The coronavirus pandemic is shutting down entire sectors of the economy and putting millions of Americans out of work, but one corner of Wall Street may find opportunity amid the carnage: private equity.
at the expense of workers and the companies themselves, which sometimes end up in bankruptcy.
The first deals are likely to be investments rather than full-on takeovers, the bankers said. Transactions known as PIPEs, or private investments in public equity, are one way companies under distress can quickly raise cash. The buyer gets shares at a discount, and the new stock typically dilutes the holdings of existing shareholders.
One example of a PIPE made during the last crisis: In 2008, Leonard Green & Partners bought a 17% stake in Whole Foods for $425 million, an investment that yielded more than $1 billion in profit when shares recovered a few years later. Another reason for a delay in deals: One banker said that private equity investors "only want to invest in the strongest companies" like makers of consumer staples, or top restaurant chains, and these companies aren't yet willing to take on expensive forms of capital.
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