Private Equity Investment in Singapore Post COVID-19

It will be very early to draw any conclusions about the long-term impacts of the Covid-19 crisis, but the top private equity firms in Singapore most prepared to endure this crisis will benefit more. Given the darkness surrounding the Covid-19 crisis, it is impossible to assess the longer-term impact on private equity industry performance. It will depend on the duration of the lockdown and the trend of the subsequent recovery. High-valuation deals done before the slowdown may ultimately suffer as company performance comes under pressure.

Investment

Competition for attractive deals will likely decline, to private equity’s benefits. With the public markets discouraged and potential corporate buyers holding onto their investments, private equity funds are well-positioned to be the buyer for any deal that does come up for sale.

Fund Raising

For investors who have survived the 2008-09 economic crises, the current crisis is unlikely to shake their confidence.  The drop in fund-raising this time around might be less harsh than in 2008–09 when the global total dropped more than 50%. At the same time, various structural factors could restrict the amount of new capital flowing into private equity in Singapore for some time.

Returns

Expect returns to take a hit for some time as funds mark down their portfolios in tandem with the drop in public valuations. However, the impact will be unknown for several quarters, as market-to-market moves lag public equities and PE funds report quarterly.

The COVID-19 pandemic has tested the private equity industry in an unprecedented way, restricting their ability to jump as investors everywhere remained cautious or complacent. But as the situation begins to stabilize, private equity firms in Singapore will enthusiastically reengage and help lead the recovery, applying their expertise and value-creating capabilities to stand companies back up and position them for long-term success.