The COVID-19 Impact on the Private Equity and Venture Capital Markets: First Thoughts

The COVID-19 Impact on the Private Equity and Venture Capital Markets: First Thoughts

Abstract:

We were convinced that we had virtually overcome the first major global crisis of this century. We had substantially forgotten its impact and were confident about the path to recovery when we have been forced to face an unexpected public health emergency and the second global crisis of this century resulting from it. The latter could lead, as it happened in 2007, to a liquidity crisis with similar and dramatic consequences for the economy, the job market and the general well-being of humankind. Even if essential activities and remote work have remained active throughout the latest crisis, the lockdown measures taken by governments have brought a significant part of the global economy to a standstill, resulting in the collapse of the real economy and financial markets, generating huge losses of human lives and hindering both corporate and household wealth all over the world.
This article is a first approach -from the Private Equity and Venture Capital standpoint- to the potential impact that the crisis caused by the so-called COVID-19 pandemic may have on such markets. In this context, the article recaps some of the effects in the preceding markets resulting from the 2007 crisis and assesses the likelihood of facing similar consequences today. At the same time, it identifies and summarizes both domestic and supranational measures taken to tackle the potential economic and financial impact of the current crisis. Lastly, the article analyzes the initial consequences of the pandemic in the Private Equity and Venture Capital markets.

Keywords: venture capital, private equity, Covid-19, global financial crisis