Coming Together in Times of Crisis

We are at a pivotal time in an unprecedented modern crisis facing the world today. 

First and foremost, the global community is facing health uncertainty: a highly contagious virus currently without a vaccine, whose methods of transmission and medium-term resistance are poorly understood. I have immense gratitude for the healthcare workers and companies that are working to combat this virus, and for the organizations that are supporting our global citizens during this time of great need. 

Second, there is a wave of concern swelling about a recession that could shake the world’s financial stability. No one can predict with any certainty or accuracy its scale or duration – we can only hypothesize and attempt to prepare accordingly based on the evidence available to us today. 

We all must consider how swift of a recovery to expect and the policy changes needed to get us there. Based on the elements available to us, certain working assumptions can be set out:

• The assumption for a V-shaped end to the crisis, never seen before with any major crisis in our recent history, is highly unlikely.
• The industrial sector will be significantly destabilized. Businesses that were in fragile positions at the start of the crisis will be even more so when the recovery starts. Moreover, State guarantees are not first demand guarantees, which means that if a business fails, the bank will cover the risk with cash from its balance sheet before being able to claim from the State. For businesses with potential, it will therefore be necessary to find equity and quasi-equity capital.
• Demand will be dependent on whether consumers feel there is a risk of a potential second wave, as indicated by the medical community. 
• The massive global rise in unemployment will put pressure on the social safety nets implemented in each State and will inevitably lead to debates concerning the sustainability of public spending over the medium term.
• Taking all these elements into account, it could be 12 to 18 months before the economic outlook will start to clear up.
• In the medium term, the policies rolled out to cushion the shock and support the recovery could have various side effects that we will have to anticipate in our investment decisions: return of inflation, sovereign debt crisis, massive swings in exchange rates.

Looking to the future with this backdrop, the question at the forefront of everyone’s minds is: will the post-coronavirus world return to the way it was before? In terms of production unit locations, dependencies for strategic supplies, the intensity of exchanges of people and goods, and the way we consume and produce, there is every reason to believe that this will not be the case. 

That said, it is our collective challenge for the months ahead to anticipate the coming changes in the world and to adapt our companies accordingly with this reconfiguration. Looking beyond the uncertainty, the message that I would like to share as we embark on this collective challenge is one of agility, trust, and solidarity—agility in how we are adapting in this crisis, trust in ourselves and each other that we will indeed get through this, and solidarity in how we overcome this crisis together. 

Agility: Companies globally, including within Eurazeo and its portfolio, have implemented teleworking measures quickly and efficiently wherever possible. Protection measures have been strictly applied and combined with the equipment needed to support staff, especially at production and logistics sites, where work cannot be carried out remotely. We commend the global workforce for adapting to these conditions – we know that this has not been easy, and we applaud the agility shown during these difficult times. This period of uncertainty has challenged us in an exceptional way and the response that I have seen has been remarkable, highlighting the dedication, mobilization and collaboration of our global community. 

The coordinated, immediate, and large-scale action taken by central banks has further demonstrated agility, ultimately supporting the market with an influx of liquidity. Retail banks, particularly in Europe, are also more robust, stable and better capitalized. The States have rolled out emergency support measures, which have the great merit of preventing the “sudden death” of some businesses, a collapse in demand, and a social crisis. Contrary to the situation seen 12 years ago, we are benefiting from a massive and largely coordinated monetary and fiscal response, as well as a healthy financial system that is much better equipped to withstand a shock, protecting the crisis from spreading between asset classes. 

Trust: Trust is a necessary pillar to the success of globalization. It is a core feature not only of our business, but all businesses, and the way that we view our roles as investors, shareholders, partners and advisors. Eurazeo is committed to working alongside management teams to respond together to any immediate risks affecting their businesses. I encourage the global community as a whole to have trust in humanity’s ability to persevere through difficult periods and come out stronger on the other side, despite the challenge it will require to get there.

Solidarity: The world stands in solidarity with the institutions and associations that are on the front lines in the fight against the pandemic, as well as the staff and companies that face emergency situations and will be the first to be confronted with the economic consequences of the crisis. Thanks to the diverse expertise and resources available in our portfolio companies, we have significantly strengthened our actions to stop the spread of COVID-19. 

Eurazeo is proud of the €10 million solidarity fund we created, financed from its cash holdings and with donations from the members of the Group’s Supervisory Board, Executive Board and Executive Committee to support employees with urgent medical or financial needs; to buy and donate products and services from our charitable investments; and donations to organizations that support individuals with the greatest need during this crisis, including APHP, SamuSocial, and The Bowery Mission in NYC. 

I would like to take this opportunity to send the global community my best wishes for good health and the hope of further clarity towards a resolution as we emerge from this pandemic, stronger together.