Recent research conducted by Prof. Oliver Gottschalg, of HEC Paris, could help shed light on the attributes of general partners more likely to outperform in a downturn.
The research was based on an analysis of 12.500 buyouts executed between 1990 – 2015 by almost 200 GP’s to identify deals impacted by a difficult environment.
A quick overview:
- A GP’s track record during an economic downturn is correlated to success and failure of a future fund for that GP.
- In his research, Prof. Gottschalg found that over a third of all realised PE deals had downturn features. In two thirds of these deals, the GP achieved success at exit, he named these “downturn successes”.
- Gottschalg’s assigned a ‘downturn success ratio’ which is the degree to which a fund manager experienced downturn deals in the past and how frequently these deals still had successful outcomes.
- Key findings were that GPs with high past downturn success ratios are most likely to deal better with downturns in the next fund.