Private equity ‘a shot in the arm’ for middle market businesses

In a recent snap poll* by leading audit, tax and consulting firm RSM, almost three quarters (74 per cent) of private equity backed middle market businesses believe that their investor has had a positive effect on their firm’s future prospects.

Nearly 7 in 10 (69 per cent) believed their private equity investor had a positive effect on their firm’s resilience during the global Coronavirus pandemic, as communication between businesses and investors increased for nearly three fifths of the companies (68 per cent).

With 59 per cent of businesses saying that the pandemic has had a negative or very negative effect on trade, the findings highlight that the strength and guidance private equity investment brings has supported growing middle market businesses throughout a difficult year.

Charlie Jolly, partner and national Head of Private Equity at RSM said: ‘The purpose of middle market private equity investment is to fund growth. A successful investment helps create a bigger, more profitable and more robust business; and this is how middle market private equity funds get good returns for their investors.

‘Our snap poll highlights that private equity backed businesses felt better supported, more resilient and more confident about their future prospects – highlighting the ‘shot in the arm’ that private equity has been able to deliver to those businesses in need throughout the pandemic. This backing has created a strong foundation for growth as we emerge out of lockdown restrictions, and with deal activity on the rise private equity will play a key role in driving the UK’s recovery post-Covid.’

Over half (51 per cent) of the private equity backed businesses have slowed down exit timings due to the global pandemic; but over two fifths (43 per cent) are sticking to investment strategies with 28 per cent saying the pandemic has made them more acquisitive.

Charlie added: ‘Despite the unprecedented shock to the economy due to the pandemic, businesses remain bullish and are sticking to investment plans or even become more acquisitive as we come out of lockdown restrictions – highlighting a real opportunity for middle market businesses looking to grow and strengthen their future prospects with a strategic investment.’

*The survey was completed by 68 executive board members across a range of UK PE backed portfolio companies and sectors.