Coronavirus
Private equity firms promise millions for coronavirus relief
April 9, 2020 View comment (1)
Over the past week, some of the biggest firms in private equity have proved willing to reach into their deep pockets to help first responders battling the coronavirus outbreak and aid their own portfolio companies struggling to stay afloat.
Firms such as Apollo Global Management, Blackstone and KKR are all taking different approaches. KKR has made the biggest public commitment so far, pledging $50 million to a range of beneficiaries, including first responders and the firm's portfolio companies.
"There has never been a more important time for us to act and give, individually and collectively," the firm's leaders wrote in a letter addressed to KKR's LPs that was seen by PitchBook. "And we're here for the challenge."
The aim of helping those affected by the crisis may be admirable. But critics point to the hundreds of billions of dollars these firms have under management and argue that they are only scratching the surface of the aid they are capable of providing.
"They think that this is going to impress people, and they'll get a blurb in The New York Times, somebody will say, 'Oh, isn't this wonderful?'" said Eileen Appelbaum, an economist who has written extensively on private equity and the workplace. "But the bottom line is, the workers in their portfolio companies are suffering, and these workers won't receive any of this money."
Some of KKR's $50 million fund will, in fact, be made available to employees of its portfolio companies, according to the letter to LPs. Some capital for the fund will come from the firm's existing assets under management, which totaled a firm-record $218.4 billion at the end of 2019, and the rest will come from the firm's executives. Co-founders Henry Kravis and George Roberts and current co-CEOs Scott Nuttall and Joseph Bae will also forgo their 2020 bonuses and salaries.
Other firms are making contributions of their own, including two more publicly traded buyout giants. Apollo co-founder Leon Black dedicated $20 million toward food and supplies for New York healthcare workers, and Blackstone is deploying its charitable arm to spread $15 million across various organizations in New York.
At Boston-based Advent International, senior firm members have devoted $25 million to a relief fund for those affected by the pandemic. In Los Angeles, Leonard Green & Partners has set up a $10 million fund to help affected portfolio companies, and Platinum Equity has said it can use capital from its recently closed $10 billion flagship fund to assist portfolio companies if needed, which could provide a direct benefit to workers facing furloughs or layoffs.
For firms, establishing a fund dedicated to coronavirus relief or portfolio bailouts will likely require conversations and new agreements with LPs, according to Jeremy Swan, a consultant at CohnReznick who advises middle-market firms. He said those sorts of talks have been happening frequently.
As new economic realities set in, firms of all sizes are working to help portfolio companies survive the storm.
"It's everything from providing advice and introducing operating partners and others who can help through the prioritization of cash payments," Swan said. "Your typical portfolio company, they have obligations to banks, they have obligations to their landlords, they have obligations to suppliers, they have obligations to employees."
As they're providing aid to those affected by the pandemic, firms are also, of course, scouring the market for new investments. Leaders at Apollo told investors last month that this was the firm's "time to shine" by pouncing on opportunistic deals, according to Bloomberg. Blackstone's Steven Schwarzman, meanwhile, told Bloomberg that his firm is "looking aggressively" to deploy some of its $150 billion in dry powder.
Numbers like that are one reason Appelbaum believes firms should still be doing more to help their workers, arguing that they have plenty of capital available without the $350 billion federal loan program they've so far been denied from accessing.
"Sure, every little bit helps," the economist said. "Good for them for thinking about doing it. But can we just say that this is truly, relative to their wealth and their capacity, an extremely small amount."
Featured image via John Moore/Getty Images News
Firms such as Apollo Global Management, Blackstone and KKR are all taking different approaches. KKR has made the biggest public commitment so far, pledging $50 million to a range of beneficiaries, including first responders and the firm's portfolio companies.
"There has never been a more important time for us to act and give, individually and collectively," the firm's leaders wrote in a letter addressed to KKR's LPs that was seen by PitchBook. "And we're here for the challenge."
The aim of helping those affected by the crisis may be admirable. But critics point to the hundreds of billions of dollars these firms have under management and argue that they are only scratching the surface of the aid they are capable of providing.
"They think that this is going to impress people, and they'll get a blurb in The New York Times, somebody will say, 'Oh, isn't this wonderful?'" said Eileen Appelbaum, an economist who has written extensively on private equity and the workplace. "But the bottom line is, the workers in their portfolio companies are suffering, and these workers won't receive any of this money."
Some of KKR's $50 million fund will, in fact, be made available to employees of its portfolio companies, according to the letter to LPs. Some capital for the fund will come from the firm's existing assets under management, which totaled a firm-record $218.4 billion at the end of 2019, and the rest will come from the firm's executives. Co-founders Henry Kravis and George Roberts and current co-CEOs Scott Nuttall and Joseph Bae will also forgo their 2020 bonuses and salaries.
Other firms are making contributions of their own, including two more publicly traded buyout giants. Apollo co-founder Leon Black dedicated $20 million toward food and supplies for New York healthcare workers, and Blackstone is deploying its charitable arm to spread $15 million across various organizations in New York.
At Boston-based Advent International, senior firm members have devoted $25 million to a relief fund for those affected by the pandemic. In Los Angeles, Leonard Green & Partners has set up a $10 million fund to help affected portfolio companies, and Platinum Equity has said it can use capital from its recently closed $10 billion flagship fund to assist portfolio companies if needed, which could provide a direct benefit to workers facing furloughs or layoffs.
For firms, establishing a fund dedicated to coronavirus relief or portfolio bailouts will likely require conversations and new agreements with LPs, according to Jeremy Swan, a consultant at CohnReznick who advises middle-market firms. He said those sorts of talks have been happening frequently.
As new economic realities set in, firms of all sizes are working to help portfolio companies survive the storm.
"It's everything from providing advice and introducing operating partners and others who can help through the prioritization of cash payments," Swan said. "Your typical portfolio company, they have obligations to banks, they have obligations to their landlords, they have obligations to suppliers, they have obligations to employees."
As they're providing aid to those affected by the pandemic, firms are also, of course, scouring the market for new investments. Leaders at Apollo told investors last month that this was the firm's "time to shine" by pouncing on opportunistic deals, according to Bloomberg. Blackstone's Steven Schwarzman, meanwhile, told Bloomberg that his firm is "looking aggressively" to deploy some of its $150 billion in dry powder.
Numbers like that are one reason Appelbaum believes firms should still be doing more to help their workers, arguing that they have plenty of capital available without the $350 billion federal loan program they've so far been denied from accessing.
"Sure, every little bit helps," the economist said. "Good for them for thinking about doing it. But can we just say that this is truly, relative to their wealth and their capacity, an extremely small amount."
Featured image via John Moore/Getty Images News
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