A view from the experts

Private equity

  • Q4 2020 transaction data has signaled support for a continued and steady stream of sponsor-backed deals through H1 2021. While private equity (PE) exits were down YoY in 2020, sequential gains each quarter were clear – a trend we expect to continue in Q1 2021
  • We saw fundraising continue apace in Q4 2020, and PE uncommitted capital remains at near all-time highs (see below), but aging analysis of this uncommitted capital, suggests an even greater imperative for sponsors to deploy such capital with relative urgency (see below)
  • As in H2 2020, businesses with strong ‘pandemic stories’ will be highly sought after, but we believe as H1 2021 progresses, even businesses with less robust 2020 results, but strength showing in 2021, will garner substantial interest
  • In our view, this combination of factors suggests exit multiples will remain at least steady, and in some preferred sectors, actually rising on a per deal basis from already elevated levels

Note: As of March 31, 2020[1]

Note: As of March 31, 2020[2]


  • While restructuring activity peaked in Q2/Q3 of 2020, it was tempered due to the availability of capital and successful lender negotiations that avoided Chapter 11
  • While the Fed supported the credit market recovery to pre-pandemic levels, capital structures remain leveraged entering 2021, and face continued risks for ongoing exposure to further impact from the pandemic
  • The percentage of leveraged loan issuers with total debt > 7x has increased from below 20% in Q4 2019, to over 30% in Q3 2020[3]. Additionally, the year-end leveraged loan default rate (by issuer count) finished at 4.22%, slightly down from a 10-year high of 4.64% at the end of Q3. By amount, the default rate at 3.83%, is almost 100 bps higher than the historical average[4]
  • According to the S&P / LSTA Leveraged Loan Index, defaulted loan volume nearly tripled that of 2019 to $45.66 bn, just shy of the record-high numbers posted in 2009[5], causing further concern in the credit markets
  • Whilst we’ve witnessed the overall loan and high yield markets recover to pre-pandemic levels, a large number of issuers who entered into covenant amendments as a result of the pandemic will require renegotiation or extension of the covenant holidays
  • As a result, we anticipate that restructuring activity will see a change in 2021 for those who have not yet seen a recovery in their businesses, or where lenders view an equity risk 

Private Capital

  • 2020 was a record year for late-stage growth equity capital raising in the US, based on dollar amounts raised and volume of deals[6]
  • In our view, the strength of the IPO market will create a recycling of capital such that LPs will commit more to venture, growth equity and PE funds due to myriad successful exits
  • SPAC vehicles are, in a sense, supplying minority stake primary capital to private companies with larger enterprise values interested in becoming publicly listed
  • While virtual deal making is the new norm, we’re seeing an increase in growth equity investor professionals working from the office now, mainly due to their generally smaller staff sizes

All impacted by a new administration…

  • We believe the equity markets have responded favorably to the recent shift to the Biden administration, and when combined with the explosive growth of more mainstream SPACs (particularly Technology & Software), there is continued support for robust M&A market activity and exit multiples going forward
  • Biden’s ‘green agenda’ with incentives for renewable energy, transportation and manufacturing, could also demonstrate areas of activity in 2021, given the government support in these new areas for development
  • Similarly, Biden’s rhetoric around a ‘world stage’ could also enhance cross-border interest this year, through reinstating global trade deals and realignment of sustainable development goals creating a more ‘welcoming’ environment for foreign investment
  • International strategic interest can, in our experience, provide stability i.e. with respect to the initial market check for pre-auction bilateral interest or by providing a bona fide cash currency indication. This consideration is driven by a long-term view as opposed to short-term analysis of recent pandemic results
  • The upcoming transition period for struggling businesses – as they move from support to independence - could mean a spike in refinancing and restructuring transactions towards the end of 2021
  • As Biden’s plan for long-term government support for impacted businesses still remains to be seen, we believe PEs are poised for special situations and distressed deal opportunities. The strength and frequency of our inbound strategic inquiries remains very strong – with many PEs, interested in our buyer set, anticipating H2 2021 exits and looking to pre-empt or kick off their upcoming sell-side processes
  • We anticipate 2021 deal flow could reach near pre-pandemic levels, driven by transactions in core resilient sectors, such as Technology & Software



[1] “Private Funds Strategies Report Q3 2020”, PitchBook, 31 March 2020

[2] “Private Funds Strategies Report Q3 2020”, PitchBook, 31 March 2020

[3] Leveraged Commentary & Data, S&P Global Market Intelligence, 26 January 2021

[4] Leveraged Commentary & Data, S&P Global Market Intelligence, 26 January 2021

[5] Leveraged Commentary & Data, S&P Global Market Intelligence, 26 January 2021

[6] NVCA Q4 Venture Monitor, Pitchbook, 13 January 2021