The Performance of Private Equity Portfolio Companies During the COVID-19 Pandemic

We study the performance of UK PE-backed companies during the COVID-19 pandemic using two methods: a standard difference-in-differences model where we match PE-backed firms to similar, non-PE-backed firms based on pre-pandemic ob-servable firm characteristics, and a novel synthetic difference-in-differences approach from Arkhangelsky et al. (2021). In both cases, we find evidence supporting the outper-formance of PE-backed companies during the pandemic period, albeit using a synthetic approach reduces the magnitude of this outperformance. This is consistent with previ-ous evidence of the performance of PE-backed companies during economic downturns. When we study company insolvency filings over the sample period, we find that PE-backed firms faced a higher probability of insolvency during the pandemic relative to control firms. However, non-PE-backed firms in distress had a higher incidence of liquidation, while PE-owned firms more often negotiated formally with creditors to continue trading