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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#241

Post by aaronharnly »

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 have no idea how reliable this source is, but it looks plausible - from the "American Investment Council", which appears to be some kind of private equity trade association ( https://www.investmentcouncil.org )

https://www.psprs.com/uploads/sites/1/AIC_PublicPensionRepor...

Some interesting details:

- "Nearly 50 percent of the private equity investment dollars that make their way into American businesses come from public pension funds", which substantiates OP's thesis.

- "U.S. public pension funds invest 9% of their portfolios in private equity, on a dollar-weighted basis." 46% is in public equity, so obviously the lion's share is in still in public markets.

Re: Private equity bought America's essential services

#242

Post by duskdozer »

WarmWash wrote: post #220
protonbob wrote: post #201

Earlier quoted context omitted.

[flagged]

Everyday I am infinitely grateful I have the ability to understand nuance, and the mental firepower to be able to comprehend data coming from sources rather than tiktoks, twitter, and hyper-partisan news orgs. No one ever said the vaccine would prevent transmission. What they said was that it !could! prevent transmission. But no one would know before studies were done. What they did say is that it would lower mortali…

Preface: I have been in favor of the COVID vaccine and disease mitigations (and wish we would have used this opportunity for clean indoor air...).

I'm willing to accept my memory is wrong here with evidence, but I remember a very strong narrative in the early period claiming that the vaccine did in fact prevent contraction and transmission, to the point where it was supposedly surprising when "breakthrough" cases started being reported.

It's possible there was some loose language around "prevent" as I did see that especially later on, but I have trouble finding reliable information on what they actually believed and if they actually reported this accurately to the public.

There is the unfortunate mark against where they knowingly promoted misinformation around masks - persistent through today - that they were ineffective, in an effort to direct uncontrolled distribution of masks to medical professionals most in need.

Re: Private equity bought America's essential services

#243

Post by jonwachob91 »

smallmancontrov wrote: post #135
jonstewart wrote: post #119

Earlier quoted context omitted.

Statutory antitrust regulation would be fantastic. Instead of litigation, the regulators, corporations, and shareholders know when a business must split or divest. The firm files a plan, it gets approved, everyone wins except monopolists.

Progressive business taxes. At a certain income level, natural pressure starts mounting to split.

elaborate on this line of thought please.

Re: Private equity bought America's essential services

#244

Post by jonhohle »

jmyeet wrote: post #228
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…

This reads as apologia, blame-shifting, "I was just following orders". People have to eat. They need water. They need a roof over their head. Nobody has to buy out all the veterinarians in an area at rates they can't say no to, have them sign non-competes and them jack up all the prices by 300% because, hey, you now own all of them. Nobody has to buy up all the trailer parks, which are normally peopple's last stop be…

Worse than vets is hospital system and medical offices. In our area there are about 6 hospitals within reasonable driving distance. 1 is a mayo and the 5 others are split between the two major mega-providers. One of those also partnered with CVS/Aetna to provide marketplace insurance, until they decided that didn’t have high enough margins so they dropped 100k (28%) subscribers.

Re: Private equity bought America's essential services

#247

Post by _DeadFred_ »

sega_sai wrote: post #3

I simply don't understand why leveraged buy-out(LBO) is allowed in the first place. It is like paying for the company with the money from the company you are buying.

This was called corporate raiding in the 1980s and even Reagan era America looked upon the practice as horrific, vilifying it in books/movies. That it's now an acceptable norm even after 40 years of it making things worse says a lot about the state of our nation. 'Money above all else' is more believed today than 1980s Reagan America.

Re: Private equity bought America's essential services

#248

Post by jmyeet »

amazingamazing wrote: post #21

Seems strange to me: 1. No one forced these people to sell. Is the idea that you can’t sell to an entity with more money? If you block that good luck with the world economy. 2. If above is ok is the idea that the new owner is inherently worse because they have more money, whereas as the smaller would be OK then where are the new entrants? 3. Going to the article it is clear enough. These industries just are not lucra…

> 1. No one forced these people to sell.

Why do we need antitrust laws? Why do mergers need government approval? Or are you a libertarian who believes in unfettered capitalism?

Where does it end? What if I threatened you with violence to sell your business? Is that OK? You might correctly say "that's illegal". If so, does that stipulate we do need laws? How far can coercion go while still being legal? What if I also own your key suppliers? What if you run a veterinarian practice and I jack up the price of all your meds, radiological film, etc if you don't sell? What if I own the major pet insurance providers and decide that your practice, if you don't sell, is no longer covered by my insurance?

> 2. If above is ok

It's not.

> 3. Going to the article it is clear enough. These industries just are not lucrative to begin with

They're engaged in anticompetitive behavior but on a local level so it tends to escape scrutiny. Unfortunately, if you dog is sick and you like in Cincinatti, you don't really have the option to go Reno where there's (for now at least) a cheaper option.

This is all just rent-seeking behavior. Nothing about this is productive. The people who engage in this should be treated the same way profitters are in wars and natural disasters, which historically hasn't been a fine or legal sanctions. I'll put it that way.

> 4. Somehow leaving money on the table in the form of a backlog is bad?

That's what rent-seeking is. It's unproductive extraction of wealth by removing all other options.

Wait until PE comes for your ISP and suddenly a 1gig fiber connection is $300/month. What are you going to do then? Start your own ISP? Good luck with that.

Re: Private equity bought America's essential services

#249

Post by scionaura »

bko wrote: post #10

The premise is that PE firms invest in companies, load them up with debt, and maximize profit. And it's especially nefarious in industries where people have "no choice but to pay" > The result is a backlog that reads like a financial opportunity in earnings calls and a crisis in every fire station in the country. As of 2025, REV Group’s backlog stands at $4.5 billion. Wait times for a custom fire truck run to four ye…

So much condescension in your comment. So little to back it up.

> So you make money by ... not delivering? I'm missing something.

Precisely. Let's review imperfect competition. Although it's you who so unpleasantly insists on framing the discussion in econ 101 terms, it's your comment that is sunk by a misunderstanding of elementary economics.

What you're missing is evidently the things one learns when they go past chapter 1 of an intro textbook!

> It's the profit maximizing level.

Not all markets match the assumptions of the simple "perfect competition" ideal you learn about first. The efficient equilibrium you describe requires an assumption that there are no barriers to entering the marketplace as a producer. An extreme example breaking this assumption is the "monopoly market", where there is only one seller of the good because barriers prevent other sellers from viably entering the marketplace. That's why the consolidation in OP is relevant to the discussion...

In the extreme case the market equilibrium is reached when a monopoly jacks up the price and produces less than it would in a competitive market. Deliberate scarcity! The (single) producer makes more money in this kind of market. The consumer is worse off. But the every extra dollar the monopolist makes in profits takes more than a dollar away from the consumers. Deviating from the perfectly competitive equilibrium results in a market inefficiency called "deadweight loss".

The article also nodded to the price-inelastic demand for the equipment enabling emergency services. Inelastic demand makes this phenomenon more extreme. It's pretty intuitive that fire departments' demand for firetrucks would be price-inelastic.

So anyway. Your comment implied that you don't want to be mad about the consolidation and price gouging for e.g. firetrucks if you're in the "woohoo go free markets" tribe. Couldn't be more wrong. You should be just as mad if you're in that tribe. The extraction of monopoly rents from emergency services is not just dangerous, and not just unfair, but also a textbook case of market inefficiency.

Re: Private equity bought America's essential services

#250

Post by muddi900 »

thecolorblue wrote: post #157

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.

The Capex and Opex requirements to do anything in the US are THE barriers to entry.

Nobody has that kinda cash lying around, banks can't justify such high liabilities, and VCs are not interested in "stable", businesses.

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