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Private equity turned vulnerable elderly people into human ATMs

theguardian.com

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Re: Private equity turned vulnerable elderly people into human ATMs

#61

Post by lisper »

tsol wrote: post #60
lisper wrote: post #24

Earlier quoted context omitted.

To be fair, my mother had cancer and my father had Parkinson's, and that was a much bigger factor in their ultimate quality of life than any deficiencies in the retirement home they found themselves in. So I don't mean "thankfully" in the sense that "thankfully they died prematurely so they didn't have to suffer under their home's new management", I mean it, "Thankfully the natural course of their lives timed their d…

I didn't read that as saying anything about your character; it's an understandable way to react. It is an indictment of the system that people have to feel that way when it really shouldn't have to feel that way.

> I didn't read that as saying anything about your character

I didn't take it that way, I just wanted to make sure there was no misunderstanding. This is an emotionally charged topic.

Re: Private equity turned vulnerable elderly people into human ATMs

#62

Post by jdkee »

lisper wrote: post #17

My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze o…

Sorry for your loss.

Re: Private equity turned vulnerable elderly people into human ATMs

#63

Post by germinalphrase »

FireBeyond wrote: post #26
lisper wrote: post #17

My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze o…

As a (former) paramedic, PE-run SNFs (skilled nursing facilities) are an absolute evil that absolutely kills people. I do want to be clear before any of the following that while there is a truth that many of the nursing staff at these facilities are often the lower quality tier of nursing care, they often care greatly for their patients/residents. Staffing/flooring ratios? Laughable correlation to reality. Many a tim…

Aren’t these kind of borderline fraudulent business practices the sort of thing state attorney generals are supposed to investigate?

Re: Private equity turned vulnerable elderly people into human ATMs

#64

Post by cloudbonsai »

danielparsons wrote: post #34

I don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors? If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin. So I can triple my money every year because it’s now generating profits of 3x my…

I'll sketch a few points to illustrate the inner workings here:

- It's hard to buy a decent company at 5x EBITDA today. A typical EBITDA multiple nowadays is like 10x-15x. (e.g. EQT bought SUSE for $3B in 2023, and the adjusted EBITDA was $240M, which implies 12x EBITDA)

- Debts are tranched. Banks typically get a senior slice, often secured by real assets (a.k.a. collateral), so they can recoup the money even when the company goes straight into a ditch. The real risk lies in the junior loans ("mezzanine"), which demand very high yields to compensate for that risk.

- In a typical PE deal, most profits are earned at exit, not via dividends en route. So managers have incentive to make the target company (look) better for the next buyer, rather than neglecting it.

A more fundamental reason why the situation you describe rarely happens is that PE fund managers treat their operation as an "on-going" business. Lenders are gonna be really pissed if they lose their money. So fund managers try to avoid that scenario to keep the credit flowing for their next deal.

Re: Private equity turned vulnerable elderly people into human ATMs

#65

Post by rkhleung »

youarentrightjr wrote: post #56
JumpCrisscross wrote: post #38

Earlier quoted context omitted.

Broadly speaking, private equity is used to describe anything leveraged we don’t like. When we like it, we tend to describe it as a start-up, family business or simply “firm.”

Hey, it's you again! I was wondering if you would pop up in the comments defending private equity as you've done in the past. Continuing our discussion from last time, can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies?

I had worked with PE firms for over 6 years from the other side where we would invest in PE funds operating primarily in emerging markets, about 50 or so during my time and reviewed another 50 more that we did not invest in. Most of them are pretty benign. We invested primarily in transportation, energy and infrastructure but also hospitality and industry. There are many many poorly run private companies out there that PE funds buy out and rehabilitate. One major segment for a couple of funds is the purchase of poorly run family businesses where the founder was successful because they had drive and energy and built something at the right time (or sometimes, they knew the right people) but lacked the interest or vision to take it to the next level. Or the founder is getting old and the family has managed to turn the once successful business into a money loser. This is a long about way of saying, the majority of PE firms are benign and have invested in many successful businesses that many of us use. There are bad actors and more so in the US where corporations are allowed to eat the weak. It is not a case of PE bad but much more so that US business laws have relatively weak protections for consumers.

Re: Private equity turned vulnerable elderly people into human ATMs

#67

Post by triceratops »

elephanlemon wrote: post #30

Could someone (please not an LLM) attempt to steel man the following position for me: Private equity is overall good for society

Private equity is just a type of investment. It can be run by scumbags or regular people.

The growing role of PE in everything and everywhere is IMO a symptom of wealth inequality. PE didn't invest in veterinary practices, retirement homes, or plumbing businesses 30 years ago. They're just running out of places to put all that cash.

Re: Private equity turned vulnerable elderly people into human ATMs

#68

Post by nighthawk454 »

danielparsons wrote: post #34

I don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors? If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin. So I can triple my money every year because it’s now generating profits of 3x my…

Yeah, that’s the idea. The loans get bundled up and resold to insurance companies, pension funds, and retail bond investors.

Funds are plenty willing to lend other peoples money to get guaranteed dividends and fee payments and not be left holding the risk. Retirement funds are the bag holder - but they won’t realize till later.

There’s structural pressure to buy from PE because insurance/pension is designed as fixed payout requiring say 7% yield forever. In a world where investment-grade bonds pay 4% and demographics are shifting from net-inflow to net-outflow, liquidity is _tight_. Meanwhile PE was promising 10% a year or whatever (someone call Madoff…) so that was preferable to the hard conversations of the funds failing. At the cost of kicking the can down to the road and making it worse in the future.

If this sounds like 2008 that’s because it is. But bigger and worse, and happening in wayyy more than just mortgages this time.

Re: Private equity turned vulnerable elderly people into human ATMs

#69

Post by jancsika »

Someone needs to create a kind of JSON for care homes, if you will. Something like a super simple spec of what a goddamned care home object is for, and the minimum number of actually fairly-paid full-time staff one needs to achieve that in practice.

Then it doesn't matter how many baroque shell companies it takes represent the thing internally. Either the thing can output a response in Care Home Object Notation, or it's just a bunch of crafty bullshit disguised as a care home.

You'd just walk in with your one-page CHOM spec and read down the sheet: "Number 1: Can I speak to a full-time nurse, please?" If they respond, "No, but here's two high-school interns in a trench coat," you can just be like, "Not a care home. Got it," and move on to the next one.

Re: Private equity turned vulnerable elderly people into human ATMs

#70

Post by a_t48 »

rawgabbit wrote: post #19
lisper wrote: post #17

My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze o…

Where I live Medicare and Medicaid want people to live (and die) in their own homes. They send out nurses and nurse practitioners to you. That is what I want. After some research I realized the provider that I want which is UTSW in Dallas has a geographical radius that they serve. I am planning to eventually move to be within that radius. https://utswmed.org/medblog/geriatrics-cove-team-makes-house...

For some (like one of my family members), circumstances are such that they need more social attention than the family/medical system can provide. That's one of the reasons we are considering.
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