Private equity houses have been backed to capitalise on uncertainty over the UK’s Brexit vote with new investments.
A Boston Consulting Group (BCG) report out today highlights a number of areas private equity (PE) should be focusing on after the EU referendum result.
And one of the report’s authors, Antoon Schneider, a senior partner at BCG, told City A.M. that PE firms can thrive while corporate deals freeze and the flotation market struggles.
“While corporates are put off by ‘oh, it’s uncertain, Brexit is happening and let’s batten down the hatches’, private equity guys are more confident in their ability to analyse uncertainty,” he said. “And maybe they’re also more willing to take calculated risks.”
Schneider added that, for PE firms, “sitting on the sidelines for a couple of years is not an option”.
He added that private equity firms are “as busy as ever” now, despite uncertainty around Brexit.
“The only time they were holding back was just before [the EU referendum],” he said. “Now that they know it’s Brexit, they know the uncertainty to an extent – though we don’t know the nature of it yet – private equity is applying its skills to try and find the right targets to buy. And we’ve not seen a slowdown in new deal activity.”
The BCG report analysed 40 priority sectors for private equity and highlighted areas such as industrial distribution, private medical clinics and laboratories, aerospace manufacturing and employment and recruitment services as some areas of particular interest.
“Companies in all of these sectors will face substantial risks at this time of uncertainty and volatility,” the report said.
“But PE firms, especially those focused on adding value to operations, are well placed to help them succeed.
“Corporate buyers, by contrast, are often limited by the pressure to ensure short-term earnings stability.
“As for the IPO market, the current turbulence will dampen demand for all but the strongest assets.”