A year ago, many stakeholders were apprehensive about the economic consequences of the COVID-19 health crisis, and no one knew whether it would affect private equity permanently.

Despite the long-term crisis, activity in France has been on the rise over the past few months, and investors have been able to quickly think of new strategies to rebound or position themselves favourably in the event of a recovery. It is up to companies to prove that the operational risks resulting from the health crisis are under control, or at least that their strategy can be adapted to mitigate them (for example, via cash flow and operational cost management, production capacity or new markets).

In this context, some companies that were attractive in good times have proved to be less solid in times of crisis, while some sectors, such as healthcare, education and digital, have multiplied their operations to consolidate their growth or take strategic positions.

IN DEPTH

Recovery and a Look Ahead

After a period of adjustment in Q2 2020, market participants adapted to new constraints linked to containment and distancing measures, finally accelerating in the last quarter. This recovery was facilitated by available cash flow linked to dry powder that was already high before the crisis, along with low interest rates and economic support programs.

The number of transactions over this period thus remained stable compared to 2019, with 172 deals (compared to 185 in 2019). In the first months of 2021 deal activity carried on strongly, with many contemplated transactions, which were put on hold due to uncertainty issues, being successively reactivated.

This resulted in editing the drafting of the documentation with the parties waiving the current or future impacts and consequences of the COVID-19 event in order to capitalize on the current or future transactions on a renewed confidence and willingness to invest in a context where investors want to act quickly. This is reflected by investment opportunities selected before their term, on firm terms, with very few guarantees, apart from the usual constraints.

Confidence is therefore high. It remains to be seen what sectoral or general trends will extend beyond the pandemic, such as the growing emphasis incorporating sustainability and social responsibility.