Coronavirus updates (May 18-May 24): Coronavirus effects on private markets

*Napoleon House is among the restaurants in New Orleans that reopened this week under city guidelines limiting them to 25% capacity. (Sean Gardner/Getty Images)*

PitchBook is providing ongoing coverage of the coronavirus outbreak and its effects across the private markets and the economy.

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Latest news on the coronavirus

Legal battles mount over scrapped deals as Forescout sues PE firm Advent

Fallout from the pandemic has created a new and growing trend: Legal battles over buyout deals that have been derailed by coronavirus-related concerns. At least a dozen acquisitions have been canceled since the coronavirus outbreak went global, according to PitchBook data.

In the latest skirmish, cybersecurity company Forescout Technologies is suing Advent International to hold the private equity firm to its $1.9 billion agreement to take the cybersecurity company private. That comes after Boston-based Advent informed Forescout it wouldn’t move forward to complete the deal, which was announced in February, saying the tech company has been hit by “a material adverse effect” on its business. —Andrew Woodman, 10:51 a.m. PDT, May 21

Ask PitchBook: Has private investor lobbying for pandemic loans been successful?

In the second iteration of “Ask PitchBook,” an invitation for readers to submit questions, we tackled an inquiry about the lobbying practices of private equity and venture capital organizations as they relate to federal loan programs.

More than two months into the economic response to the COVID-19 pandemic, uncertainty over who should receive taxpayer-backed funds has been especially prevalent among companies that are privately backed. Trade organizations have pushed lawmakers to ensure portfolio companies aren’t left out of the US Treasury’s Paycheck Protection Program and the Federal Reserve’s Main Street Lending Program. And lobbyists representing VC and PE interests have been willing to spend big. —James Thorne and Adam Lewis, 9:52 a.m. PDT, May 21

Coronavirus effects on startups

Vroom files for IPO, reveals furlough of about a third of its staff

Vroom, the operator of an ecommerce platform for used cars, has filed for an initial public offering. In the first quarter of this year, the startup’s revenue rose to $375.8 million from $235.1 million a year ago, according to an SEC filing. For the same period, Vroom reported a net loss of $41.1 million, compared with $27.1 million last year.

The company said that between March 11 and March 31, its ecommerce revenue dropped about 15% over the previous 20-day period, as consumer demand fell due to the pandemic. As a result, Vroom cut vehicle prices to drive sales and reduce inventory.

About a third of the company’s workforce was furloughed as of May 3 and the remaining workers received pay cuts, with CEO Paul Hennessy forgoing 30% of his salary. Backed by investors including General Catalyst, L Catterton and T. Rowe Price, the company has collected more than $720 million in total VC financing, according to PitchBook data. —Priyamvada Mathur, 6:14 p.m. PDT, May 19

Coronavirus effects on venture capital

SoftBank-backed Ola to lay off 1,400

Ola has announced plans to let go of 1,400 employees, citing “unprecedented economic and social destruction” due to the coronavirus outbreak. Based in Bengaluru, the ridehailing company is backed by investors including SoftBank, Tiger Global and Tencent. —Priyamvada Mathur, 3:00 p.m. PDT, May 20

Investors bet on HR automation as potential boon amid mass layoffs

In the midst of extensive layoffs and an economic downturn, venture capitalists are keeping tabs on which industries can thrive, and some are particularly bullish on the possibilities for artificial intelligence in human resource applications. When the uncertainty of the pandemic finally settles to reveal the new reality, they reason, employers will need tools to help conduct thousands of virtual interviews and handle a potentially significant wave of applicants.

“There’s always been a war for talent, but now there’s a massive shift in labor,” said Anton Simunovic, chief investment officer at Alumni Ventures Group. “We’re seeing an uptick in investor activity toward AI solutions that help companies look for employees who can add value immediately.” —Priyamvada Mathur, 11:29 a.m. PDT, May 19

Coronavirus effects on private equity

KKR-backed Casual Dining Group files to appoint administrators

UK restaurant chain operator Casual Dining Group is preparing to appoint administrators as COVID-19 batters the restaurant industry. CDG, which has been backed by KKR since 2018, filed a notice of intent Monday to protect itself from creditors for 10 days. The company operates about 250 restaurants, employing more than 6,000 people.
CDG is working with management consultant AlixPartners to come up with a restructuring plan to repair its finances. A spokesperson for the group said that it is reviewing all options, including a company voluntary arrangement.

Although the delivery space has boomed, the UK food and beverage sector overall has not fared well in the pandemic. Italian restaurant chain Carluccio’s reportedly entered into administration in March after closing all of its locations due to the lockdown. And Three Hills Capital hired KPMG earlier this month to find buyers for hamburger chain Byron, according to Sky News. —Leah Hodgson, 3:41 p.m. PDT, May 19

Economic impacts of the coronavirus

Uber lays off another 3,000 employees, closes offices

Uber announced plans Monday to eliminate 3,000 jobs and close or consolidate 45 offices worldwide, according to The Wall Street Journal. The new layoffs, its second round of cuts in less than a month, mean Uber has let go of roughly 6,700 employees—reportedly about 25% of its workforce—as the demand for ridehailing plummets amid the pandemic. The layoffs come a week after the company reportedly made an offer to acquire Grubhub, a key rival in the booming food-delivery space. —Kate Rainey, 10:24 a.m., May 18

Facebook leads big tech in pandemic-era investment push

As cash-hungry startups conduct layoffs and confront falling valuations, investments by tech giants are gaining steam.

Facebook‘s acquisition of GIF-sharing platform provider Giphy on Friday was the latest in a stream of M&A activity and investments. The social media juggernaut joined Apple, Amazon and Microsoft in setting the highest level of combined quarterly dealmaking that the group has recorded in more than a year, according to PitchBook data.

Lawmakers and regulators have continued to scrutinize big tech during the pandemic, but popular opinion of the largest players is on the rise. —James Thorne, 12:08 a.m. PDT, May 18

PitchBook reports on the coronavirus impact on private markets

How the big five public PE firms fared in Q1

The big five publicly listed PE firms have released their first earnings reports since the coronavirus crisis began, providing a trove of data on how they’re responding and evolving. Our latest research note takes a deep dive into these new reports to analyze key financial results and broader trends from Q1 2020. The findings include:

Cash produced from management and other fees is up year-over-year for each manager
GPs are temporarily boosting assets under management by holding onto capital that would have otherwise been distributed
As GPs continue to collect and deploy capital, fee-related earnings should be able to support management companies

—Wylie Fernyhough, 6:13 p.m. PDT, May 11

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