Partners Group will consider paying a premium for certain assets to capture attractive opportunities in a post-coronavirus environment.
In its latest Private Markets Navigator Outlook 2021, published Monday, the Zug-headquartered firm said the pandemic had sharpened its focus on certain investment opportunities.
“We continue to look for resilient, high cashflowing assets with above-average profit margins and growth potential driven by secular trends,” the report said.
“We also focus on the visibility of organic growth, consolidation potential and downside protection. In this context, we may accept higher prices if we have a strong conviction about future growth resilience.”
Partners Group acquired a significant equity stake in crop nutrition business Rovensa from Bridgepoint – which owns PEI Media – at an enterprise value of about €1 billion in July, according to a statement. The firm was also active in infrastructure, acquiring a windfarm project in Australia and a stake in European electronic toll collector Telepass in August and October, respectively.
Global investment activity has slowed this year. Deal value fell 12 percent year-on-year to $353 billion YTD and deal count was down 30 percent as of 20 November, according to EY. Retail and utilities sectors experienced the biggest spike, with deal value climbing 89 percent and 83 percent respectively versus YTD 2019, while real estate and oil and gas each fell by more than 66 percent.
“The gap in valuations between what buyers were willing to pay and what sellers expected weighed on activity, on top of the physical distance challenges faced when diligencing and closing transactions during lockdown,” Partners Group noted in the report.
However, the pandemic has also encouraged some owners to sell. US portfolio company EyeCare Partners – acquired by Partners Group in December – made nine add-on acquisitions between May and July this year. Likewise, French property management business Foncia – purchased in 2016 – completed more than 50 add-on acquisitions between January and August.
The firm said that investment volumes and valuation levels remain split across sectors despite a rebound in capital markets and the renewed availability of debt.
“Resilient, high-margin assets with growth visibility are in high demand and, consequently, trade at premium valuations, often exceeding pre-covid-19 levels,” it said.
“This is especially the case for companies that have embraced or are facilitating the transition toward a digitised economy and certain segments within the healthcare sector, with IT software and essential health services being prime examples.”