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There could be another wave of takeovers if markets fall back again
Thursday 18 Jun 2020 Author: Mark Gardner

Private equity firms have hoarded a record pile of cash and are ready to swoop on distressed firms if markets fall again.

According to data provider Preqin, private equity investors – including sovereign wealth funds and leveraged buyout firms – are sitting on $1.4trn (£1.1trn) of cash.

A report by Mazars shows that two thirds of private equity firms are looking at deals to buy distressed companies, indicating that investors are willing to look outside their normal investment criteria as they seek to snap up a bargain.

Paul Joyce, head of London M&A at Mazars, said the findings suggest exit horizons for existing portfolio companies ‘may well be delayed’ given the current market conditions, but many private equity funds ‘remain highly liquid’ and are continuing to look for new opportunities.

The sizeable amount of cash in the industry has led many to believe there could be a deal bonanza, with knock-down prices in a market slump potentially increasing investment returns over time.

PwC’s UK chairman Kevin Ellis believes there will be a lot more mergers and buyouts compared to the recovery after the global financial crisis.

He said: ‘This isn’t a liquidity-led recession, this is a humanitarian-led recession. Therefore, there’s probably twice the level of available cash to do deals than there was in 2008.’

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