ST. LOUIS, April 17, 2020 (GLOBE NEWSWIRE) — A new Stifel Financial Corp. (NYSE: SF) survey of nearly 300 technology executives, entrepreneurs, and private equity (PE) and venture capital (VC) investors finds most expect the COVID-19 crisis to have a lengthy impact on business operations, leading to a U-shaped economic recession. At the same time, the survey indicates that a majority of companies appear to have sufficient liquidity to weather the storm and potentially eye add-on acquisitions.
Key survey highlights include:
- The majority of PE/VC respondents (62%) expect to see a business impact from COVID-19 on their portfolio companies for more than six months, while nearly half of tech executives/entrepreneurs (46%) are also planning for disruption lasting at least half a year.
- Most (55% of executives/entrepreneurs and 65% of PE/VC investors) expect a U-shaped recession.
- A majority of PE/VC investors (76%) and executives/entrepreneurs (55%) are planning to pursue add-on acquisitions or will push their portfolio companies to do so as the tech sector faces COVID-19 business disruptions.
- Executives/entrepreneurs are slightly more optimistic about 2020 revenue projections with one-third (34%) expecting to meet their budget goals, but just 19% of PE/VC investors believe their portfolio companies can reach that achievement.
- Customer churn doesn’t seem to be a problem yet, with roughly 77% of executives/entrepreneurs and 76% of PE/VC investors reporting less than 5% churn in recurring revenue.
“Our technology industry clients and their investors appear well-positioned to withstand the immediate negative impacts of COVID-19,” said Cole Bader, Co-Head of the Stifel Global Technology Group. “While a natural slowdown in activity is expected, we believe that technology will be the key driver of a global economic recovery and the sector will continue to grow strongly post-pandemic.”
“Interestingly, the majority of our PE/VC respondents are only forecasting a modest reduction in prices for acquisitions and sales of technology assets and expect to continue with add-on acquisitions for portfolio companies,” added Patrick Seely, Co-Head of the Stifel Global Technology Group. “Deal activity may slow, but it clearly won’t stop.”
The online survey of 270 global technology executives, entrepreneurs, and investors was conducted April 6-12, 2020.
- Most respondents (65%) expect to delay any portfolio company exits planned for the first half of this year to 2021. 30% said their planned exits would be delayed by 3-6 months, but would take place before the end of 2020. Only 5% plan to continue along pre-existing timelines.
- Almost every respondent said they expect valuations they will pay for companies in 2020 to decrease at least somewhat. 54% of respondents expect valuations to come down 5%-20%, and 43% of respondents saying they expect valuations to come down more than 20%.
- Similarly, sale prices for portfolio companies are also expected to decrease, with 73% expecting valuations to come down a modest 5%-20%, while nearly a quarter (24%) of respondents expect valuations to come down more than 20%.
- Over half (53%) of respondents reported no change in their approach to new “platform” investments, while 40% said they are pursuing value-based deals. Only 7% of respondents have put their investing approach on hold.
- The overwhelming majority of respondents (95%) said their Limited Partners are not pressuring for short-term liquidity.
- The vast majority (70%) of respondents say their investors and debt providers have been very supportive, with another 27% saying they’ve received partial support. Only 3% say their investors and debt providers were unable to support them at all.
- Most respondents (66%) believe they have enough liquidity to handle more than 12 months of an economic downturn, while 31% have the liquidity to handle less than 12 months of a downturn. 3% do not have sufficient funds to handle any downturn.
- Over half of those surveyed (52%) do not expect to initiate layoffs as a result of the economic crisis caused by COVID-19. Another 39% expect layoffs but believe the impact will be minimal. Only 9% of executives/entrepreneurs believe that there will be layoffs with significant impact.
- 60% of technology executives/entrepreneurs surveyed believe the federal government’s responses have been adequate to support the economy or their business, while 40% say the response has been inadequate.
Click here to view the full survey results.
Stifel Company Information
Stifel Financial Corp. (NYSE: SF) is a financial services holding company headquartered in St. Louis, Missouri, that conducts its banking, securities, and financial services business through several wholly owned subsidiaries. Stifel’s broker-dealer clients are served in the United States through Stifel, Nicolaus & Company, Incorporated, including its Eaton Partners business division; Keefe, Bruyette & Woods, Inc.; Miller Buckfire & Co., LLC and Century Securities Associates, Inc. The Company’s broker-dealer affiliates provide securities brokerage, investment banking, trading, investment advisory, and related financial services to individual investors, professional money managers, businesses, and municipalities. Stifel Bank and Stifel Bank & Trust offer a full range of consumer and commercial lending solutions. Stifel Trust Company, N.A. and Stifel Trust Company Delaware, N.A. offer trust and related services. To learn more about Stifel, please visit the Company’s website at www.stifel.com. For global disclosures, please visit www.stifel.com/investor-relations/press-releases.
Neil Shapiro, (212) 271-3447
Jeff Preis, (212) 271-3749