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Private equity is buying everything from vet offices to tech conglomerates

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Re: Private equity is buying everything from vet offices to tech conglomerates

#241

Post by refurb »

linuxftw wrote: post #56
toast0 wrote: post #43

Private equity leveraged buyouts are an option for companies to change their fate. Typically, they're on a long path towards an slow death. With the buyout, current shareholders get a return, and the company is on a 3-7 year path towards a crisis bankruptcy. It's good for the current shareholders, and it's good for the private equity company. It's not good for the business, but if the old owners and the new owners li…

The problem lies in where the money comes from the execute taking the company private. A big bank will issue the debt, then peddle the debt as AAA rated into all of America's 401k's via their friends at the brokerages. You think the banks are just sitting on those debts hoping to make it to maturity? And it's never the PE firm that owes the debt, they're able to get paid back by the thing they buy, and that shell owe…

No, PE firms either use investor money or take loans against the business itself.

It's a high risk game, anybody investing knows exactly what's up.

Re: Private equity is buying everything from vet offices to tech conglomerates

#242

Post by refurb »

KerrAvon wrote: post #163

Instant Pot just got knifed by PE. https://www.theverge.com/2023/6/12/23758602/instant-pot-bank... > The other reason it’s absolutely got to keep growing is that there are expectations placed upon it by Cornell Capital, the private equity firm that acquired the Instant from its founder in 2019 and merged it with Corelle Brands, which makes all the Pyrex and CorningWare products you probably heat up leftovers in. … >…

Instapot was going into a crapper PE or no PE.

Re: Private equity is buying everything from vet offices to tech conglomerates

#243

Post by jxramos »

JohnFen wrote: post #188
TrackerFF wrote: post #183

Earlier quoted context omitted.

Yes, they are called "Insecure overachievers". They are the bread and butter of investment banks, management consulting firms, big law firms, etc. They are also the reason that partnerships still thrive. A couple of years ago I was talking with this (big law) partner at a dinner, and we came in on the topic around partnership - and he just said it straight: The competition / rat race towards partnership is 100% skewe…

> Prestige is a powerful motivator. I know this to be true because I've seen so many people given BS titles instead of raises and be happy about it as if they got something of real value. But I don't understand it at all. Apparently, I lack the "prestige" gene.

I refer to it as being "immune to prestige"

Re: Private equity is buying everything from vet offices to tech conglomerates

#244

Post by garbagecoder »

MandieD wrote: post #112
garbagecoder wrote: post #8

Earlier quoted context omitted.

I mostly agree with this. I would say a lot of what is wrong with America is that corporation laws allow this kind of thing. There are other ways. Nobody thinks Germany is an economic backwater and they require, I believe in large companies, for employees to have a role in the management of the company [1]. There are also co-ops like the Mondragon Coop in Spain[2]. Some states have co-op laws but are mostly used by f…

We also have very effective unions in a lot of sectors, particularly manufacturing. They're usually one of the main factions in a Betriebsrat, so do a lot of negotiating long before problems rise to the level of a strike. We employees vote for our Betriebsrat members, and in very large firms like mine, the candidates organize themselves into faction lists (kind of like parties), and it works basically like electoral…

There were many similarities to this in the US. Employment lawsuits are a constant drag on business, but this is the future they chose. Where a labor contract existed, dispute resolution was often easier similar to the way you said and can be a lot more likely to stay out of the courts. Businesses do not want to hear this. They'd rather avoid the slow drag of the union and risk never hitting the landmine of an employment lawsuit, until they do. Now there are very few unions left, especially in the private sector.

Re: Private equity is buying everything from vet offices to tech conglomerates

#245

Post by ryandrake »

legitster wrote: post #40

Despite the directions the interviewer tried steering this conversation into, this is a really interesting interview. But when it comes to the private equity roll-ups, I think everyone is missing the forest for the trees. If you are a doctor looking to retire and sell your business there is no one else right now who would buy it . The same goes for every category of "mom and pop" business in the US. Even if you could…

> Even if you could find someone experienced enough and interested in running it - that person could not afford the business.

I mean, this must be a huge factor. Ignoring doctor's offices for a moment--even regular mom-n-pop small businesses. Few actual humans can afford one, so PE gobbles them all up. I'd love to own a small local business. Know why I don't buy one? I just can't afford any, it's that simple! Same reason fewer and fewer people can buy houses: They simply can't afford them. So PE swoops in and buys housing, too.

This seems to be one of the many ill effects of America being set up so there are fewer and fewer rich people, and those fewer own more and more of the pie. If wealth were distributed more evenly, maybe more Average Joes would be able to buy and run their own businesses. But our society doesn't encourage this broad base of wealth. It instead encourages a shrinking elite owning everything.

Re: Private equity is buying everything from vet offices to tech conglomerates

#246

Post by JumpCrisscross »

pitaj wrote: post #162
JumpCrisscross wrote: post #148

Earlier quoted context omitted.

> Am I supposed to have any respect for somebody selling out their employees and patients to vampires so they can retire to a beach Nobody else will buy it. The alternatives are shutting down the practice or forcing oneself to keep working. Particularly in medicine, the latter is dangerous. > solution I'd want to see for situations like this is to find a way to sell to the people who have a continuing interest in how…

> Nobody else will buy it. The alternatives are shutting down the practice or forcing oneself to keep working. Particularly in medicine, the latter is dangerous. Can't you just hire a "CEO" who will take over all management responsibilities?

> Can't you just hire a "CEO" who will take over all management responsibilities

You, the retiring doctor, hire a manager whose job it is to hire another doctor? Do you not see why this works at scale but for one practice?

Re: Private equity is buying everything from vet offices to tech conglomerates

#247

Post by JumpCrisscross »

jfidbfidvdid wrote: post #191
JumpCrisscross wrote: post #136

I have a pet theory: there are managerially-minded university graduates who value prestige more than power or pay. In the post-War era, they became beige-suited company men. In my generation, they went corporate finance. Today, they work for private equity. Banking was great. Everyone–from liberal arts to engineering majors–could putz around for years in a pre-defined and prestigious path with moderately above-market…

too complex. world is simple. boom-bust cycles enable capital to buy everything in the bust period. every thing. legal entities keep shifting to join news tax avoidance tricks. it's not a static game.

> boom-bust cycles enable capital to buy everything in the bust period.

Out of curiosity, what happens to the busted capital in this toy model?

Re: Private equity is buying everything from vet offices to tech conglomerates

#248

Post by austhrow743 »

icelancer wrote: post #108
mbesto wrote: post #88

Earlier quoted context omitted.

My firm supports 100's of PE acquisitions every year and I can tell you that your experience is far more the norm than what the parent comment has suggested.

The idea that PE comes in and sets eight figures of their own money on fire and ruins a business, shooting themselves in the foot makes no sense, yet every other story online is about them doing exactly that. Of course there are LBO scams going on (more historically rather than currently) but these billion dollar firms don't come in and lose a ton of their own money along with money of their outside investors on a re…

A startup going from being VC backed to PE is one that is greatly reducing its expectations of the future value of current work.

I can see how it would feel like the PE firm is ruining the business to a current employee. Projects that you worked on, saw a lot of money poured in to, that you personally still believe in; get shut down and you think "why would these idiots buy that just to shut it down? Must be finance shenanigans involving write offs and shell companies" when really they valued those projects at $0 or less when they bought the company.

Re: Private equity is buying everything from vet offices to tech conglomerates

#249

Post by JumpCrisscross »

jazzkingrt wrote: post #176
JumpCrisscross wrote: post #136

I have a pet theory: there are managerially-minded university graduates who value prestige more than power or pay. In the post-War era, they became beige-suited company men. In my generation, they went corporate finance. Today, they work for private equity. Banking was great. Everyone–from liberal arts to engineering majors–could putz around for years in a pre-defined and prestigious path with moderately above-market…

A friend of mine is VP (not partner), and he seems to spend most of his time on deals. Market research, building financial models for a potential LBO, or for the sale of a portfolio company. From what I understand, the on-the-ground management work after acquisition is outsourced to specialized executives with whom the firm has a relationship. They can bring expertise in a specific industry, and the deal structure pa…

> he seems to spend most of his time on deals

Transactional staff are typically a minority of PE branded employees. There is a stable of executives to pick from. But underneath them, operational staff (who may also be drawn from transactional) who aren’t in on the upside typically come via the fund. They will work in a fund office, have fund swag, but work on operational reporting, portfolio surveillance, refinancing and cap structure management, et cetera.

Re: Private equity is buying everything from vet offices to tech conglomerates

#250

Post by JumpCrisscross »

paxys wrote: post #182
JumpCrisscross wrote: post #136

I have a pet theory: there are managerially-minded university graduates who value prestige more than power or pay. In the post-War era, they became beige-suited company men. In my generation, they went corporate finance. Today, they work for private equity. Banking was great. Everyone–from liberal arts to engineering majors–could putz around for years in a pre-defined and prestigious path with moderately above-market…

PE fund managers and associates aren't on the ground managing factories. Very, very far from it.

> fund managers and associates aren't on the ground managing factories

Not on the ground. But providing that service from away. Most commonly, the CFO’s “staff” will be associates. They build the same models and doll up the same decks. Same for communicating portfolio health to LPs. That’s a reporting function.

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