Year-over-year deal activity from private equity in the FS sector dropped by approximately 36 percent in 1H20. The drop is largely attributed to the impact of COVID-19 which turned a buying spree into industry-wide panic. Overall, during the first half of 2020,  PE remained most acquisitive in countries such as the US (#20), India (#20), China (#8) and the UK (#8) while the ASPAC region saw the highest deal flow (total deals #39). Moreover, PE bidders from the US accounted for 49 percent of the total transaction market in 1H20.

• In the Americas, particularly the US, PE has shown strong interest in long-term care insurance, insurance brokerage, insurtech and payments. They also continue to hunt for wealth management firms as advisory players provide reliable revenue despite volatile market conditions. Many PE firms have held investments rather than sell at marked down prices during the ongoing crisis and turned to investments such as add-ons, PIPEs, carve-outs, and distressed-forcontrol transactions.
• In Europe, many private equity firms have turned into rescuers (i.e. set up financial lifelines for their European holdings), providing emergency loans or buying debt from companies they own. Targets such as balance sheet light business models, lending, insurance, wealth & financial technology continue to attract the PE players. In the UK, within the insurance sector, the intermediary segment is offering consolidation opportunities for PE investors while the UK’s life, annuity, health insurance and payment sectors remain attractive.
• In ASPAC, PE investments in payments as a sub-sector increased compared to 1H19. India remained the hotspot for PE activity followed by China. Strategic investments by PE in weaker banks, distressed sales of weaker non-banking finance companies (NBFCs), lease finance firms and payments service providers remained key targets in 1H20.

In the coming months, the drop-in valuations could drive PE firms to pursue carve-outs and lead to an acquisition of distressed assets as corporates are expected to sell units to raise capital during COVID-19. Bolt-on acquisition opportunities are likely to rise for their portfolio and for acquiring smaller stakes in firms that are in need of capital.

Globally, private equity and venture capital investors envisage a decline in fund-raising activities over the next six to 12 months because of the pandemic. The market is sitting on sufficient un-invested capital and therefore PE investors are expected to focus on segments that are minimally impacted by the pandemic or those with promising opportunities.

Payment targets continued to garner attention from PE firms globally, while leasing and financing remained the preferred target segment in Asian countries and regions such as India, mainland China and Hong Kong SAR.