Private equity investments after the crisis: looking ahead

Thanks to their expertise in dealing with corporate and capital structures, experienced private equity managers are well placed to lead their companies out of the crisis. Historically, a weak economic environment has even proven to be favorable for entering into a private equity engagement. The prerequisite for success on the investor side remains careful strategic planning and holistic support for the investment, from liquidity planning to reporting.

The image of the private equity market in Germany has changed in recent years, from an unknown niche to the playground of speculative "locusts" to an important and constructive part of the economic cycle. Accordingly, more and more institutional and other investors have become receptive to the asset class, contributing to the acceptance and growth of private equity. The financial crisis has now put this image transformation to the test once again. Fundraising and investment volumes in the private equity market have dropped significantly for the time being, and some investors are asking themselves whether private equity investment is the right way to achieve stable and attractive returns after the shock of the crisis.

Anyone who keeps a long-term perspective and looks ahead must answer this question in the affirmative. Experience has shown that the quality of the fund management is more important for the development of a private equity fund than the respective market environment; this has been confirmed once again in this crisis. Private equity funds, which are usually the main owners of their portfolio companies and are in intensive dialog with management, can and must implement necessary cost-cutting and restructuring measures quickly and consistently in order to protect the company - and thus also their investment. This was precisely what was now observed on the market. In many cases, costs were reduced, sometimes radically, liquidity was secured, and where appropriate and necessary, the funds injected equity and/or worked with lenders to find new ways to finance