The ever-expanding private equity arena makes for a substantial share of global investment capital. Much like every other aspect of the global economy, private equity has also been a victim of the devastating impact of the ongoing coronavirus pandemic.
“The rate of changes wrought by COVID-19 is unprecedented in the modern era,” claims Australian businessman and AFL fan, Darren Herft.
As policymakers rush to inject capital into small businesses to keep them afloat as they reel under the impacts of the virus, Darren Herft thinks that private equity can play a crucial role.
“Knowing where and when to invest is a rare skill that forms the foundation of the private equity model,” he contends.
According to the veteran investor, rapid economic recovery will need investments to reignite company growth, rehire employees, restructure debt and make crucial investments.
“While they are infamous for buyout deals and vulture capitalism, private equity firms possess the expertise to change the direction of underperforming businesses,” says Darren Herft.
He thinks that this is because of their capacity for risk tolerance, and their experience in helping companies grow over several years to produce outstanding results.
Darren Herft contends that “private equity players are willing to invest under challenging economic times.”
It is no secret that a plethora of businesses are under severe economic strains. Covid-19 has changed the landscape with millions of people losing their livelihoods.
“Private equity players can help firms not only with alternative funding opportunities but also provide key expertise in helping management lead better,” says Darren Herft.
The entrepreneur is of the opinion that private equity firms have an eye on making potential investments to companies in distress as well as keeping their pre-existing portfolios afloat.
“They have the firepower needed to transform whole sectors and create growth and value,” he says.
Such decisions would undoubtedly require careful considering as short-term prospects are obfuscated by the myriad of challenges posed by the pandemic and its fallout.
“Private equity players cannot go on with business as usual.”
“The new business environment created by the virus has made long-term investments a necessity to obtain the growth that firms desire,” he adds.
Firms should be prepared to forgo their initial targets. To Herft, these changes are not walls but hurdles that firms should take on as a challenge.
He says, “More than ever before, the market requires private equity firms to multitask.”
Herft recognizes that not all firms are prepared for the changes as many do not possess the capabilities or capacity for such projects.
The businessman is certain that just like the last major economic crisis, the global recession of the previous decade, the best private equity players will take on COVID as a test of their mettle and bounce back rapidly.
“I am certain that private equity firms are working round the clock to discover any opportunities and will overcome this crisis,” he adds.
