There is one major overriding theme that dominates at a level and with a consistency we have not previously witnessed – forget M&A, all attention has been turned to preservation of the portfolio.
It is expected that many portfolio businesses will look to defer tax payments (which at this stage seems to be supported by HMRC) and/or delay paying rent or otherwise renegotiate lease terms. As a consequence, the commercial landlords (and RE related funds) are likely to face the double hit of a significant reduction in cash collections and a post Corona environment with less demand for commercial real estate - eyes are being opened to the possibility of remote and agile working at a scale and speed few of us could have contemplated.
On the other side of the coin, attempts to collect and pool cash are being prioritised, large numbers of corporates will look to draw down unutilised facilities and there will be very little (if any) discretionary spend.
We have clear winners and losers already. Many Funds have identified the assets within their portfolio which will not survive. Some are obvious simply by falling into the wrong sector – one PE house has an investment linked to hospitality which 3 weeks ago was its best performing asset. Yesterday it had "£O" revenue and next week it may well be placed into administration. Another investment by the same PE house in the tech space is flying simply because it is centred around the services and products which are now in most demand. Certain sectors whilst already attractive will also find their profile and desirability supercharged – EdTech, video conferencing and remote GP services to name a few.
For those portfolio businesses which are not clear winners or losers (which is the vast majority), the challenges are to keep going whilst revenue will be down, employees displaced or ill, cash challenged and supply chains compromised. Their success in doing so will depend on the length of the journey, the speed at which those businesses can adapt, how much the Government is prepared to intervene (the early signs are promising), the depth, quality, creativity and flexibility of their people… and of course last (but by no means least) the willingness of their PE investor to continue to provide support.