latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/private-equity-deal-flow-expected-to-be-muted-for-remainder-of-2020-ubs-60453867 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Private equity deal flow expected to be muted for remainder of 2020 – UBS

StreetTalk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk – Episode 69: Banks left with pockets full of cash and few places to go

Street Talk Episode 68 - As many investors zig away from bank stocks, 2 vets in the space zag toward them

Street Talk Episode 66 - Community banks tap the debt markets while the getting is good

Private equity deal flow expected to be muted for remainder of 2020 – UBS

Private equity deal flow will remain muted for the rest of 2020 as sponsors push the buying and selling of assets into the new year when more certainty is hoped for, senior UBS Group AG professionals expect.

The firm anticipated that valuations would fall, but this prediction has not materialized. More rationality to an overinflated environment of high multiple valuations would have created "a perfect vintage" for private equity, Simona Maellare, Global Co-Head of the Alternative Capital Group said during a private equity and leveraged capital markets press roundtable Sept. 23.

UBS has seen few deals, and they have been especially scant in Europe. Those that have completed involved companies that have proven to be coronavirus and recession resilient, and have occurred once market participants were able to evaluate the effects of lockdown on performance, Maellare said. Most transactions have been been in the healthcare and technology sectors, which did not see discounts. "There is a premium that needs to be paid for growth, one, but also for being recession resistant," the firm said.

UBS clients are keen to get comfortable with EBITDA, and business plans on both the buy side and the sell side, Maellare said. Most businesses have been negatively impacted by the coronavirus, resulting in softer EBITDA for the year and a dampened deal flow. Maellare anticipates an uptick in activity in 2021 when market participants have "at least a couple of quarters to prove that really the performance has stabilized," but that is based off the "tough assumption" that there is not another wave of the coronavirus and consequential lockdowns. "Business plans, valuations, and how to really price assets in this market remains, I think, the major challenge for most of the sponsor community and therefore, will limit the ability of most to transact," Maellare said.

"One of the major rules in leveraged finance is it's difficult to sell into a declining EBITDA," Sarah Mackey, UBS's EMEA Head of Leveraged Capital Markets said. A lot of businesses have been able to prove that the third quarter has been more stable, "but I think the outlook is still uncertain, and you can see that maybe some sellers are looking to just check their numbers and check where the financials are coming out before putting their assets up to sale."

Mackey expects the leveraged loan market will remain open over "next months and quarters" to support new transactions but added, "the hardest thing may be finding the deals to actually lend to in the coming months."

As a consequence of pushing out exit horizons, managers will be assessing their options. Maellare expects to see more sponsors selling stakes in their portfolio companies to de-risk, rather than take a hit on returns.

These options may include selling minority stakes in portfolio companies, control deals through which they sell 50% of a portfolio company to its newest fund and sell the remaining 50% to another sponsor "on the basis that they still believe there is a lot of growth in the investment, but again, in this environment, they want to de-risk." General partner-led recapitalizations also create options, allowing a fund to carve out remaining assets from a vehicle at the end of its life cycle, find new limited partners, and "effectively reset clock so that you have the flexibility to hold the assets for a bit longer," Maellare said.