New York (ots/PRNewswire) – Research analyzes insights into investment trends, exit strategies, funding sources, emerging challenges, and opportunities in the mid-market
New York Life Investments Alternatives in partnership with Coalition Greenwich today released a new research report analyzing how mid-market private equity sponsors have responded to the global pandemic. The report is entitled “Lessons Learned: Insights from the COVID-19 Crisis for Middle Market Private Equity Sponsors“and contains research from more than 100 interviews with executives and partners of private equity sponsors in the mid-market segment in the United States.
“The pandemic has put mid-market private equity sponsors to the test at all levels, but sponsors have shown themselves to be more than equal to the situation, such as the sharp increase in transaction volume in the second half of 2020 and this year From optimizing their investment processes to rapidly adopting new technologies, funders have adapted quickly to the new environment in order to best support their current portfolio companies while continuing to raise capital for new transactions, “said Christopher Taylor, Head of New York Life Investments Alternatives and CEO of Madison Capital Funding.
The investigation found that the Covid-19 pandemic had a profound impact on the midsize private equity industry, triggering lasting changes in sponsors’ core areas such as investing, deal sourcing, transaction finance, exit strategies and fundraising.
The most important insights from the research data include:
- New deals are driving the development: For 60% of the mid-market private equity sponsors participating in the study, new deals are the most common driving force behind capital spending in 2020, while add-on investments come in second place.
- Funders sharpen investment processes: Almost 30% of sponsors surveyed said the crisis and the subsequent recovery led them to tighten their assessment discipline.
- Relationships prove valuable, especially when financing deals: The sponsors surveyed named the relationship history and the flexibility of the agreements as the characteristics they consider most important when financing partners in an uncertain market environment.
- The pandemic had different effects on the exits: More than a third of the sponsors surveyed report that the pandemic has delayed the exit and extended holding times. The sponsors report delays ranging from a few months to two years to give the portfolio companies more time to meet growth expectations.
- The optimism among the LPs remains: More than half of the study participants believe that the LP community is still optimistic about the investment climate; however, around 30% of the study participants stated that the LPs rate the environment negatively – often due to assessment concerns.
- The introduction of the ESG continues: Three quarters of the specialist sponsors surveyed and half of the generalists stated that they consider ESG factors in their investments. However, most have not yet established formal procedures for assessing ESG or incorporating DEI factors, and less than 5% of sponsors surveyed have signed the UN PRI.
“Looking to the future, after acting quickly and decisively in 2020, the sponsors are still ready to benefit from the favorable conditions in the mid-market. The flow of transactions in the mid-market segment continues to gain momentum as the markets recover rapidly and the Funders want to deploy a record dry powder inventory in advance of possible tax changes, “added Taylor. “The Covid-19 crisis combined with the economic and social upheavals of last year not only had a lasting impact on business processes, investment decisions and portfolio management, but also shifted the sponsors’ focus from the ‘E’ to the ‘S’ in ESG, which underscores the incredible importance of diversity, equality and inclusion in investment processes and portfolios. “
To learn more about the survey results, you can download the full research report here: Lessons learned: Lessons learned from the Covid-19 crisis for mid-sized private equity providers.
methodology
Between February and April 2021, the Greenwich Coalition, in partnership with New York Life Investments Alternatives, conducted a study to examine the impact of the Covid-19 crisis on mid-market private equity sponsors. Coalition Greenwich surveyed 100 executives and partners of mid-market private equity sponsors in the United States. These in-depth phone calls discussed the impact of Covid-19 on investment trends, exit strategies, funding sources, and new challenges and opportunities.
Learn about New York Life Investments Alternatives
New York Life Investments Alternatives LLC (“NYLIA”) is a registered investment advisor providing comprehensive capital solutions and other alternative strategies to a wide range of institutional clients. NYLIA is made up of three highly specialized alternative investment boutiques: GoldPoint Partners, Madison Capital Funding and PA Capital, which together manage over $ 35 billion in assets under management (as of 7/31/2021 *).
For more information, see https://www.newyorklifeinvestments.com/nyl-alternatives p>
Information on Coalition Greenwich
Coalition Greenwich, a division of CRISIL, an S&P Global company, is a leading global provider of strategic benchmarking, analysis and intelligence to the financial services industry. We specialize in delivering unique, high quality data and actionable recommendations that help our customers improve their business results.
* Madison Capital Funding LLC (MCF) assets under management include approximately $ 271 million in equity, mezzanine, fund, and other subordinated investments, and approximately $ 4.3 billion in senior third party loans managed by MCF. These assets are considered Regulatory Assets Under Management (“SPACE”) as defined on the SEC Form ADV. AUM excludes approximately $ 265M SPACE, which consists primarily of unsecured capital commitments to certain private funds managed by MCF. The remainder of the AUM, approximately $ 8.2 billion in senior loan commitments and $ 73 million in fund investments, is managed by MCF on its own account. These senior loan commitments and fund investments are not considered SPACE and are therefore not included in the calculation of SPACE on MCF’s ADV Form for regulatory purposes.
Inquiries & contact:
New York Life Investments Alternatives
Allison Scott
allison_scott@nylim.com
Kate Sylvester
xylvester@sloanepr.com
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