Private equity funds are targeting investments in businesses in the travel, entertainment and energy sectors that have seen their valuations drop as a result of the coronavirus pandemic.
Funds have been stockpiling cash due to the fact they have been reluctant to invest in what they view as over-valued companies. As a result, they now have an estimated $1.5 trillion that they are ready to deploy.
Now, with the coronavirus pandemic meaning that company valuations have been slashed, it is anticipated that there will be greater interest among private equity funds in making investments.
It is expected that, initially, deals will take the form of investments rather than takeovers. Transactions known as PIPEs, or private investments in public equity, are one of the ways in which companies in distress will be able to quickly raise cash.
Funds are understood to be targeting the travel, entertainment and energy sectors in particular.
However, one senior investment banker told CNBC: “Private equity is trying to do PIPEs all over the place right now,” with the targets being every industry where stock prices have collapsed.
That said, it is understood bank advisers are telling struggling companies to reject private equity investment for the time being and instead explore opportunities presented by the US Government’s $2 trillion aid package.