ICYMI // In A Year Of Crisis, Private Equity Has Been A Crucial Backstop For American Businesses And Workers

Last year was tumultuous for many businesses and their workers. The necessary safety precautions that were adopted to limit the spread of COVID-19 made it harder for many businesses to operate. Millions of Americans lost their jobs. Despite these challenges, private equity remained a critical partner for companies of every size looking for capital and expertise to keep their doors open or grow. The industry also provided invaluable counsel to help those businesses weather this unprecedented storm.

This week, the American Investment Council released its 2020 investment report examining the impact private equity had on businesses across the country. Despite the difficulties posed by the COVID-19 pandemic, private equity invested more than $561.3 billion dollars in 4,335 businesses across America.

One of these businesses is Oregon-based Black Rock Coffee, which operates more than 70 locations in seven western states. The company first began talks with private equity firm The Riverside Company in 2019 to grow and compete with more established coffee chains like Dunkin and Starbucks. Black Rock CEO Jeff Hernandez saw private equity as a partner who could deliver capital to expand to more markets, and provide critical industry expertise and training to new managers.

This private equity partnership became even more critical in early 2020. Difficulties posed by COVID-19 made it exponentially more difficult for Black Rock to operate. State and local restrictions on restaurants and food providers limited their ability to sell coffee and food to customers. Black Rock also had to develop safety protocols to ensure their customers and staff did not contract a deadly virus.

Black Rock officially formalized their partnership with private equity in June 2020. Private equity has since worked hand-in-glove with Black Rock to tackle the challenges posed by COVID-19. According to CEO Jeff Hernandez, “[Private equity] saw through the madness and chaos of everything going on in the world … They followed through and made that investment. They gave us some great shortcuts in the long run of how to adapt to this massive change in our industry rather quickly.”

Today, Black Rock Coffee continues to grow at more than 20 percent annually and is one of the fastest growing coffee chains in the country.

Private equity investments were especially crucial for small businesses that otherwise wouldn’t have the capital or expertise to weather the COVID-19 pandemic. Some 71 percent of private equity investments in 2020 were for individual deals under $100 million.

Minnesota-based Victory Innovations is one such small business that has recently partnered with private equity firm The Carlyle Group. Victory Innovations manufacturers high-grade hand-held and backpack disinfectant sprayers that have been critical to prevent the spread COVID-19. Their products have been used to clean schools, airplanes and other public spaces.

Private equity worked closely with Victory Innovations in 2020 to scale up their operations and meet the massive new demand for disinfectant sprayers. According to Victory Innovations CEO Chris Gurreri, “When you add The Carlyle Group through private equity with Victory Innovations, we’re just going to be a much better company. We’re going have better expertise, we’re going to have access to better markets, we’re going to have more access to capital.”

Since partnering with private equity, Victory Innovations has grown from just eight workers to more than 50.

American businesses like Black Rock Coffee, Victory Innovations, and the workers they employ aren’t the only beneficiaries of private equity. The returns from private equity investments primarily go to public pension funds, charitable foundations, and university endowments. In other words, every private equity success story helps secure the well-deserved retirements of first responders, teachers, and other dedicated public servants in all 50 states.

Last year, the American Investment Council released its annual public pension study showing that private equity delivered a median annualized return of 13.7 percent over a 10-year period, making it the highest performing asset class for public pension funds. More than 30 million public sector workers and retirees benefitted from private equity returns.

American businesses and workers will continue to face many of the same daunting challenges posed by the COVID-19 pandemic in 2021. Nevertheless, private equity will continue to invest in business across America, support workers, and ensure that dedicated public servants can enjoy the retirements they deserve.