Private Equity and COVID-19 Federal Support: To Receive or Not To Receive?
Download a PDF of this articleWhile much attention has been paid in recent weeks to how the COVID-19-induced downturn will affect specific companies and workers across the US, considerably less attention has been focused on the dangers of any slowdown for private equity (PE) firms. PE firms collectively invest in hundreds of portfolio companies spread across every segment of the United States economy, and their investments directly employ almost nine million people. Ensuring that these firms continue to support companies and employ large numbers of workers should be of critical importance for policymakers.
For PE General Partners, it might be tempting to forestall plummeting portfolio valuations and potential liquidity concerns by asking portfolio companies to turn to federal assistance. This question is especially salient following the passage of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which set aside more than $375 billion in grants and loans to small businesses which will be administered by the Small Business Administration (SBA).
But what are the considerations that GP’s and portfolio companies alike need to make as they navigate (often for the first time) the minefield that is the federal bureaucracy? And most importantly, would receiving such assistance be helpful for funds’ long-term goals?
Our experts have compiled a few thoughts that PE-backed companies and their owners should consider when making that determination.
