undoubtedly a time of uncertainty in our lives, and businesses.
Business owners are seeing the values of their business plummet. Keep in mind most businesses were being overvalued, so we can't say if these values are discounted or just normalized, but we are already seeing middle-market businesses trade at lower multiples. Falling values will create a disconnect between sellers and buyers, and deals under LOI are proceeding with maximum urgency or they’re on hold - with almost nothing in between.
The virtue of private capital is that it can withstand this short-term volatility – and now is the time to prove that. Buyers, sellers, owners, advisors - everyone is paying attention right now. The eyes of the world are all watching, and now is the time to be a firm that leads from the front.
Reflecting on our last significant downturn, and what successful firms did then to manage changing market dynamics, a few things to view as opportunities:
- The industry has more capital at its disposal
- Dry powder levels are still at record levels
- The industry has diversified in ways that increase its resilience
- PE firms have expanded operating capabilities
- Retooling sourcing efforts to match this environment will be the difference
- Increased focus on ‘recession proof’ business categories
COVID-19 Impact for Private Equity Firms
For PE firms, a downturn should represent opportunity. They can plan and invest over the long term, enabling them to deploy capital at more attractive terms, and make calculated moves without being restricted by the short-term volatility. Additionally, many will view a downturn as a cleansing of non-serious competitors, leaving only the legit players standing to buy whatever they want with their committed funds.
The economy is different from what it was during the last downturn, but many PE firms are much different, too. Greater levels of liquidity, more portfolio diversity, and a systematic and operationally-focused approach to value creation will allow firms to be more resilient in today’s market.
“PE firms and their portfolio companies have much stronger baseline fundamentals. And while an environment of heightened policy risks creates challenges, it also offers opportunities for those that have the resilience and foresight to navigate the new context. By capitalizing on bold plays and doubling down on operational improvements, the PE industry can make itself more recession proof and future ready.” - Markus Massi, BCG
How to Adjust Private Equity Digital Strategies
Instead of pausing investment activity and retrenching, top PE firms should use their strong operational health to capture the upside of a downturn—pursuing growth and accelerating business transformation. Today’s PE firm’s ability to invest for longer periods of time, coupled with its record-high levels of dry powder and more permanent capital, will allow successful firms to put their capital to work more quickly.
Your branding, positioning, and overall digital strategy are going to be crucially important during the next few weeks. Your digital footprint impacts how LPs, targets, and bankers view you in amongst a sea of competitors. Are you going to sit on the sidelines and wait for the dust to settle - or take action?
It is increasingly important to clearly communicate your firm's value in a concise, cohesive manner. Differentiating yourself in today's market can be accomplished by having a strong brand and digital presence. From identity, logo, website, peripherals, etc, these are the little things that can be the difference between being just another buyer and being the buyer that seizes the market. Our US-based team can help with:
- Web Development
- Content Creation
- Branding, Messaging, Positioning
- Competition Analysis
- Digital Outreach
- Digital Due Diligence
About Merger Labs
Merger Labs is the only domestic digital marketing team that exclusively serves the M&A and Private Equity industry. We understand that the deal space is like no other and have developed service options that we feel directly reflect the needs of firms like yours.
Our founding team is comprised of bankers, private equity professionals, and M&A service providers who have worked within the deal space for more than a decade. Our entire service model is built around the idea that we intimately understand the needs of the deal maker. We can provide a value focused, hands-on approach to your digital marketing need all while literally and figuratively speaking the language of a deal maker.
We plan to be working with M&A and PE professionals through this downturn and the next - if we can be of any help to any of you, please do not hesitate to reach out today by emailing garrett@mergerlabs.com or calling (844) 815-4500.
