BackPrivate-equity executives see opportunity in uncertainty
A panel of deal makers at the Milken Institute Global Conference said they continue to evaluate investment opportunities across all sectors, including ones hit hard by the
PremiumA recovery from the economic damage caused by coronavirus pandemic is taking longer than deal makers originally anticipated, but firms with money to spend are seeing plenty of investment opportunities, according to a group of executives who spoke at the 2020 Milken Institute Global Conference Thursday.
Raymond Svider, chairman and partner at London-based private-equity firm BC Partners, said the U.S. economy was still in a bit of a bubble as a result of the government stimulus package. He added that most countries are emerging from the pandemic with high levels of debt, leaving less room for central banks to make moves supporting the global economy than they could during the last economic downturn a decade ago.
“The economic recovery is going to be slow," Mr. Svider said. “It’s probably going to be more painful than people necessarily imagine at this point in time."
Scott Kleinman, co-president of Apollo Global Management Inc., said that while growth-oriented companies are commanding high valuations in acquisitions, many companies, “that are just not as sexy from a growth standpoint are trading at pretty attractive valuations right now," as well.
In the past six months, Apollo has invested almost $5 billion in the airline, aerospace and aircraft industries through structured credit and structured equity, according to Mr. Kleinman.
“We think [that there’s] only more to come there," he said. “We haven’t yet felt all the pain that some of these sectors are seeing. When we look at some of these sectors, we’re literally modeling 2023 looking like 2019."
Apollo was also keeping a close eye on commercial real estate, where Mr. Kleinman predicted certain subsegments would see shakeouts over the next two years.
“Cheap liquidity eventually cannot overcome true, fundamental demand problems," he said.
Although the U.S. growth rate slowed in the downturn, long-term secular trends in demographics, health and wellness likely will persist and present opportunities, according to David Tayeh, head of North America private equity at Bahrain-based Investcorp Holdings BSC.
The private-investment firm targets deals across six core sectors: technology-enabled services; knowledge and professional services; data and information services; supply-chain services; industrial services; and consumer services.
Mr. Tayeh said Investcorp was looking at a couple of businesses in its target sectors that the firm felt hadn’t permanently changed because of the pandemic.
“We’ll probably be a little bit more conservative, but we’ll think about a range of outcomes as opposed to the false precision of a five-year outlook," Mr. Tayeh said. “There’s a lot of different ways to try and create value."
Even hard-hit industries such as hospitality and leisure aren’t being completely abandoned, although investors may need to proceed more cautiously because of the uncertainty created by the pandemic. Virginie Morgon, chief executive of Paris-based Eurazeo, which has invested in the two sectors for 15 years, remains optimistic about the sectors’ long-term prospects.
She added, however, she added that since “we were sitting in an era of complete uncertainty, give yourself more time to be certain you’re effectively going to make money on that investment and ride the cycle when it’s back."
This story has been published from a wire agency feed without modifications to the text
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