Economic Situation
The current international situation will have a global impact and will
continue in the long term with as yet unforeseen consequences.
Probably the multiples to which the international stock exchanges have
become accustomed will undergo significant corrections in the
medium-long term.
However, several investment funds seem to have the necessary liquidity
to grow and support the companies in their portfolios thanks to the
liquidation of investments in recent years, interest rates that have
remained at minimum levels for a prolonged period of time and an
increasing ability of Private Equity companies to allocate capital and
guarantee high returns.
In this macro-economic context, Private Equity must increasingly
distinguish itself as an alternative vehicle to regulated financial
markets. Following the lock-down due to the Coronavirus, Galileo
Business Consulting has mapped three important investment strategies
of the major international Private Equity firms:
Grow by Acquisition
The first strategy is to grow by acquisition the turnover of portfolio companies. Growing by acquisition the investments made in the past will prove to be the preferred solution and will consequently create supply chains with subjects that are increasingly capitalized and able to withstand the international "dynamism".
Risk Reduction
The second strategy will see investments directed towards those sectors not necessarily affected by the Coronavirus crisis and less exposed to the Russian market. In addition to Chemicals, Pharmaceuticals and Cosmetics companies, there are also Food, Luxury and On-line companies that have shown resilience in the lock-down phase and, above all, will not see the total long-term debt increase if they do not concert on the Russian market.
High Value-Added
The third strategy will
focus its action on projects that are complexly structured, but with
the opportunity to realize high added value following proper long-term
implementation. These situations include cases of over-indebtedness of
subjects with solid prospects for industrial recovery and important
Carve-Out actions by conglomerates interested in the spin-off of
non-core activities to increase their liquidity.