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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#231

Post by pizzafeelsright »

itake wrote: post #31
b3lvedere wrote: post #17

[flagged]

One thing I don't see is the other side of this story: the sellers. I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell? When PE takes over medical practices, my understanding is there just isn't enough capital available for a dentist to "cash out". The options are either they find another dentist to buy it, the close the practice, or they sell the private equi…

Successful business owner has revenue of $2-20MM with their owner's "salary" being $200k-4MM which is very respectable.

Owner gets old or want to quit the business and a PE offer of 2-8x Revenue comes in.

Owner making $200k instantly cashes that $4MM check and walks away.

PE takes contracts, guts all the expenses and cuts staff in half, and purchase price is recovered in Suddenly there is only one HVAC or dentist company that can maintain licenses and insurance.

Re: Private equity bought America's essential services

#232

Post by Ekaros »

DanielHB wrote: post #208
Ekaros wrote: post #35

Earlier quoted context omitted.

Non-bank entities being in play is likely part of the problem. If you can sell the bad debt to some other entity say a fund that got investment from pension you win. For fund managers these things can look great on paper and that is everything that matters. Even if things do not workout they can on paper extend and pretend or take payment-in-kind. Meaning well you are short on interest payments so you just tack it on…

Ah so it is related to that whole private debt markets, the loans these PE companies take are not with banks. It is related to that whole thing with Trump opening those kind of loan investments to ordinary americans and pension funds. Great another financial crisis.

Most fun thing is that even if bank can't led to these sort of companies they can lend to companies that lend to them... So added fun. And well this has been going on for long time and cracks have started properly showing up more recently.

Re: Private equity bought America's essential services

#234

Post by hilariously »

nemomarx wrote: post #159
amazingamazing wrote: post #104

Earlier quoted context omitted.

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.

Yes, breaking up things wasn't bad, it was the completely lax failure to continue this action and to regulate corporations that got us rafts of stupid ass legislation culminating in citizens united. "Too big to fail" companies are just government entities that are not regulated properly.

Re: Private equity bought America's essential services

#235

Post by pizzafeelsright »

pelotron wrote: post #149
itake wrote: post #31

Earlier quoted context omitted.

One thing I don't see is the other side of this story: the sellers. I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell? When PE takes over medical practices, my understanding is there just isn't enough capital available for a dentist to "cash out". The options are either they find another dentist to buy it, the close the practice, or they sell the private equi…

I think it's totally appropriate to hold it against them if they knowingly sell out to scumbags. Society used to look down on selling out. We wrote songs about it. But in 2026 it is glorified.

You're 55, making $400k a year as a HVAC Repair Company, and while you love the business and your kids are in expensive colleges (not taking over the business) you are offered $8MM to sell. Instant retirement. A buy out isn't the same as selling out because people live off of cash and not principal.

Re: Private equity bought America's essential services

#236

Post by cameronh90 »

yardie wrote: post #195
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…

One of the tools we use was bought by PE last summer. When it was time to renew our support contract had tripled in price. I use it across 10 projects so our costs went from $200k to $500k. I let our account manager know this was unacceptable but even his hands were tied. Cancelled those contracts and let them know we were retooling with a competing tool and opensource to fill those gaps. The impression I got was we…

This is just the design of a PE fund. They run on a fixed cycle, so early on they heavily invest into their portfolio with the aim of resolving that risk and maximising the sale value by the end of the cycle.

In principle, I don't think there's anything wrong with this. All investment expects a ROI over some time horizon. Public companies do the same thing. Anyone who founds a start-up is doing it too. The only real distinguishing feature of PE is how successful they have become at aggressively optimising for market value.

The issue is that the sale value at the end of the cycle can be massively influenced by cynical financial engineering. This seems to me to be more of an issue with how every institutional investor apparently now prices companies purely on reductive metrics like EBITDA x the industry standard multiple.

The cause of the rot is widespread over-confidence in dumb financialization models shaping the system.

(Or, since it's HN: if your machine learning model is training well, but misaligned with real life: do you blame AdamW?)

Re: Private equity bought America's essential services

#239

Post by vjvjvjvjghv »

elevation wrote: post #113

Not all PE problems are existential; they will be outcompeted. What keeps a newly graduated Veterinarian from opening her own clinic and undercutting the PE competition? With no massive loans on her books, she can profitably offer lower prices than PE can. She may even drive the local PE clinic out of business.

First, opening a clinic requires some serious money. Then, if the new clinic gets traction, PE can make a very good offer for a buyout and the owner would have to be stupid or very stubborn to refuse. Most big companies these days just buy up competition. Good for the owners but bad for the customers.

Re: Private equity bought America's essential services

#240

Post by muddi900 »

dd36 wrote: post #2

End consolidation. Go back to pre-1980s antitrust policy. Encourage competition and bust the trusts.

The pre 1980s standards were ridiculous though. However, even if the US moves to some 3 quarters of the way towards now would be a huge improvement.

The "consumer harm" standard is idiotic.

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