How COVID-19 is transforming the PE operating model

In this episode of the NextWave Private Equity Podcast, Tim Dutterer, EY-Parthenon Head of Private Equity, and Greg Schooley, EY US Value Creation Leader, join Winna Brown to discuss how COVID-19 is transforming operating models across the PE portfolio and beyond.

After the economy recovered from the Great Financial Crisis of 2008, economic activity and growth were steady and predictable. As a result, private equity-owned companies optimized their operating models for efficiency, anticipating the next economic cycle would a more modest recession. No one, publicly traded corporates or PE-owned companies, was prepared for the sudden and complete secession of economic activity caused by COVID-19.

However, PE investors reacted very quickly, understanding the severity of the crisis and mobilizing to increase liquidity across the portfolio. While a few sectors were spared from the sudden economic collapse, a wide spectrum of both impacts and actions can be observed across the vast majority of the US economy.

We believe that the COVID-19 induced economic collapse will greatly accelerate several ongoing trends:

  • Global supply chains will fragment as companies look for more resiliency
  • Continued reconsideration of extent of reliance on China compared to lower-cost and lower-profile countries 
  • Automation will be more widely deployed in a range of activities and sub-functions
  • Back-office functions will be increasingly outsourced 
  • The value of office real estate will diminish due to large-scale adoption of remote ways of working 
  • Assessing the impact “black swan” events will become the norm in scenario planning

The post-great recession period of stable, predictable growth enabled companies to optimize and achieve greater efficiencies. The big question for the next decade will be: how much efficiency must be sacrificed to achieve greater resiliency that the post-COVID-19 world requires? And how will this resiliency affect the returns PE firms can generate?

For your convenience, full text transcript of this podcast is also available. Read the transcript

Presenters

Tim Dutterer
EY-Parthenon Americas Private Equity Sector Leader

Podcast

Episode 11

Duration 29m 00s

In this series

series overview
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How COVID-19 is transforming the PE operating model

In this episode, our speakers describe how COVID-19 is transforming operating models across the PE portfolio and beyond.
Podcast

Episode 11

Duration
29m 00s

Presenters

Tim Dutterer

EY-Parthenon Americas Private Equity Sector Leader