2020 Review and Outlook for the Future
The last few months have been a stressful and fraught time for many individuals, organisations and markets, who have had to face up to the short term impact of COVID-19, as well as trying to understand what the long term impact will be.
However, despite what we hear and see in the media, it hasn’t been doom and gloom everywhere. Many markets have not only survived but stand to gain from the pandemic - such as software, online retail, pharmaceuticals, and home entertainment.
From an investment point of view, while new deal activity largely ground to a halt during lockdown, we are now starting to see some green shoots of recovery and are cautiously optimistic about this increasing over the coming months as confidence starts to slowly recover and the impact of the economic stimulus starts to filter down.
At Fresh Equity we have remained busy throughout the COVID-19 pandemic – we have continued to work with our portfolio as they adapt to new working practises, and in a number of cases have helped them to secure CBILs funding, capitalise on new opportunities and help them to adapt their businesses and work forces for life operating in a post Covid world. We have seen a significant increase in interest from customers operating in our specialist sectors of automation, robotics, controls & system integration, and SaaS & unified comms as companies increasingly look towards technology to assist them with remote working and increased levels of automation and improved productivity.
We were fortunate that as we entered lockdown we did so with our portfolio in pretty robust shape and enjoying health order books in sectors not too adversely affected by Covid. We haven’t felt the need to furlough staff in the majority of our portfolio and have adapted to remote working and social distancing protocols.
We are now starting to see some tentative signs of activity returning to the M&A market although deal volumes are still understandably low. We believe that Covid will accelerate the trend towards automation and remote working with the increased adoption of robotics and technology to enable this. The unprecedented economic stimulus the Chancellor has given to the UK economy will hopefully insulate most industries from the worst effects of the severe economic downturn brought on by Covid and lockdown and the benefit of this should start to be felt over the coming months.
Whilst we are by no means out of the woods, and the signs are that a ‘Second Wave’ is more likely, we are cautiously optimistic about the next 6-12 months and see some interesting opportunities for value creation, both within our portfolio and new investments in our preferred sectors.