The Performance of Private Equity Portfolio Companies During the COVID-19 Pandemic

57 Pages Posted: 24 Dec 2022 Last revised: 11 Dec 2023

See all articles by Paul Lavery

Paul Lavery

Adam Smith Business School, University of Glasgow

Nick Wilson

University of Leeds - Credit Management Research Centre; University of Leeds - Division of Accounting and Finance; University of Leeds - Faculty of Business

Date Written: May 26, 2023

Abstract

We study the performance of PE-backed companies during the COVID-19 pandemic. Our findings suggest that PE-backed firms' sales, employment, and earnings were more resilient compared to closely matched industry peers during the pandemic. These effects are found to be insignificant among firms which were the most vulnerable at the onset of the pandemic, and firms in the most exposed industries. These more vulnerable firms appear to have been less active in obtaining additional financing during the pandemic, and consequently, suffered a significantly higher incidence of distress. However, non-PE-backed firms in distress had a higher incidence of liquidation, while PE-owned firms more often negotiated formally with creditors to continue trading. Our analysis shines light on how PE investors may respond to a large, exogenous shock such as the COVID-19 pandemic.

Keywords: Private equity buyouts; firm performance; COVID-19 pandemic

JEL Classification: G01, G23, G32, G34

Suggested Citation

Lavery, Paul and Wilson, Nicholas, The Performance of Private Equity Portfolio Companies During the COVID-19 Pandemic (May 26, 2023). Leeds University Business School Working Paper, Available at SSRN: https://ssrn.com/abstract=4301174 or http://dx.doi.org/10.2139/ssrn.4301174

Paul Lavery

Adam Smith Business School, University of Glasgow ( email )

University Avenue
Glasgow, Scotland G12 8QQ
United Kingdom
07979140811 (Phone)

Nicholas Wilson (Contact Author)

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

University of Leeds - Division of Accounting and Finance ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

University of Leeds - Faculty of Business ( email )

Leeds LS2 9JT
United Kingdom

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