Surveying private equity in 2021: Optimism and obstacles

The Torys team reveals the outlook, challenges, and opportunities for the 2021 private equity market

Many private equity and pension fund professionals see much optimism for 2021 and expect to see an overall improvement in the transaction environment. They believe that this will drive deal-making and fundraising activities throughout the year, despite uncertain global economic conditions as the pandemic persists.

Following the onset of the pandemic in 2020, many in the private equity industry put plans on hold as they worked to quickly respond to the COVID-19 crisis. Part of the optimistic sentiment from respondents can be attributed to the challenges of 2020, with the majority of respondents believing the relative outlook for 2021 will be much improved. More transaction volumes, better debt financing terms and heightened M&A activity are all expected, and year over year, twice as many respondents also anticipate it will be easier to raise new funds in 2021.

Despite the generally positive outlook, challenges persist. Competition for new investment opportunities continues, valuation multiples remain high, and some businesses that have shown COVID-19 resilience, are commanding a premium. LPs continue to expect sponsors to deliver co-investment opportunities. And the ongoing disruption caused by COVID-19 is influencing deal terms, with four out of ten respondents expecting to see the use of earn-out provisions to address valuation gaps.

Click on the link to read more from Torys’ survey of this year’s Private Equity outlook.

Contributing Authors: Michael F.E. Akkawi, Jamie Becker, Guy Berman, Laurie N. Duke, Jared Fontaine, Shannon Gotfrit, Michael Horwitz, Amy C. Johnson-Spina, Neville Jugnauth, Cameron D. Koziskie, Guillaume Lavoie, Joseph J. Romagnoli, Stefan P. Stauder, Venera Ziegler