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McKinsey : Lessons for Private Equity from the last downturn

Updated: May 20, 2020

Jeremiah Connolly, Bryce Klempner et. al. from McKinsey's US team have summarised their findings from private equity fund performance before and after the last downturn, to extract some key insights relevant to the current situation.

Their research highlights that those GPs who had emphasis on portfolio company value creation and those who remained active in dealmaking throughout the downturn were able to outperform their peers both during and after the period.

LP behaviour also responded to their differentiated approach, noting and "voting with their feet" towards those GPs who focussed their attention on adapting and responding through their portfolio's operational strategies.

The current downturn has undoubtedly created a larger gap than ever between buyer valuations and seller exit price expectations, so there's only so much GPs can achieve new deal wise until the dust has settled.

With that in mind, an emphasis on mobilising portfolio companies to adapt and respond to what will likely be an emergent "new normal" lies at the heart of both fund performance and GP differentiation through this challenging phase.

The authors kindly leave the door open to the smaller players like 1-2-10 in their findings, by emphasising that deployment of a small number of trusted value creation partners within the portfolio can be all that is required to bring home the alpha.

Read the full article on the following link :



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