12 May 2020
Deal activity has bounced back strongly in recent weeks following the initial impact of the Covid-19 lockdown, according to David Gee, an investment committee member at YFM Equity Partners.
Gee has more than 30 years of private equity experience, and invested through the 90s recession and recovery, the dotcom bubble, and the 2008 banking crisis.
He said that, while the initial shock of lockdown was evident in early April, with some deal processes being postponed or even falling away entirely, new deal activity and bounced back in just a few weeks.
“When the UK first went into lockdown six weeks ago, the worry for many business owners and start-ups was that potential investors may be losing their appetite, or they would be too portfolio-focused to consider new opportunities,” said Gee.
“In fact, we are already seeing some winners in the market push ahead with their business plans, particularly early stage tech businesses who have adapted quickly or were already geared up for remote working. There are businesses which have been relatively unaffected by the current ‘pause’ who want to move forward with offers or discussions, but with a focus on putting the relationship first –partnering with the right PE team to help them through uncertain times, is a key component in getting the best deal.”
Gee said YFM had adapted to help meet the changing needs of businesses.
He said: “As a firm which likes to get close to its portfolio businesses, the need for social distancing in recent weeks has presented some challenges, but we’ve been able to adapt our own processes and use technology to virtually meet management teams, introduce non-exec candidates and work through our due diligence.
“It’s important to look beyond the current disruption – a good venture capital investor is a long-term supportive partner that knows the business well and doesn’t overreact when plans change. One way of ensuring this is to raise finance with a house that is very much open for business in a downturn and one that is prepared to take time to understand the people and markets in a less than ideal environment. YFM has recently raised a new £80m buyout fund to support SMEs throughout the UK, demonstrating our belief in future opportunities.
“Having been in the business for almost 40 years, we’ve invested through many economic cycles and are able to see beyond the immediate challenges. In fact, taking investment in a downturn can free up a company to expand both by acquisition and in preparing an organic plan to maximise the opportunity in a market that may well be less competitive and in a greater state of flux on which to capitalise.”
Gee cited a number of significant deals that were completed in challenging economic conditions.