Private equity portfolio firm performance in periods of crisis

Our recently published study with Dr Paul Lavery in the Journal of Corporate Finance https://doi.org/10.1016/j.jcorpfin.2024.102641 investigates the performance of private equity (PE)-backed companies during the COVID-19 pandemic, revealing their greater resilience compared to closely matched industry counterparts. However, the superior performance was less pronounced than in the pre-pandemic period, suggesting that outperformance is due to investors’ initial target firm selection combined with active support mechanisms. Outperformance was negligible among the most vulnerable firms and those in highly exposed industries at the pandemic’s onset. These vulnerable firms are less proactive in securing additional financing, leading to a higher incidence of distress. However, non-PE-backed distressed firms face a higher liquidation rate, while PE-owned firms more frequently engage in formal negotiations with creditors to continue operations. The analysis highlights PE investors’ role during a significant exogenous shock, indicating that the combination of skilful target selection and proactive crisis management explains their outperformance   #privateequity #venturecapital #resilience #management #productivityinstitute #leedsuniversity #crisismanagement  #productivity. Leeds University Business School University of Glasgow Adam Smith Business School LUBS Accounting and Finance Department