Tech sector to drive recovery in private equity

Strong investor appetite for the technology sector is set to drive recovery in private equity with the booming area seen as a safe harbour for investments during COVID-19 and forecast to be the major source of deal activity.

In a report to be released on Monday titled The Carry: Private Equity Insights, law firm Herbert Smith Freehills found market uncertainty caused by COVID-19 triggered a dip in deal activity in the second quarter of the year but renewed interest in technology and software could pave the way forward for private equity.

The report records 21 deals completed in the first quarter of the year with the technology sector accounting for 33 per cent. However, there were only six deals in the second quarter of the year because of the “disruptive impact” of COVID-19.

Citadel chief executive Mark McConnell, the technology business that was acquired by private equity firm Pacific Equity Partners last week in a $500 million deal. Credit:Alex Ellinghausen

The report highlights investor interest in technology-based businesses in communications, logistics, telehealth, fintech and wellness. It says sponsors are becoming more comfortable with allocating committed capital to software and technology investments and technology was being seen as a “safe haven” for investing during the pandemic.

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