Published on May 8, 2020 on LinkedIn
During the last 6-8 weeks since the Covid-19 crisis hit us, most Private Equity funds have been focusing on managing portfolio liquidity issues and rightly so. However, as the economy starts to sputter back into action, funds with experience of managing past economic crises are deploying a strategy that we believe will make the difference between the winners and losers. What is this strategy?
#1 Research, research and research…
Spend time researching sectors and sub-sectors, understanding market dynamics, competitive landscape, profitability at a granular level. As an example, if you are looking to invest into healthcare, which sub-sectors are insulated from the crisis? Are these sectors earning attractive ROC for investors? What will change in the future?
# 2 Identify potential target companies in chosen sub-sector
In the chosen sub-sector, what are some of the actionable target companies? Which of these meet your investment criteria? Do these companies have a strategic advantage? Doing preliminary “outside-in” research, talking to customers/suppliers gives a good grasp on the position/real attractiveness of these companies & management.
# 3 Open channels of communication with target companies…NOW!
While it is unlikely that a deal gets done in coming weeks, it is important to have a credible channel of communication with your potential targets. Demonstrating that you understand the sector, their challenges and can bring expertise beyond capital, is attractive to any CEO/business owner living through this crisis. If anything, this crisis has reminded many small-medium owners that the world can change overnight and having a partner with ability to deploy capital at short notice is an asset.
Over the last few weeks, we at Medi-Tech Insights, have worked with investors to deploy these strategies in the healthcare sector. Are you ready with a clear action plan when the fog clears out?