For all the twists and turns of the last two years, one sector of the economy has certainly landed on their feet after a rough time early in the pandemic spring of 2020: the private equity realm. After a clearly delineated 2020, with the first half of the year decimated by the pandemic, the second half of the year skyrocketed as far as private equity deals were concerned. The momentum gained speed and the private equity sphere has carried through 2021, with no end in sight to the plethora of deals or the companies ready to purchase other companies, debt and all. As the pandemic goes, the country has learned to expect the unexpected.
The Gains
A prolific gain in private equity deals seems counterintuitive in a global pandemic. Although other parts of the economy have faltered in the pandemic world, private equity deals continue to burgeon. According to the Wall Street Journal, “Private-equity firms have announced a record $944.4 billion worth of deals in the U.S. so far this year, including buyouts and exits, according to Dealogic. That is 2.5 times the volume in the same period last year and more than double that of the previous peak in 2007.”
Because the interest rates are so low, investors see this as a great opportunity to purchase large conglomerates for a fraction of the usual cost. And with a variety of businesses inexplicably flourishing throughout the pandemic, there are a variety of companies from which investors can choose.
The success of the private equity market is a self-fulfilling prophecy now. The high action and volume in private equity is such that it just keeps creating more action. “Lots of funding and investment opportunities have created a real boom in private equity,” said Meziane Lasfer, a professor of finance and researcher on private equity at Bayes Business School in London. “The more PE firms take over companies, the more they grow, the more cash they can extract from their investments, the more opportunities they can take.”
