The annual report’s survey of over 100 executives at private equity institutions and pension funds highlighted the prevailing optimism towards dealmaking in 2021—which Guy said was partly due to industry players’ agility and their use of technology.
“I think the industry has figured out that they can work in this environment, that they can meet their targets,” Guy said.
“They know they can do things by video call, and do their due diligence, get to know the company they are interested in, the business and the people.”
Michael noted that despite the initial onset of economic turbulence in 2020, there is now more certainty in the market and investors are willing to invest their capital.
“There’s so much capital allocated to these classes… and that capital needs to be deployed, so they are out there looking for the best opportunities in the current environment,” Michael said.
Both Guy and Michael highlighted that the survey results showed a high interest from pension funds to co-invest deals and Michael pointed out that there is a general consensus that private equity investments perform well over longer periods of time.
“What’s really behind that is, when you look at the uncertainty of the markets, I think there’s a feeling that private equity over the long run tends to do perform very, very well,” Michael said.
Michael also noted that private equity managers are traditionally conservative.
“By nature, pension fund and PE managers are conservative and don’t want to pay inflated valuations,” Michael said.
But Guy noted that the “key thing” to building a successful relationship with a potential organization is to pay close attention to that relationship to try and avoid a possible deal ending up in an auction process.