In Corona economic times the credit crisis would definitely impact M&A transactions that are done by private equity groups (PEGs). Although we all know that using debt “leverage” is common.
For most PEGs, not being able to raise much debt in the current environment has put a kink in their business model. For some it’s a small kink and for others it is a pretty darn big kink. The bright side of this is that there is obvious risk in having too much debt, and many believed some PEGs were over-leveraging their acquisitions.
There isn’t any doubt the credit markets will come back, though not to the same easy-money levels, and the PEGs will once again be as active in the market as they were last year – and at more reasonable debt levels.
We believe in Maxloyal AB that this credit market situation will impact all European markets, and is going to create favourable advantage for cash investors. As much as the opportunity for aggressive leverage would be less likely, as much the market will be welcoming buyers with cash advantage.
Most experts believe we are in a recession, which makes it a buyer market with an opportunity to leverage cash for more equity acquisition.
Cash investment put small businesses in less risk and less exposure to lenders especially in shaky consumer market condition. Therefore, we think that for acquisition offers or partial divesting plans the market will be more welcoming for cash investors.
Sam Jobara