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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#151

Post by randusername »

giraffe_lady wrote: post #117
randusername wrote: post #98

Article doesn't really dig into the angle I personally find most horrifying, strip-mining social capital. In my area PE is gobbling up mom-and-pop apartment complexes, plumbing companies, restaurants, and generally making customers and employees alike pretty miserable. Hard-working founders should be able to cash out, but there has to be a better system than this one. Succession, maybe. Not that we should push an unm…

> Hard-working founders should be able to cash out Why? Operating a successful business should be remunerative on its own, or else it's not successful. Owners who don't want to do it anymore can let it become worker owned. If they don't want it, it can dissolve. What else do you need? The very concept that the end of a successful business is a big payday for its creator is itself the poison here. There is no end just…

I think you're right to zoom in on that point.

My guess is owner-operator selflessness is a key ingredient in a lot of beloved small businesses. I don't know for certain that the winning personality for getting a business off the ground on all the bad days is the same one that raises rates proportionally with their success.

So it becomes all-or-nothing. It's my friends and neighbors when I'm working, when I sell-out it's purely business. No in-between.

Re: Private equity bought America's essential services

#152

Post by scary-size »

Huh, that somehow reminds me of Crassus from Rome [1]

> The first ever Roman fire brigade was created by Crassus. Fires were almost a daily occurrence in Rome, and Crassus took advantage of the fact that Rome had no fire department, by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the firefighters did nothing while Crassus offered to buy the burning building from the distressed property owner, at a miserable price. If the owner agreed to sell the property, his men would put out the fire; if the owner refused, then they would simply let the structure burn to the ground. After buying many properties this way, he rebuilt them, and often leased the properties to their original owners or new tenants.

[1] https://en.wikipedia.org/wiki/Marcus_Licinius_Crassus

Re: Private equity bought America's essential services

#153

Post by nemomarx »

spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

Why don't pensions just invest in index funds generally? High required rate of returns or?

Re: Private equity bought America's essential services

#154

Post by AndrewKemendo »

amazingamazing wrote: post #79
AndrewKemendo wrote: post #67

Earlier quoted context omitted.

> What is stopping one of the previous owners from creating another company and taking them? You will not find any investors. The investors that want to invest in fire trucks already invested in the PE fund and will give them money over any new start That’s the point There’s no money elsewhere.

How did the original businesses start to begin with? Also where is this information coming from? It isn't in the article.

Usually from a loan or they bought someone out before the PE consolidation in that market really ramped up.

This is the insidious part: small markets that grow organically over about 10-20 years are specifically what PE investors look for because they are cash heavy but don’t have desire to expand.

So the owner gets 3M cash out for property worth 4M. PE bundles similar businesses (boba tea shops are a popular one) and then uses the net cash to get a loan to expand.

They expand, cut corners then cash out on the net profit and then sell the skeleton in the pink sheets or go bankrupt.

I’ve had to deal with investors and finance for almost 15 years now. My company was bought by a PE backed company and I knew fund owners

this is how the economy works

Re: Private equity bought America's essential services

#155

Post by esseph »

amazingamazing wrote: post #92
asolove wrote: post #89

Earlier quoted context omitted.

The OP explicitly answers this: go back to pre-80s antitrust policy. Companies can be bought and sold but not if it creates concentrations of economic power that allow them to dictate prices to vendors or customers.

This is vague and not actionable. Should Microsoft and Amazon have been able to buy Anthropic and OpenAI 5 years ago? People always give these vague guidelines (and even the guidelines in the 80s were) and wonder why they are easily circumvented.

> This is vague and not actionable. Should Microsoft and Amazon have been able to buy Anthropic and OpenAI 5 years ago?

No, because if we had proper anti-trust they already would have both been broken up years ago.

Re: Private equity bought America's essential services

#157

Post by thecolorblue »

PE profits sound like other companies opportunities. Unless there are barriers to entry not covered in this article, I would think other companies could move in, deliver a fire truck faster and at a lower cost, and at least take a portion of the market that is able to switch.

Re: Private equity bought America's essential services

#158

Post by thijson »

spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

I wonder if this creates opportunity for spinning up competitors to these PE owned companies. If they are underinvesting in their products in order to extract value eventually their offerings will not be competitive.

Re: Private equity bought America's essential services

#159

Post by nemomarx »

amazingamazing wrote: post #104
hilariously wrote: post #97

Earlier quoted context omitted.

This is actually how anti-trust works - if you decide a company gets too big you Ma Bell it and break it up, its very actionable, just hard.

People keep bringing up Bell as if the situation now is not just as bad.

And they want to do it again and enforce anti trust laws? I don't see any contradiction here. Break up faang and keep a close eye on all these acquisitions the ai companies are doing and why they need to own package management and code editors and etc.

Re: Private equity bought America's essential services

#160

Post by b65e8bee43c2ed0 »

scary-size wrote: post #152

Huh, that somehow reminds me of Crassus from Rome [1] > The first ever Roman fire brigade was created by Crassus. Fires were almost a daily occurrence in Rome, and Crassus took advantage of the fact that Rome had no fire department, by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the firefighters did nothing while Crassus off…

>Upon arriving at the scene, however, the firefighters did nothing while Crassus offered to buy the burning building from the distressed property owner, at a miserable price.

sigma

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