What owners and operators are thinking now

Perhaps the key benefit of taking part in the Industrial Exchange network for PE fund managers and operators is access to valuable information. Our surveys of your network peers are a particularly useful source of information for benchmarking and other purposes. A survey we recently released to over 100 Fund Managers and Operators to gauge the impact of the COVID-19 pandemic produced five insights and observations that we believe are worthy of consideration and action: 

A new perspective on remote work

The pandemic has changed owners’ and operators’ views about working from home. Most of those surveyed say the practice will become more mainstream after the current crisis abates. But most also say that it will apply only to certain employees. 

Deciding who can work from home and who can’t may be more complex than it appears at first glance. To be sure, the technological infrastructure exists for many employees involved in areas such as administration and sales, for example, to work remotely. But requiring some employees to come to a company facility while freeing others from the mandate creates dual classes of employees. That raises legal, compliance and business culture issues, not to mention ethical questions about potentially putting some employees more at risk than others.

Most companies did not take PPP money

Given the predominance of private equity ownership in our membership and the confusion over the affiliation rules in the government’s Paycheck Protection Program (PPP), it’s understandable that most of our survey respondents have not taken part in this Small Business Administration program. In fact, about a third of the companies who took the PPP money are considering giving it back. The legal and public relations costs of accepting PPP funds as a result of an inadvertent mistake seem to be dissuading many companies from going near the program.

Companies say they should have been better prepared

Roughly two-thirds of managers and investors surveyed said that the pandemic is the kind of crisis that management teams should have prepared for. 

Several public health experts over the past decade have warned about the nation’s vulnerability to a pandemic much like COVID-19. Until now, however, the black-swan nature of such events and the nation’s lack of recent experience with one led to understandable, if unfortunate, complacency. Going forward, management will have to make tough decisions about how much preparation should be undertaken for crisis events that may have a low probability, yet high cost, of occurrence. 

Better logistical planning and data analytics are needed

The vast majority of respondents — about three-quarters — agreed that additional planning must be done with logistics providers to avoid bottlenecks and to secure capacity during times of stress. The tone of the response suggests this planning is already under way. Similarly, two-thirds of respondents expressed a need to enhance their firms’ business intelligence and data analysis capabilities. Look for more investment in technology and hiring in this area once restrictions are lifted. 

Three interesting sectors — and one that isn’t

Despite the recent successful Space X launch, no respondents were interested in investing in the aerospace sector currently – despite having a number of respondents who have already invested in the sector. At the same time, interest in industrial services was strong, as was interest in building products, housing and construction — indications that the business recovery may have legs. 

If you would like more information about Industrial Exchange information products and services, or would like to take part in upcoming surveys, please email me.

Jon Cooper
CEO and Co-Founder
Industrial Exchange