TresVista Investor Confidence Index: U.S. Middle Market Private Equity Quarterly Report for Q1 2021

July 26, 2021

Back to form within a new normal. In the first quarter of 2021 we had a few key developments compared to 2020, though none as significant as the development of multiple effective COVID-19 vaccines. The deployment of vaccines across the country led to a precipitous drop in positive cases and fatalities, though more importantly allowed citizens to resume some element of a routine and allowed businesses the opportunity to thrive after seeing some tough days last year.

From an operational standpoint, respondents to this survey and clients we have spoken to have generally returned to levels of activity seen before the pandemic though with a few key logistical adjustments. While many have returned to the office, even more so have settled into a hybrid working environment, and a handful have even embraced remote working as the new standard. Whatever the case may be, investors are certainly making up for the lost time and momentum as we see more deals getting done more speedily in a virtual environment.

Some of the key themes we mentioned in our Q4 2020 report have continued into the first half of 2021 and in certain cases have become more prominent. Time spent on fund raising and diligence activities continues to increase as evidenced by more frequent conversations with LPs and a larger pipeline, respectively, while portfolio related worries are not as prevalent. Active deals in the pipeline have risen, though the expectation for competition has also gone up alongside. Based on the responses to the survey and ongoing conversations with investors, the worry around higher valuations is likely to persist given the record high levels of dry powder and a dearth of high-quality assets in the marketplace.

In terms of other key changes expected over the course of this year (provided there is no pull-back from another wave), we are likely to see in-person networking start to return in the back half of the year. Travel (at least domestically) seems close to being back to normal already and here’s hoping we continue moving towards being able to greet everyone in person sooner than later.

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