Planning and Navigating the Storm: How Should Private Equity Firms Respond to Market Uncertainty?

The decline in M&A activity reflects the radically changed macroeconomic environment that dealmakers are operating in following the pandemic, characterized by record inflation, persistent supply chain disruptions, geopolitical instability and tightening financial conditions. Economic indicators in Europe and the US are already signaling an impeding recession, with significant impacts on portfolio companies’ growth and profitability in the coming quarters and years.

PE firms should adopt a structured approach to assess the impact of an economic downturn on portfolio companies, alongside mitigation measures available to PE and management teams to immediately act upon the changing conditions. Key steps include:

1. Understanding the impact of a potential downturn

2. Developing mitigation measures

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