Opportunities for private equity post-COVID-19

The COVID-19 crisis has had a damaging impact on the economy—in a matter of weeks, once-safe assumptions about the economy have evaporated. Government policymakers are racing to pump billions of dollars into small businesses to help keep them from shuttering or laying off workers. The impacts will likely reverberate for months to come.

In time, perhaps this year or next, it is hoped, the virus will subside, and economic life will begin to return to normal. But by whom? Other than governments and central banks, very few entities have the kind of dollars that may be needed to help restart company growth, make vital investments, rehire workers, and restructure debt. Even then, deciding where to invest and what to save is a rare skill.

That’s why it’s important to recognize the role private equity firms can play in this environment. While they are perhaps best known for buyouts—and the political fire such deals often inspire—private equity firms can create far more value through their work in particularly challenging economic moments. The firms have the ability to take positions in out-of-favor companies and sectors, guide portfolio company management, and help grow businesses steadily over several years. The outsized returns these firms are able to generate—and for which they are sometimes reviled—often only emerge when the economy, and the companies they own, fully recover. In short, private equity firms often invest when so many others are afraid to act.

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