Global Private Equity Outlook 2021 - Dechert LLP
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2021 Global Private Equity Outlook
Contents
Introduction: Silver linings 3
Fund trends: A slight pause 6
Spotlight on APAC 16
Deal targeting: No stone unturned 20
Spotlight on North America 30
Private debt: Credit markets adjust 34
Spotlight on EMEA 36
Exits: Realizing value 38
Conclusion: Coping with uncertainty 40
Methodology
In the third quarter of 2020, Mergermarket, on behalf
of Dechert LLP, surveyed 100 senior-level executives
within private equity (PE) firms based in North America
(45%), EMEA (35%), and Asia-Pacific (20%). In order
to qualify for inclusion, the firms all needed to have
US$500m or more in assets under management and
could not be first-time funds. The survey included a
combination of qualitative and quantitative questions,
and all interviews were conducted over the telephone
by appointment. Results were analyzed and collated by
Mergermarket, and all responses are anonymized and
presented in aggregate.
2
Introduction:
Silver linings
The global PE industry financing where necessary NUMBER OF GLOBAL BUYOUT DEALS, 2015 – Q3 2020
experienced a short, sharp and applying strategic and
4000
shock towards the end of Q1 operational lessons learned
999
and going into Q2 as a result of in the last downturn to steady 952
909
3000
Number of deals
the COVID-19 crisis. Although the ship. With the economic 834
735 957 989
the pandemic rapidly knocked outlook uncertain and fair 2000
913
750
782
most auction processes off value of assets difficult to 753
1009 978
course, the effects were determine, transactions were 1000 731
838 947 639
seemingly momentary. Already, put on pause—total buyout 793 938 894 871
642 710
many of the transactions that value fell 22% year on year in 0
were put on hold back in the first half of the year, to a 2015 2016 2017 2018 2019 2020
March and April have come total of US$234.7bn.
back and buyout activity has Q1 Q2 Q3 Q4
risen above last year’s quarterly Given the availability of
value in Q3, and the number financing at almost pre-
of notable deals announced in COVID-19 levels and terms VALUE OF GLOBAL BUYOUT DEALS, 2015 – Q3 2020
September indicates forward and the PE industry’s historic
momentum as we enter into levels of unallocated capital, 600
$127.3
the last quarter of the year. however, deal activity was $153.8
Value (US$bn)
$132.9
bound to pick up again. By 400 $138.4
$129.4 $134.1
As the pandemic hit the summer, the public health $123.1 $149.6
$148.1
market at the end of Q1, situation had stabilized in $108.6
$108.1
$179.9
$180.6
GPs faced the challenge many parts of the world and 200 $170.0 $95.7
$129.1
of stabilizing their existing PE houses turned their eyes $105.5
$139.7 $139.0
$90.5 $120.8
portfolio companies as a towards deals once again: in 0
$64.8 $73.4
first priority, drawing under Q3, total value rebounded to 2015 2016 2017 2018 2019 2020
existing revolving credit US$148.1bn—10% higher
lines and providing follow-on than Q3 2019 (US$134.1bn). Q1 Q2 Q3 Q4
3
Key
In particular, the industrial forecasting, making realistic
and chemicals sector, along portfolio valuations and pricing
with the pharma, medical both acquisitions and exits.
and biotech and the TMT Nevertheless, the rise in
findings
sectors, have fared the best, activity in Q3 demonstrates
seeing total value over Q1–Q3 how adaptive the PE industry
increase on the previous year. can be.
Whether this rate of activity In the long term, PE stands to
will continue apace to the benefit from the sustained low-
end of the year remains to be rate, low-yield environment,
seen. The PE industry faces a as it has in the years following
number of tough challenges the GFC. The PE industry has
ahead. Protectionism in been shown to outperform
both trade and foreign direct public markets in a downturn
investment is the highest it and this one should prove
has been in a generation and no different—especially PE buyouts remain
tensions between China and considering the industry’s war resilient
the US have only worsened in chest of US$1.7 trillion in Although activity
2020. The US elections and dry powder. dropped year on
Brexit are further potential year (YOY), the fall
dampeners of activity, and a In the shorter term, the in activity was less steep than
second wave of the pandemic industry must navigate what overall M&A. Across the first
has led to new lockdown are sure to be choppy waters three quarters, PE buyouts fell
measures in many countries. by formulating innovative by 21% in terms of volume and
strategies and finding value by 12% in terms of value in Q1–
Government and central bank amidst a downturn. Previous Q3 2020 to 2,260 deals worth
stimulus programs to buttress editions of the Global Private US$382.7bn. In contrast, overall
economies have eclipsed that Equity Outlook have shown M&A volume dropped by 27%
seen during the Great Financial a willingness on the part while value fell 28% over this same
Crisis (GFC), suppressing of respondents to diversify period. Moreover, Q3 recorded an
yields and forcing investors into other asset classes impressive US$148.1bn in PE deal
into higher-risk assets. This and embrace creative deal activity—a 10% year-on-year rise—
has led to the fastest bear structures, and this year is no although volume over this period
market and recovery on record, different. Rather than retrench dropped 24% to 750 deals.
led by the technology and life into comforting formulas, the
sciences sectors’ huge success PE industry recognizes the
amidst lockdown conditions. importance of responding to
the market opportunistically—
For private market fund which bodes well for the asset
managers, the mixed signals class’s resiliency during this
of an economic retraction uncertain period.
and highly bifurcated market
have presented a number of
challenges, including revenue
4
Geopolitical Potential Buy-and-
concerns loom impacts build deals
large of the are on the
Among APAC-based COVID-19 upswing
respondents, trade pandemic are on The number of add-on
conflict between the US and respondents’ minds acquisitions increased
China is expected to have the 90% of respondents 28% YOY in the first
biggest impact on the deal expect more distressed three quarters of 2020,
environment in the coming debt deals and 80% with 1,249 such deals
12-18 months. 25% of expect more deal announced. The size
respondents ranked this as the delays as a result of of these deals appears
number one concern—more the pandemic. 44% of to be smaller, however,
than the number of respondents respondents believe the as total value during
who thought COVID-19 would crisis will affect the PE this period came to
have the biggest impact (20%). industry more severely US$32bn—29% below
In North America, 27% of than the GFC. the same period in
respondents ranked partisan 2019.
political gridlock number one
as having the biggest expected
impact on deal environment,
just below the 33% who
believed the pandemic would
have the biggest impact.
5
Fund trends:
A slight pause
Private equity fundraising has fund closes, the lowest tally “Fundraising has not
had an incredible run. Annual going back at least five years.
aggregate capital raised over changed, apart from the
the past decade has reached There is good reason to expect
heights the industry has never that full-year 2020, while fact that the process
previously seen. For each of the below average compared
past three years, for instance, against the heights reached now has a large virtual
funds surpassed US$600bn, in recent years, may not be so
according to Preqin—an weak as widespread lockdowns component, which had
unprecedented feat. All told,
GPs now collectively steward
and economic disruption might
suggest. Only one in ten of our already been in the
US$3.8 trillion in assets,
including both dry powder and
respondents expect fundraising
will be negatively affected
making for several years.”
invested capital. by suspensions related to
COVID-19. Meanwhile, 61% of
Markus Bolsinger, Dechert
Against that backdrop, those surveyed said they raised
the events of 2020 have a fund in the last 12 months
undoubtedly been felt in the or were currently raising a new
fundraising market, but not to fund—only slightly below last
the extent that some may have year’s result of 67%.
anticipated. Q1 2020 was
largely unaffected by the then “On the surface of it, one
emerging pandemic. Q2, on might expect travel bans to put
the other hand, saw $116bn fundraising on hold, but these
in aggregate capital raised, processes are lifecycle driven,”
the lowest sum since Q1 2018 says Markus Bolsinger, a
($110bn), Preqin data shows. partner in Dechert’s New York
This was shared across 225 and Munich offices.
6
HAS YOUR FIRM RAISED A FUND IN THE LAST 12 MONTHS, “The large asset managers
OR IS IT CURRENTLY RAISING A NEW FUND? have been continuously
fundraising for their many
strategies and for them,
39% 61% fundraising has not changed,
apart from the fact that the
No Yes
process now has a large virtual
component, which had already
been in the making for several
IF YES, WHAT IS THE BIGGEST FUNDRAISING CHALLENGE YOUR FIRM HAS FACED? years. Sponsors and limited
(SELECT THE MOST IMPORTANT) partners have adjusted rapidly
to the COVID-19 situation and
13% this is
Competing against other funds for LP capital, a continuation of a pre-
especially the largest GPs pandemic development.”
As the pandemic continues
to take a toll on the global
economy—especially in sectors
26% such as leisure, transportation
Convincing investors their capital and energy—certain assets will
will be put to work quickly undoubtedly be held longer
by their PE owners. In such
cases, the GP may consider
establishing a continuation
17% vehicle.
Large LPs concentrating their
investment relationships to a
smaller number of funds A continuation fund allows
GPs to transfer assets from
3% the existing fund to a newly
Longer-term capital funds created vehicle—with LPs
given the choice to exit or
8% rollover into the new fund
LP skepticism surrounding
alongside new investors.
valuations and health of
pre-pandemic investments
Fundraising for continuation
vehicles poses unique
26% challenges which managers
must keep in mind: keeping
LPs’ inability to conduct sufficient due
diligence because of the pandemic the pricing attractive for a win-
win-win situation for the GP,
5% exiting LPs, and new investors
Meeting fundraising deadlines
2% can be a tough balancing act,
Securing smaller commitments (under US$100m) requiring careful negotiation.
from large institutional investors
7
A time of opportunity The complication of investment styles. Therefore, the
One element working in PE undertaking due diligence is need for due diligence before re-
fundraising’s favor is market another factor working against upping into a successor fund is
timing. Fund vintages that the fundraising market. Of limited. Similarly, firms which
immediately follow downturns the 61% of respondents who are well known in the industry
generally outperform as there raised a fund in the last 12 will be able to rely on returning
is a repricing opportunity for months or are currently mid- investors as well as attract new
GPs to capitalize upon, as raise, over a quarter (26%) investors, as their reputation
well as a rise in distressed believe that the most important in the market will make them
deal flow. For this reason, fundraising challenge is LPs’ a safer bet. It is the forging
funds raised in 2017 to 2018 inability to conduct sufficient of new relationships that has
that already had a majority due diligence because of been made more challenging
of their capital drawn prior the pandemic, due to social by the inability to meet in
to COVID-19 are likely to be distancing measures and travel person before committing to a
weaker performers. Those with restrictions. This is matched by new manager.
capital to deploy since the 26% who believe convincing
pandemic struck, meanwhile, investors their capital will be “The hardest challenge is
should deliver attractive put to work quickly will be their for sponsors to truly connect
returns over the next three- to biggest fundraising challenge in with potential limited partners
five-year investment cycle. This the current environment. who they have never met and
puts well-capitalized managers might not in the foreseeable
at a significant advantage. To some extent, a manager’s future meet in person,” says
success at fundraising Bolsinger. “Fundraising has
Some inertia in the fundraising depends on its investor base. always been a high-touch
market remains a possibility, Sponsors in the typically process and not being able to
however, as LPs pause and enviable position of having share a meal, look someone in
assess their portfolios and an institutional investor base the eye and shake their hand
asset allocations. Stock market are suddenly faced with the is impacting the fundraising
falls inherently overexpose challenge of obtaining waivers processes. But there’s no
investors to their illiquid assets and exceptions to on-site due alternative so people are doing
by virtue of the denominator diligence requirements, which it virtually.”
effect. However, 2020 has is made more difficult when
been unlike other down- such requirements are set These factors have been
markets. The fastest bear forth in statutes or regulations. particularly accentuated with
market on record has made the Family offices, private respect to first-time managers.
denominator effect short-lived. foundations and high net worth Although some emerging
In principle, this should create individuals, on the other hand, managers have been able to
a positive bias towards PE are proving to be nimbler in raise their funds in the current
investment, although the sheer this environment. environment, all of the typical
volatility of the stock market disadvantages experienced
and the variance in sector Firms with lasting investment by emerging managers have
performance will oblige LPs to relationships will be less been magnified by virtue of
take a measured approach to affected. LPs are already the difficulties brought about
the PE strategy. familiar with the personnel of through a compromised due
these firms, their strategies and diligence process.
8
Beyond buyouts OVER THE NEXT 12–24 MONTHS, DO YOU PLAN TO DIVERSIFY YOUR
A degree of competitive ASSET CLASS EXPOSURE?
tension may have eased in
2020 as GPs momentarily
6%
turned their attention away
Yes, without a doubt
from securing new deals and 27%
instead attended to their Yes, most likely
existing portfolio companies,
providing both capital and 37% It’s possible but as yet
unclear
operational knowhow. However,
No, almost certainly
the fact remains that fund not
managers have more dry 30%
powder at their disposal
than at any time in PE’s
history. This circa US$1.7 IF ‘YES, WITHOUT A DOUBT’ OR ‘YES, MOST LIKELY’, WHICH ASSET CLASSES IS YOUR
trillion stockpile means there FIRM CONSIDERING EXPANDING INTO? (SELECT TOP THREE AND RANK THEM 1-2-3,
continues to be pressure on WHERE 1 IS THE HIGHEST PRIORITY)
firms to be creative.
2
Cryptocurrencies 3
10
Further, an ongoing pre-
3
pandemic trend is the Distressed debt 21
19
concentration of capital.
0
LPs’ appetite for PE assets Hedge fund 0
0
continues to grow, but even as
23
they increase their exposure Impact investing 16
12
to the asset class, they have 3
sought to rationalize the Infrastructure 0
9
number of managers with 23
whom they invest. This is Private debt/direct lending 10
12
benefiting large, multi-strategy Real assets (e.g. metals 2
outfits that are able to deliver 5
& mining, farmland, water) 4
diversified risk-adjusted 5
Commercial real estate 9
returns via not only buyouts 2
but the gamut of private 0
Residential real estate 0
capital asset classes, from 4
growth equity to investment- 2
Venture capital 11
grade credit, infrastructure to 9
distressed debt. Specialized or niche segment 32
(e.g. Blackstone establishing 18
a Life Sciences division) 7
Although the number of Structured equity/
5
7
respondents to this year’s Tactical opportunities 12
survey who say they will 0% 5% 10% 15% 20% 25% 30% 35%
diversify their asset class
over the next 12–24 months 1 2 3
is down compared to last
9
year, a clear majority (57%) (32%) followed by impact WHAT IS THE MAIN REASON YOUR FIRM
are still looking to diversify. investing (23%) and private IS CONSIDERING EXPANSION INTO NEW
This comprises 27% who will lending (23%). The latter of ASSET CLASSES?
definitely do so and 30% who these is one area that has seen
say they are likely to. a large influx of GPs in recent Seeking advantages 29%
years. The number of asset of larger scale
The motivation for diversifying managers operating in private
assets could become less debt hit a new high of 1,764 Seeking higher returns/
pressing as the pandemic last year, more than double specific opportunities we 28%
brings down buyout multiples the number only five years ago. see in new asset classes
in certain industries. In recent For buyout shops who have
years, the buyout market come to rely on these funds Interest in new asset
classes on the part of 24%
has become red hot and as a major source of leveraged investors
elevated levels of dry powder financing, the popularity of the
has pushed price multiples asset class is a clear benefit.
upwards. One of the attractions Diversification of asset 16%
of asset diversification is As for the motivations behind base/hedging of risk
being able to serve investors pushing into adjacent asset
with different risk and return classes, 29% of firms cited
expectations as well as being the advantages of becoming ESG considerations 3%
able to invest at all levels a larger-scale firm and 28%
of the capital structure. The said pursuing higher returns/
asset classes with the highest specific opportunities was the
priority, meanwhile, are top reason for such a move.
specialized or niche segments
10COVID-19 makes its mark WHAT TRENDS DO YOU SEE GROWING IN THE WAKE
The most recent comparable in nature. In the short term, OF THE ONGOING COVID-19 CRISIS (CHOOSE ALL
crisis to the current the market and operational THAT APPLY)?
pandemic is the GFC. impacts to certain industries
However, they are also have been significant. More distressed deals 90%
very different in nature. Sectors such as energy,
While 2008 was defined leisure and transportation, for
by a liquidity crunch in the instance, have seen buyout More deal delays 82%
banking system that had activity drop significantly
a knock-on effect on the in 2020. When surveyed in
economy, 2020 was primarily the summer, half (44%) of
Fund restructurings
a health crisis that disrupted respondents believed the 64%
businesses and especially COVID-19 crisis would affect
those in sectors dependent the PE industry more severely
Suspension of
on physical interaction, such than the GFC, while a further fundraising 55%
as hospitality, leisure, retail, 32% said it would affect
and dining. the industry slightly more
severely. Fewer buyouts
54%
Their effects on the PE
industry are likely to be Longer term, the PE industry,
Greater injections of
divergent as well. In the however, is well-positioned rescue capital into 51%
short term, the liquidity to weather the storm brought portfolio companies
crunch during the GFC about by the pandemic. Data
made transacting nearly from Q3 already shows bold Trading successful
portfolio companies 50%
impossible, while in the strategies in effect, as deal to successor funds
longer term, the GFC resulted values rose above the same
in a major regulatory push quarter the previous year. Increase of
42%
in the financial services add-on acquisitions
for existing platforms
industry in an attempt to Nonetheless, the pandemic
reduce previously overlooked is still expected to bring
Greater emphasis
risks, although a decade about changes to society and on ESG
36%
of ultra-low interest rates the economy, and therefore
have benefited the asset to the PE industry. In terms
class. This policy drive made of how these will manifest, Fewer exits 21%
investment into PE funds respondents expect more
by banks and insurers distressed debt deals (90%)
more onerous. in the wake of the ongoing Other, please specify 0%
COVID-19 crisis. Continued
The effects of the current travel restrictions and
crisis on the PE industry are remote working could also
likely to be far less structural lead to continued delays in
11HOW WILL THE COVID-19 CRISIS AFFECT THE INDUSTRY WHAT PLANS HAVE YOU PUT IN PLACE TO
COMPARED WITH GREAT FINANCIAL CRISIS? MAINTAIN BUSINESS CONTINUITY DURING
THE ONGOING COVID-19 CRISIS?
(CHOOSE ALL THAT APPLY)
24% More severely
44% Succession planning 77%
Slightly more
severely
On a similar level
Increased
communication with 74%
32% professionals and staff
Enhancing digital 70%
due diligence
Home-working protocols 69%
deals (82%), although the pandemic, such as home-
uptick in deals announced working protocols (69%) Upgraded cybersecurity 52%
in Q3 suggests that some and improved cybersecurity
transactions which were (52%). Surprisingly, only 28%
put on pause at the start of established a pandemic
the pandemic are back on task force. Investing in technology 49%
the table.
PE firms looking to put in Documenting all policies
place business continuity and procedures 44%
plans during the pandemic
were split on the best way to
do so: tasks that PE funds Travel bans
38%
have been tackling are
succession planning (77%)
and increased communication
with professionals and Pandemic taskforce 28%
staff (74%), as well as the
expected administrative
protocols and procedural
changes during the
12LP trends: Co-investments OVER THE LAST 12–24 MONTHS, HOW HAS THE
Co-investing, whereby LPs Respondents were least likely LEVEL OF INTEREST IN CO-INVESTMENT AND JOINT
in a fund invest directly into to say that LPs’ interests in VENTURES ON THE PART OF YOUR LPS CHANGED,
deals alongside the fund, has specific targets was the main IF AT ALL?
gained in popularity in recent motivation for co-invests 1%
years. In keeping with our (20%), although this result
previous findings, the vast was double last year’s (10%),
Decrease
majority (74%) of firms report suggesting that it is a 25%
an increased appetite for growing trend.
Stay about
co-invests and joint ventures the same
among their LP clients over Looking ahead, some of the
the past 12 to 24 months. largest LPs invested in PE Increase
74%
have signaled intentions to
Since the GFC, co-investment commit to co-invests for the
capital nearly tripled to 28% long term. The US$246bn
of all capital committed to California State Teachers’
the PE asset class in 2019. Retirement System, the
This is perhaps unsurprisingly second-biggest pension
with deal sizes increasing— scheme in the US, has said
the number of deals worth it will continue to build out its IN YOUR EXPERIENCE, WHAT IS THE PRIMARY
US$10bn or more has steadily co-investment team in spite DRIVER OF LP INTEREST IN CO-INVESTMENT
been increasing since 2015. of the pandemic. OR JVs CURRENTLY?
Deals of that scale would be
difficult to pull off without
LP desire for greater 30%
co-investments. control over the direction
of portfolio company
On the LP side, interest in co-
investments has been driven
in large part by a desire for LPs seeking to average 28%
more control, according to down the overall cost
of investing
survey respondents. Nearly a
third (30%) of GPs say that
LPs are chiefly seeking greater
LPs seeking to put
control over the direction more capital to work
22%
of their portfolio companies
while 28% say it is to average
down the cost of investing.
Just under a quarter (22%) Strong LP interest in
20%
specific targets
say it is so LPs can put more
capital to work.
13An open partnership
One of the more notable Among our respondents, more challenging and fund
industry innovations that has 56% of GPs have not sold a managers seek alternative
grown in popularity is GPs minority stake in their firm sources of capital in order to
selling a minority piece of over the last three years. Of meet the GP commitments
their own management firms those who have not brought to their own funds. If fund
to third parties. This trend was outside investors into the managers are not able to
best illustrated by the recent management business, 37% realize sufficient capital from
announcement that Mubadala are considering the possibility the portfolios they manage,
Investment Company, a UAE- of selling a minority stake. outside parties represent a
based sovereign wealth fund, Of those who did or are credible substitute and may
had acquired a stake in US considering selling a minority be capable of negotiating
PE firm Silver Lake. As part stake, the main driver for this attractive buying terms
of the deal, the PE house is is succession planning (41%) depending on the scarcity of
launching a new long-term followed by gaining access to liquidity available to GPs from
investment strategy with a growth capital for new lines portfolio company sales.
25-year time horizon—far of business (34%)—a change
longer than the typical 10-year from last year’s results, which On the other hand, for many
PE fund lifespan. found that gaining access GPs selling an interest in their
to growth capital was the management firm, this is an
This has been a gradually primary driver (45%), while opportunity to monetize the
emerging trend but until succession planning was only intangible value they have
recently has largely been the cited by 30% of respondents built over years of hard work.
preserve of the very biggest as a driver. However, if COVID-19 has a
multi-strategy institutional negative impact on incentive
firms, many of which were Over the next few years this allocations, GPs may not
founded decades ago and trend has the potential to consider it an opportune time
have sought solutions to their become more mainstream, to sell and may prefer to wait
succession needs. even among smaller managers until the value of their firm
and in non-buyout firms. In returns to normal.
That is beginning to change recent months, for instance,
as investment firms—often Japanese financial services
entities that would typically be group Daiwa took a 40% stake
classed as LPs—with limited in German renewables fund
in-house private markets manager Aquila Capital.
expertise seek to acquire that
knowhow rather than develop Despite some downsides,
it organically. For their part, including potential skepticism
GPs can benefit from having from the existing LP base,
a long-term strategic partner this trend could be boosted if
alongside them. the exit environment becomes
14OVER THE PAST THREE YEARS, HAS YOUR FIRM
SOLD A MINORITY STAKE IN THE GP/FIRM?
56% 44%
No Yes
IF NO, IS YOUR FIRM CONSIDERING THE
POSSIBILITY OF SELLING A MINORITY STAKE?
63% 37%
No Yes
IF YES, WHAT IS OR WAS THE MAIN DRIVER OF
SELLING A MINORITY STAKE IN THE FIRM?
Gaining access to
growth capital for
34% new lines of
business
41%
Gaining access to
growth capital for
new partners
25% Succession
planning
15Spotlight on APAC
The three major PE loosening,” Siew Kam Boon, a NUMBER AND VALUE (IN US$BN) OF PE BUYOUT
jurisdictions—North America, partner in Dechert’s Singapore DEALS IN APAC, 2015 – Q3 2020
EMEA and APAC—have seen office, says.
their deal activity impacted
150,000 700
to different degrees by the Unlike the US, for example,
pandemic. This correlates these countries imposed 120,000
600
with varying responses to the strict lockdown measures,
Number of deals
Value (US$m)
health crisis. track and trace approaches 90,000
and mask-wearing to curb 500
The first three quarters of the virus. China, the world’s 60,000
2020 saw US$80.5bn in second-largest economy 400
buyout deal activity in the and responsible for around 30,000
APAC region, an impressive half of the region’s buyout
0 300
13% rise above the same value, had one of the most 2015 2016 2017 2018 2019 2020
period in 2019. Volume over effective outbreak containment
this period fell 8% to 379 responses. Unlike APAC’s other Q1 Q2 Q3 Q4 Number of deals
deals—a far less steep drop major economies, China is not
than overall PE volumes. The expected to fall into recession
top sector by a considerable in 2020, albeit the IMF
distance was TMT with prediction of 1.9% growth will
US$33bn invested, followed by be far and away the weakest
pharma, medical and biotech expansion in decades.
with US$13.4bn invested.
“From a macro perspective,
These deal totals set the conditions vary from
region’s PE market apart jurisdiction to jurisdiction
as the least affected by the and the rules within each
ongoing crisis. A number of jurisdiction as to how they
countries in the region are treat the COVID-19 crisis has
considered as having capably varied,” says Ross Allardice,
contained the virus outbreak, a partner in Dechert’s London
including China, South office. “We seem to be seeing
Korea, Taiwan, Hong Kong, the effects of that in the
Singapore, Vietnam, Thailand, private markets as the crisis
Japan and Australia. has affected the way people
have been able to conduct
“In certain industries, the business.”
pandemic is still having a
large impact, but by and Consistent with this more
large, in Asia, COVID-19 is effective curbing of the
quite contained and well dealt health crisis in the region,
with. In many countries in APAC respondents are
the region, people are more marginally less concerned
or less going about their lives by the effects of COVID-19
as normal and restrictions are on the PE market than PE
16PE BUYOUT VALUE BY SECTOR IN APAC (US$M),
2019–2020
$27,907
TMT
$32,960
$15,209
Pharma, Medical &
Biotech $13,433
Business Services $11,118
$10,522
Industrials & $11,212
Chemicals
$6,832
$7,244
Financial Services
$5,519
$15,120
Consumer
$4,793
$2,085
Transportation
$2,374
$5,076
Leisure
$1,454
Energy, Mining & $5,314
Utilities $1,282
$7,784
Real Estate
$1,237
$273
Agriculture
$46
$2,503
Construction
$13
2019 Q3 2020
17executives in other regions. IN YOUR ESTIMATION, WHICH CURRENT OR UPCOMING
Rather, their biggest concern DEVELOPMENTS IN ASIA-PACIFIC WILL HAVE THE BIGGEST EFFECT
is Sino-American diplomatic ON THE DEAL ENVIRONMENT OVER THE COMING 12–18 MONTHS?
relations, which are at their (RANK THE TOP TWO 1-2, WHERE 1 IS MOST IMPORTANT)
worst in a generation. Half
said the ongoing US–China 10%
Debt levels in China
trade conflict is the current 5%
development expected to China economic 15%
have the biggest detrimental slowdown 15%
effect on dealmaking over Impacts of the 20%
the next 12–18 months. COVID-19 crisis 25%
Just behind this, 45% of US-China trade 25%
APAC respondents expect the conflict 25%
COVID-19 crisis to have the Potential 20%
downturn/recession 15%
largest impact on the deal
Ongoing disputes and 0%
environment. protests in Hong Kong 0%
Heightened tensions
10%
The two are not unrelated. between India
15%
and China
Last year, the trade war
loomed large, but this has 1 2
not abated. Instead, the US
and Europe are taking an
increasingly arms’-length
approach to China, APAC’s
geopolitical and economic
locus. This widening
“In certain industries, the
geopolitical chasm and pandemic is still having a large
economic decoupling from
China have the potential to impact, but by and large, in Asia,
frustrate PE activity in certain
industries and cross-border COVID-19 is quite contained and
dealmaking in particular.
well dealt with.”
These tensions are being felt
intra-regionally too. Both Siew Kam Boon, Dechert
India and Japan introduced
tighter restrictions on foreign
investment in 2020, the
latter cutting the threshold
requiring foreign investors
to notify regulators prior to
share purchases in sensitive
companies from 10% to
just 1%.
18“There are various dimensions APAC will also be responsible
to current geopolitical for around 90% of the 2.4
tensions beyond just the trade billion members of the middle
war between China and the class underpinning future
US,” says Boon. “Depending demand. This will largely
on the jurisdiction of the come from China, India and
acquirer and the target as Southeast Asia’s high-growth
well as the industry the target developing markets.
is engaged in, certain cross-
border deals are taking longer Not only does APAC have
within the region because of an unmatched economic
these frictions. India, Japan profile—both in size and
and Australia have imposed growth—it is significantly
new foreign investment rules under-penetrated by PE. APAC
and certain others within currently represents just 25%
the region have developed of the global PE industry. This
informal policies along similar leaves headroom and runway
veins. Factory production is for significant growth for the
being repatriated by Japan next decade at least. These
and India or moved out of fundamentals will ensure
China into Southeast Asia.” that PE investors remain
compelled by the APAC
The ongoing geopolitical growth story, in spite of
tensions could accelerate a current geopolitical tensions.
growing trend of the past few
years: the increasing foreign
direct investment (FDI) in
Southeast Asia, as well as
growth in the region’s
manufacturing sector.
Diplomatic challenges
notwithstanding, APAC
represents a huge opportunity
for the PE industry. For one,
it is the world’s fastest-
growing region, propelled by
demographic tailwinds and a
growing consumer class. In
2020, Asia’s GDP is expected
to overtake the GDP of the rest
of the world combined and by
2030 will contribute 60% of
global growth, according to
the World Economic Forum.
19Deal targeting:
No stone unturned
Unsurprisingly, the onset of houses in order and ensured WAS YOUR MOST RECENT PRIMARY LEVERAGED
the COVID-19 pandemic at the that their portfolios were on BUYOUT VIA AN AUCTION PROCESS?
end of Q1 precipitated a sharp a firm footing, things have
tumble in PE dealmaking, but returned to some degree of
activity has already rebounded normality, especially on the 49% 51%
significantly in Q3. transaction side. Funds are
No Yes
looking at buying and selling
Globally, there were 1,510 again. There was a shock, but
transactions worth an aggregate it appears to have been
US$234.7bn across the first relatively short-lived.”
six months of the year, a 19% said that the process took
drop in volume and a 22% drop In spite of the rise in buyout longer during the COVID-19
in value on the same period in activity in Q3, certain outbreak; 22% said it took
2019. Q3, however, witnessed challenges for the industry substantially longer.
750 deals worth US$148.1bn, remain as the global economy
representing a 10% rise in faces difficult conditions Another potential challenge
value, although volume was amidst a second wave of is achieving adequate due
down 21% on Q3 2019. infections in parts of the diligence on assets. Analyzing
world and subsequent social profit and loss accounts and
“GPs spent much of March distancing measures. balance sheets is only one part
through to June in 2020 in of the diligence equation. Flying
crisis management of their Sales processes could take to meet senior management
portfolios, making sure their longer to complete, for one. teams has been frustrated
businesses had sufficient Just over half (51%) of by lockdowns and a greater
capital, because people were respondents said that their aversion to in-person meetings.
initially fearing a potential most recent leveraged buyout While videoconferencing tools
capital crunch,” said Bolsinger. was done via a traditional have helped to keep business
“However, once they put their auction process, and 55% processes—and indeed the
20global economy—in motion, WHAT DO YOU SEE AS THE BIGGEST CHALLENGES CURRENTLY FACING THE PRIVATE
they are a meager, though EQUITY INDUSTRY?
unavoidable, substitute for
sitting across the table from a Protecting portfolio companies 24%
senior management team and in the wake of the COVID-19 crisis 31%
being able to read the room.
Valuation uncertainties
making buyers and sellers 17%
Another issue is the simple reluctant to transact 8%
challenge of agreeing on
price. Businesses largely Amount of dry powder and 7%
ability to put capital to work 10%
unaffected or even buoyed
by COVID-19 continue to Exiting investments at
11%
demand elevated evaluations. high enough multiples
11%
However, businesses that have to exceed hurdle rate
been affected are faced with
7%
a pandemic discount and the High multiples
6%
task to pro-forma adjust their
financials for the COVID-19 18%
Availability of leverage
disruption. Those are the 7%
transactions for which bridging
Region-specific factors
the gap between the seller’s (e.g. macroeconomic and
16%
expectations and the buyer’s 27%
geopolitical issues)
assessment of value can be a
challenge, especially where the 1 2
long-term impact of current
events on the business model
and earnings of a company is
open to interpretation.
earn-outs help to give buyers
peace of mind and reward “It can be difficult at
One way to address the gap
sellers who are true to their
word on the prospects of the
times like this for parties
between seller expectation
and buyer assessment is
businesses they are selling.”
to agree on price and
the inclusion of earn-out
provisions. These are of
While valuation uncertainties
which make buyers and sellers
earn-outs help to give
particular relevance in light of
current economic and trading
unwilling to transact were cited
by 17% of respondents as the
buyers peace of mind.”
conditions and can help buyers greatest challenge to the PE Markus Bolsinger, Dechert
and sellers to get a deal over industry, managing existing
the finish line. assets pose a bigger concern.
Indeed, 31% ranked protecting
“We have seen more earn-outs portfolio companies in the wake
to bridge the total valuation of the crisis as the biggest
gap,” said Bolsinger. “It can be challenge to the industry—and
difficult at times like this for 24% cited it as the second-
parties to agree on price and greatest challenge.
21Closing the deal MAC clauses have historically HAVE YOU SEEN A SIGNIFICANT CHANGE IN
Once a price has been agreed been rarer than in North THE NEGOTIATION AND/OR WORDING OF WHAT
to, much can still go wrong America—say they have seen CONSTITUTES A MAC (MATERIAL ADVERSE CHANGE)?
before the deal is completed. an increase in their usage in
This is where material adverse their jurisdictions. 25% 75%
change (MAC) clauses come in.
A MAC clause gives the buyer Nonetheless, the increasing No Yes
the right to walk away from a usage of MAC clauses and
deal should events drastically the greater attention paid to HAVE YOU SEEN AN INCREASE IN THE USE OF MAC
change after the deal has been their negotiation should not (MATERIAL ADVERSE CHANGE) CLAUSES IN YOUR
agreed but before it has closed. be seen as a major obstacle JURISDICTION? (YES ONLY)
to dealmaking. MAC clauses
Historically, these clauses are typically not a central Asia-Pacific 75%
have been necessarily broad as negotiating point in APAC
they are intended to address transactions, said Boon.
circumstances that are not “Parties usually reserve their
known at the time of the negotiation capital for other EMEA 86%
negotiation. In 2020, they have things. But this year, MAC
been brought into sharper focus clauses have been a focus,
in light of market turbulence. particularly if the transaction -
completion date is stretched HAVE YOU SEEN AN INCREASE IN WARRANTY AND
Given the downturn in out,” she added. INDEMNITY INSURANCE BEING USED? (YES ONLY)
the economy and the
unpredictability of the recovery, Mitigating exposure Asia-Pacific
- 70%
MAC clauses will continue to In keeping with a more
be subject to greater scrutiny unpredictable market,
in deals going forward—M&A respondents across all regions
EMEA
-
practitioners will be running (80% in EMEA, 70% in APAC 80%
a fine-tooth comb over their and 69% in North America)
precise definition to avoid have seen an increase in M&A
being unexpectedly on the insurance (representation and North America
69%
hook. Three-quarters (75%) warranty insurance in North
of all respondents have seen America and warranty and
a significant change in the indemnity insurance in
negotiation and/or wording of EMEA and APAC) being -
what constitutes a MAC. used in transactions. The use of M&A insurance
can help sellers to transfer
Moreover, as a result of the “The market is still red hot for indemnity-risk to insurance
-
pandemic, the inclusion of MAC warranties and indemnities providers in order to protect
clauses in merger agreements insurance in APAC and EMEA,” themselves against having to
could expand in regions where said Boon and Allardice. return proceeds to the buyer for
they are not as commonly “And the same is true for losses after the deal has closed.
used. The vast majority of representation and warranty
respondents in EMEA (86%) insurance in North America.”
and APAC (75%)—where
22Taking a smaller piece the majority of PE investment been willing to accept PE
Private equity is typically activity, 98% of firms surveyed investments are more likely
associated with the acquisition said their firms made minority to seek financing options as
of majority positions in investments. earnings come under pressure.
companies via leveraged Even in a benign economic
buyouts, and management There is potential for this environment, minority deals
teams retaining a minority investment type to increase have the advantage of allowing
stake to ensure their interests over the next 12 to 24 the current owners to retain
are aligned with the GP. months in light of current control over their business.
Although this established circumstances. For one, owners The minority alternative is
model continues to constitute who might not have previously comparatively more appealing.
DOES YOUR FIRM MAKE MINORITY STAKE IF YES, WHAT IS THE MOST IMPORTANT DRIVER OF
INVESTMENTS? MINORITY STAKE PURCHASES OR RETENTIONS BY
YOUR FIRM?
2% 98% Allows us to
combine efforts and 9%
No Yes expertise with other buyers
(strategic or financial)
When retaining minority
DOES YOUR FIRM EVER RETAIN A MINORITY STAKE stake at exit, allows 15%
WHEN EXITING A PORTFOLIO COMPANY? us to reap benefits of
company’s further growth
64% 36% Increases pool of potential 20%
investment targets
No Yes
Makes us attractive to
founders who are resisting 24%
IF YES, OVER THE LAST 12–24 MONTHS, HOW a control investment
HAS YOUR FIRM’S TARGETING OF MINORITY STAKE
INVESTMENTS (OR THE RETAINING OF A MINORITY
Opportunity for
STAKE WHEN EXITING A PORTFOLIO COMPANY) lower-risk investments/ 32%
CHANGED, IF AT ALL? diversification of risk
Decreased 15%
Stayed about
35%
the same
Increased
50%
-
23Getting creative
PE firms remain equipped
with capital commitments,
the volume of which they
have never previously seen.
Although the buyout market
saw a sharp quarter-on-quarter
rise in Q3, many industrials
are still facing challenging
conditions which have put their
valuations under pressure.
In such cases, GPs will be
incentivized to get creative
with their deal structures and
find mutually attractive deals
in order to compel owners who
may be reluctant to sell unless
For GPs, the flexibility to Of those firms who participate they have to.
make a minority investment in minority stake acquisitions
can increase the likelihood or minority rollovers, 50% have In addition to eyeing carve-
of securing a deal and a increased this activity over outs and minority stake
meaningful foothold in an the last two years while 35% opportunities, firms are more
attractive asset at a favorable have maintained levels. Nearly likely to weigh up strategic
valuation, since sellers are not a third (32%) stated that the alignments with corporates
risking selling most of their most important driver of these and companies that have
equity at a bargain price. deals is the opportunity for come under stress amid the
lower-risk investments or to pandemic. Nearly all (98%)
Another related trend of recent diversify their risk, followed of respondents at present are
years has been for GPs to by 24% who said such likely—and 54% very likely—
retain a minority stake when arrangements are attractive to to consider partnerships with
exiting a portfolio company. founders who are resisting a strategic buyers.
This has the benefits of giving control investment.
the selling fund exposure to The benefits of such
future upside in a company One of the potential partnerships are two-fold. The
and a management team they complications of this trend is GP gains tacit sector knowhow
know and believe in. While putting in place M&A insurance which can help to deliver
rolling over a portion of its when the GP is exiting ahead higher-value gains and de-risk
investment in connection with of the majority shareholder. the investment. It also gives
a sale is less popular than Insurers can sometimes be the GP a potentially effortless
minority investing, it is still hesitant to underwrite risk for a exit route as the strategic will
employed by a clear majority minority investor who does not often have a prearranged call
of GPs where it makes sense to have operational control—this option or similar arrangement
do so—64% of firms reported is something GPs will have to on the asset and will already
conducting these minority bear in mind as these deals know it intimately.
position retentions. become more commonplace.
24Distressed deals are another Other provisions that may debt and can help to give GPs
deal type that is being widely become more popular are greater security, limiting their
considered—as much as 87% structured equity investments downside risk, while staggering
of firms are currently weighing with varying levels of follow-on investments in
such transactions. It goes seniority and convertible or tranches can ensure funds
without saying that business exchangeable options, as well increase their exposure to
defaults will be elevated as tranche provisions that a business only when it
through 2020 and likely 2021, allow GPs to make follow- proves that it can perform
especially in sectors hit hard by on investments, provided in challenging economic
the pandemic. This will present that agreed performance conditions. The bottom line is
an opening for opportunists milestones are reached. These that creativity and flexibility in
and distressed debt funds in are especially attractive in the deal structuring can improve
particular, which can acquire current environment. These the chances of deals closing
debt for a fraction on the dollar structured equity investments as the buy-side and sell-side
and force equity swaps. can take the form of equity or make concessions.
HOW LIKELY IS YOUR FIRM TO CONSIDER THE FOLLOWING DEAL TYPES AT PRESENT? (SELECT ONE FOR EACH TYPE)
Investment in structured 13 36 13 38
equity/salvation capital structures
Distressed deals 42 45 1 12
Take privates 13 32 12 42 1
Private investment in
2 33 21 42 2
public equity (PIPE)
Carve-out of orphan/non-core 43 28 14 14 1
divisions from corporate sellers
Vertical integration with a portfolio 13 52 13 22
company rather than horizontal
Combining a portfolio company with 5 21 51 23
another firm’s portfolio company
Partnerships with strategic buyers 54 44 2
Very likely – this deal type is appealing in the current environment Somewhat likely – we’re open to the idea
Not very likely – this deal type doesn’t work for our model or is unappealing Depends entirely on the particular deal
Unclear at present
25Buy-and-build “Add-on acquisitions present As earnings come under
Roll-up strategies are one of a lower risk than acquisitions pressure, the synergistic
PE’s ways of creating value— of a new platform, since the cost savings that can be
GPs can outsize their returns GP already is invested in the achieved through clubbing
by buying a platform company, industry,” Bolsinger stated. assets together will continue
bolting numerous companies “In addition, these deals are to make buy-and-builds more
on to it and selling the enlarged often proprietarily sourced, compelling. Moreover, given
entity. using management’s and the that the exit environment
GP’s existing contacts with is likely to prove more
The strategy also tends to and knowledge of the other
be more attractive in the market participants.”
recessionary environment. Buy- DOES YOUR FIRM USE THE BUY-AND-BUILD
and-build transactions are one This is a tried-and-tested STRATEGY (DEFINED AS TARGETING ADD-ON
of the few forms of M&A which method. More than two-thirds ACQUISITIONS TO A PLATFORM COMPANY OVER
have increased in number (68%) of firms use buy-and- THE COURSE OF A HOLD PERIOD) AT ANY OF ITS
throughout 2020. There were builds at any of their portfolio PORTFOLIO COMPANIES?
1,249 such transactions in the companies and, of those,
first three quarters of the year, around one-third (34%) of
a 28% increase YOY, although their portfolio companies 32% 68%
the size of these deals has pursue the strategy.
No Yes
been smaller—despite the rise
in volume, total value of such
transactions dropped 29% over IF YES, WHAT ARE THE BIGGEST CHALLENGES YOUR FIRM FACES WHEN MAKING ADD-ON
the same period to US$32bn. ACQUISITIONS FOR A PLATFORM COMPANY? (SELECT TOP TWO AND RANK THEM 1-2,
WHERE 1 IS MOST IMPORTANT)
The reason this strategy
is so compelling is that Gaining buy-in from management 15
there is often an arbitrage teams at the acquired companies 21
opportunity. Smaller companies
Generating and/or raising enough capital
generally trade at lower (including debt) at the platform
32
16
earnings multiples than larger company to make add-on purchases
businesses and there is less Formulating a strategy
31
competition for these assets to achieve synergies and
19
growth for the enlarged company
as they can fly under investors’
deal sourcing radars. GPs not Identifying a sufficient
13
only benefit from building a number of suitable add-on
22
targets during the hold period
bigger and better asset, they
can compound their return Integrating the add-on 9
by coming in at a lower entry acquisitions effectively 22
multiple and exiting at a
higher multiple. 1 2
26challenging, rather than Challenges remain for the enlarged company is
bringing assets to market, For all the benefits of scaling their greatest concern.
GPs may spend more time up a platform business, buy-
developing their existing assets and-builds are not without their “The biggest challenge
through add-ons and put the challenges. For one, there are has been the complexity
new and improved business financing demands that may of executing these,” said
up for sale when market not be able to be met by the Boon. “The key problem is
conditions have stabilized. PE fund itself over concerns of first identifying targets that
concentrating too much capital can be synergistic and then
Tech synergies into one portfolio company. fulfilling the requirements of
Technology is also taking a This requires debt financing achieving those synergies. The
central role, whereby add-on and 32% of GPs that use this execution of these deals is fairly
acquisitions can harness the strategy say that generating complex in Asia, particularly
tech assets of the platform, and/or raising enough capital with its diverse rules around
providing a further synergistic (including debt) at the platform foreign ownership restrictions,
dimension to build-outs. company to make add-on regulatory approvals, exchange
For 29% of firms, the first- purchases was their biggest controls and stakeholder
choice investment thesis for challenge. This is closely interests, among others. So,
a buy-and-build is building a followed by 31% who say GPs need to think carefully
platform company around a that formulating a strategy to before executing these
core technology. The second achieve synergies and growth strategies.”
most favored strategy, cited
by 31% of respondents, is
building a dominant player IF YES, WHICH BUY-AND-BUILD STRATEGIES DO YOU CURRENTLY USE MOST OFTEN?
in an emerging sector, (SELECT TOP TWO AND RANK THEM 1-2, WHERE 1 IN MOST COMMON)
benefiting from the early-mover
advantage. Acquiring synergistic/ 22
complementary products 28
It is perhaps unsurprising,
then, that add-on investments Building a dominant player 22
in an emerging sector 34
have proved exceptionally
popular in the TMT sector this
Building up a platform company 29
year. The total value of such around a core technology 26
deals reached US$12.9bn in
the first three quarters of the Regional consolidation
21
year, more than four times (i.e. acquiring similar businesses
9
located in one specific region)
the total value over the same
period the year before. Regional diversification
6
(i.e. combining similar businesses
3
located in different regions)
1 2
2728
Carve-outs
Acquisitions of corporate “Conglomerates that are OVER THE NEXT 12-18 MONTHS, WHAT DO YOU
assets can be expected to rise, over-leveraged and have EXPECT TO HAPPEN TO THE NUMBER OF CARVE-
not in spite of the coronavirus collateralized heavily against OUTS TARGETED BY YOUR FIRM?
pandemic but because of it. their assets have been looking
After more than a decade at divesting their assets to 10%
of accumulating debt in delever as well as to conserve Decrease
the low-rate environment liquidity for existing assets.
precipitated by the GFC, That’s happening more and Stay about
corporate liabilities are at an more, particularly because of 30% the same
all-time high. The amount of the COVID-19 situation,” said
60% Increase
global debt from financial and Boon.
non-financial corporates rated
by S&P Global Ratings topped Of course, PE houses
US$20.6 trillion in 2020. As themselves may utilize carve-
earnings come under pressure outs as a strategy for their
amid the economic fallout of own assets—indeed, 17%
the health crisis, this could of firms said they anticipate
tip some large businesses into carving out units of portfolio IN YOUR OPINION, WHAT IS THE MOST IMPORTANT
default territory. companies. This may come as CURRENT DRIVER OF CARVE-OUT ACTIVITY?
existing portfolio businesses
An attractive option for come under pressure and
corporates seeking to GPs seek ways to drum up Corporates selling business 33%
units to pay down debt
deleverage their balance cash, but going forward, fund
sheets is to review their managers are also likely to
operations to identify any scrutinize new deals more
Corporates shoring
non-core business units that carefully over the coming up liquidity
21%
can be divested. Well over half months for opportunities to
(60%) of respondents in our streamline assets by selling off
research expect to increase superfluous units in the target PE firms carving out units 17%
the number of carve-outs business. of portfolio companies
targeted by their firm over the
next 12-18 months; further,
corporates’ need to pay down Divestitures required by 15%
merger control authorities
debt is seen by 33% of GPs
as the most important current
driver for this activity over the
Corporates rationalizing
next few years. non-core business units
14%
29Spotlight on North America
In the first three quarters to already be making a in business models that
of 2020, North America comeback, with 19 US$1bn- flourished in pre-lockdown
saw 921 PE buyouts, worth plus buyouts announced in times but have been stopped
US$151.4bn in total—a the region in Q3, more than in in their tracks in 2020, with
23% decrease in volume all of the first half combined traditional retail, leisure
and a 29% decrease in value and in Q3 of the previous year. and hospitality in particular
compared to the same period exposing their vulnerabilities.
in 2019. This is a steeper fall The top sector across the Conversely, many tech and
than either the APAC or EMEA first three quarters was TMT software businesses have not
regions—likely a reflection with US$59.7bn in total deal only withstood the effects of
of the high number of value. This in part speaks to lockdown but boomed as a
COVID-19 cases in the region. the broad reach of this sector, consequence, as consumers
Nonetheless, Q3 has seen a covering as it does technology, and businesses came to
sharp rise in buyout activity media and telecoms. But depend upon their products
on the previous quarter, with the strong showing of TMT and services amid lockdown
value increasing by 229% to also reflects the prospects conditions and remote
US$71.9bn, while volume of technology and software working.
rose 16% to 281 deals. businesses. The pandemic
has revealed weaknesses One-third (33%) of North
Bigger deals also appear
NUMBER AND VALUE (IN US$BN) OF PE BUYOUT IN YOUR ESTIMATION, WHICH CURRENT OR UPCOMING
DEALS IN NORTH AMERICA, 2015 – Q3 2020 DEVELOPMENTS IN NORTH AMERICA WILL HAVE THE BIGGEST EFFECT
ON THE DEAL ENVIRONMENT OVER THE COMING 12-18 MONTHS?
300 1,800 33%
Impacts of the COVID-19 crisis 22%
250 1,500 2020 US presidential 18%
and congressional elections 18%
Number of deals
Value (US$bn)
200 1,200
0%
Civil unrest 0%
150 900
11%
Potential downturn/recession 27%
100 600
ESG factors in business 0%
2%
50 300
2%
Economic growth 5%
0 0
2015 2016 2017 2018 2019 2020 27%
Partisan political gridlock 13%
Q1 Q2 Q3 Q4 Number of deals 9%
US trade conflicts 13%
1 2
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