A majority of UK CFOs surveyed by search firm Unquoted Advisory anticipate that the coronovirus crisis will add one to two years to exit timetables, with a very small proportion expecting longer delays.
Unquoted Advisory, a CFO search service for UK private-equity- and venture-capital-backed businesses, polled 144 CFOs of UK companies to gauge their outlook on the coronavirus crisis. Of the 144 respondents, 71 work for a PE- or VC-backed company.
The vast majority (69%) anticipate that exit timetables will slip significantly in the current environment, although the remaining 31% expect no change at all. The largest contingent (37%) think exits will slip by a year, with a further 26% seeing the crisis adding two years to their exit timetable. Only a very small proportion (sub-5%) expect their exit schedule to be delayed by more than two years.
The majority of respondents (52%) stated that their investors have been "very supportive" since the outbreak, with 38% thinking backers have offered a "moderate amount" of support. However, a not-insignificant 10% painted their investors' response as "not supportive at all".
The survey also looked at the level of redundancies in the respondents' companies, finding the average level of redundancies for PE-backed businesses sat at slightly more than 15% of the workforce. This is comparatively lower than VC-backed companies (18%) and privately held businesses (23%), but higher than listed companies (sub-3%), a set of results that Unquoted Advisory partially attributed to the average size and development stage of the companies in each bracket, as well as the inherent level of support afforded by the presence of a financial sponsor.
Unquote recently analysed how the global financial crisis affected average holding periods in Europe, and how these were tracking prior to the Covid-19 outbreak.
Commenting on the prospect of longer holding periods given the current environment, Antoine Drean, chairman and founder of fund advisory Triago, recently told Unquote that he expects GPs to be more proactive and imaginative than they were during the GFC when it comes to finding ways to accelerate growth during an extended exit slowdown: "Exit droughts become opportunities when they permit GPs to conceive and execute more ambitious, longer-term plans that can drive even better multiples on investment and higher annual returns. Of course, such a strategy for dealing with an exit drought dovetails with LPs' growing comfort with longer hold periods – provided they're justified by return targets."
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