The Performance of Private Equity Portfolio Companies During the COVID-19 Pandemic

Dr Paul Lavery (Glasgow University), Prof Nick Wilson: We study the performance of PE-backed companies during the COVID-19 pandemic. Our findings suggest that PE-backed firms’ sales, employment, and earnings were more resilient compared to closely matched industry peers during the pandemic. These effects are found to be insignificant among firms which were the most vulnerable at the onset of the pandemic, and firms in the most exposed industries. These more vulnerable firms appear to have been less active in obtaining additional financing during the pandemic, and consequently, suffered a significantly higher incidence of distress. However, non-PE-backed firms in distress had a higher incidence of liquidation, while PE-owned firms more often negotiated formally with creditors to continue trading. Our analysis shines light on how PE investors may respond to a large, exogenous shock such as the COVID-19 pandemic. Full paper