Is there a threat of distress in private equity funds?

I think that is unli­kely. Every crisis also repres­ents an oppor­tu­nity. The port­fo­lios of estab­lished private equity (PE) compa­nies in parti­cu­lar have alre­ady proven to be extre­mely robust during the Covid 19 crisis. The current geopo­li­ti­cal situa­tion in Europe and the energy crisis will also be dealt with by the private equity indus­try accor­din­gly. Funds conti­nue to be laun­ched and successfully placed on the market.

Basi­cally, I expect two deve­lo­p­ments in the coming years. First, that tech­no­lo­gies as well as purcha­sing, produc­tion and supply chain proces­ses will become even more of a focus for PE houses. Here we are talking about the opti­miza­tion of opera­tio­nal proces­ses, which can be used to further increase effi­ci­ency and cost savings. Second, I think private equity firms will incre­asingly make acqui­si­ti­ons that stra­te­gi­cally comple­ment their port­fo­lios. The aim is to create syner­gies among the port­fo­lio compa­nies and thus be even better prepared for crises.

Among our clients, our tran­sac­tion teams have contin­ued to record a high number of invest­ments and tran­sac­tion volu­mes to date. Howe­ver, we are actually noti­cing a certain reluc­tance among inves­tors at the moment. In my opinion, this is merely a snapshot. I inter­pret this as a short phase of market obser­va­tion before invest­ments are made again.

The time for PE lenders remains quite promi­sing. Howe­ver, as far as the donor menta­lity of inves­tors is concer­ned, the invest­ment decis­ion depends on the indi­vi­dual case. Recently, company valua­tions have often moved upwards, making purcha­ses less attrac­tive — this dyna­mic has some­ti­mes been incom­pre­hen­si­ble to inves­tors. The current inte­rest rate level corrects this trend. It again weak­ens company valua­tions and, over time, makes compa­nies lucra­tive targets for pati­ent inves­tors. I curr­ently see great oppor­tu­ni­ties for inves­tors and port­fo­lio compa­nies alike in the areas of private debt and distres­sed equity.

On the one hand, we see that inter­na­tio­na­liza­tion will play a central role. This is because we expect the trend to conti­nue and U.S. private equity houses to invest more in the German market; inves­tors from the United States are bene­fiting from a strong dollar. — On the other hand, I see the poten­tial for an incre­asing number of medium-sized compa­nies to choose private equity capi­tal as a finan­cing option in the coming year. Rising inte­rest rates make this alter­na­tive seem more attrac­tive. We see this very clearly in our role as a corpo­rate service provi­der for nume­rous medium-sized compa­nies, which we support in their inter­na­tio­nal expan­sion with our Global Payroll and HR Services, among other things.

Marc-Oliver Knob­loch

is Head of Commer­cial at Vistra (Germany) and a member of the manage­ment of Vistra Germany. He is based in our Frank­furt office and is respon­si­ble for sales in Germany. Before joining Vistra, Marc-Oliver was Head of Sales at Credit­s­helf AG, the first listed FinTech company in Germany offe­ring digi­tal finan­cing for small and medium-sized enter­pri­ses (SMEs). Prior to that, he was Head of Deal Sourcing at Part­ner­Fonds AG, a private equity firm based in Munich.