A Pandemic Is Bad for Deals

If you agreed to buy a company in the Before Times, you probably do not want to buy it anymore, at least not at the price you agreed to back then. If, for instance, you are SoftBank Group Corp., and you agreed to buy $3 billion worth of WeWork stock last October, that seems crazy now: People have stopped going to WeWorks, revenue is way down, and $3 billion worth of WeWork stock (at October prices) is not worth anything close to $3 billion. Or if you are private-equity firm Sycamore Partners, and you agreed to buy 55% of the Victoria’s Secret retail clothing chain for $525 million in, wow, late February, you probably regret it: Retailers are closing up stores and furloughing workers, nobody is going out to malls to buy bras, and $525 million of Victoria’s Secret stock isn’t worth $525 million anymore.

Now, if you agreed to buy a company in the Before Times, and then you closed the deal in the Before Times—you handed over the money and got the shares—you are out of luck; now you are stuck with a company that has no revenue. If you were negotiating a deal in the Before Times, but you didn’t sign anything before the coronavirus hit, you are in luck; now you can keep your money and stop answering the phone when the company calls. But there are plenty of buyers in SoftBank’s, or Sycamore’s, position: They signed an agreement to buy a company in the Before Times,2 but didn’t close the deal before the virus hit. They still have their money, though they have promised to hand it over in exchange for the company. The money looks a lot more attractive than the company does, though, now.