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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#421

Post by conductr »

WarmWash wrote: post #142

Run from investing in PE, run as fast as you can. I (and leaders at my PE-owned company) cannot say enough bad things about private equity. How anyone who managed to make money in their life decides PE is a good investment blows my mind. We are now on our 5th PE firm in 10 years, and just completed a "PE lifecycle" of buy -> merge -> sell -> part out -> merge. None of these PE firms bring anything to the table. Even…

Have worked in C levels of many PE portfolio companies across industries and this all tracks for me.

I make a good amount every time the company changes hands so I’m kind of complicit but I also try very hard to run each company the best it can be run from the perspective of all stakeholders. Sometimes they just live in la la land with their expectations. They put together an investment thesis prior to investing and cant wrap their heads around any deviations from some stupid excel model they built with 5-10 year financials all on rose colored assumptions. One business I was a part of had a new government regulation immediately erode 40% of their revenues and every month explaining it over and over why we were down to plan was ridiculous. Then the annual budget we told them would be a readjustment to reality. When we presented it they acted flabbergasted. This same thing went on over and over until I just got fed up telling them I didn’t care about their investment thesis and would only discuss reality and left the company purely because of the investors. Stuff like that is pretty common

Re: Private equity bought America's essential services

#422

Post by FuriouslyAdrift »

pjc50 wrote: post #205
FuriouslyAdrift wrote: post #186

Earlier quoted context omitted.

Pension funds still exist?

There's $32trn of them: https://fred.stlouisfed.org/series/BOGZ1FL594090005Q Who do you think is buying .. everything? They're holding substantial fractions of both the whole stockmarket and national debt.

I do not know anyone other than teachers, cops, or firemen that have pensions and all of those are grossly underfunded (see city of Chicago).

Now... if you mean IRAs then yeah... that's 99% of all private "investors"

EDIT: I forgot all about State and Federal pensions.

Re: Private equity bought America's essential services

#423

Post by simonsarris »

CGMthrowaway wrote: post #411
MichaelZuo wrote: post #286

Earlier quoted context omitted.

Huh? Don’t many jobs still have gold plated pensions? Like millions upon millions? They need to be paid out somehow.

Government jobs, yes. Of which there are more and more every year. https://fred.stlouisfed.org/series/USGOVT

true but be sure to see `All Employees, Government/Population`

https://fred.stlouisfed.org/graph/?g=1WF5r

Re: Private equity bought America's essential services

#424

Post by alexpotato »

cyberax wrote: post #396
alexpotato wrote: post #376

Earlier quoted context omitted.

> By year 3 they start the squeeze, layoffs, asset selloffs (stripping), and lowering quality, raising prices. That is where the real teeth of wolf are shown. To play devil's advocate: Doesn't this also open the market to new entrants? e.g. young person looking to start a HVAC company in the old days couldn't compete with the established firm that already had contracts and the local market wasn't big enough for two p…

A lot of markets can't support more than a couple of competitors. And in many cases, you can't easily open a new company because of upfront expenses. E.g.: an emergency room.

This is true but to use your example of an emergency room:

It's not uncommon in more rural areas to find a business that is essentially "more than an urgent care but less than an emergency room". e.g. they aren't doing trauma surgery but they can deal with broken limbs, severe lacerations etc that an urgent care couldn't handle.

My point is that while it's true that there are "step functions" in certain services, this is not always the case.

Re: Private equity bought America's essential services

#425

Post by everybodyknows »

cameronh90 wrote: post #310
mcphage wrote: post #269

Earlier quoted context omitted.

> how successful they have become at aggressively optimising for market value They use money to turn value into money, which they then use to turn more value, into more money. And in the end, they have a lot of money, and all of the value is gone.

That's only possible if the financial system is valuing things systematically incorrectly. IFF a company is truly, honest to god, less valuable than the sum of its parts, then it (or the subset that would have more value to someone else) SHOULD be dismantled, and those resources sold and reallocated to more productive use. You probably make these sorts of decisions in the capacity of your own personal finances withou…

> some institutional sucker will buy the company

What sort of institutions would try to take on operating such a business? And when does word get around, and the pool of suckers dry up?

Re: Private equity bought America's essential services

#427

Post by deepfriedchokes »

rocketpastsix wrote: post #116
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…

I think part of the problem with the succession idea is that a lot of people in these positions worked these hard jobs to try and give their kids a better life. They encouraged their kids to go to school for their passions and now those kids are in careers far removed from what their parents did. Instead of succession, I wonder if there is a way to make it easier for these people to sell their company when its time t…

We should be encouraging employee stock purchase plans with tax incentives. [0] It’s better for the businesses and better for our communities than PE.

[0] https://en.wikipedia.org/wiki/Employee_stock_purchase_plan

Re: Private equity bought America's essential services

#428

Post by pelotron »

pizzafeelsright wrote: post #235
pelotron wrote: post #149

Earlier quoted context omitted.

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.

At the end of the day it comes down to how much money your principles are worth. People are commenting about dentists and doctors being bought out. Those strike me as the kind of people that can afford retirement without also contributing to the worsening of society.

Re: Private equity bought America's essential services

#429

Post by ahepp »

spyckie2 wrote: post #290
Galanwe wrote: post #207

Earlier quoted context omitted.

> The irony is that PEs exist largely because of pension funds. The irony goes way deeper than that. A large part of PE clients are university endowment funds. Harvard for instance has close to $60B in its endowment fund, 40% of which is invested in PE. At this point, Harvard is more an investment fund, with a university as side business.

I think, if you were to say there is a way where you can take $10b and have that money make more ROI with less risk than $1000 can, people would look at it and scream this is broken let’s policy this out of our economy. It defies all laws of a balanced economy (not a capitalistic one, a balanced one). It’s just like monopolies and we have strong laws against that. But… if you were to say hey we need to pay our old pe…

I think you have this pretty backwards. Private equity does not exist because of pensions. Private equity is investment that has not taken additional steps to be a part of regulated public markets.

It's true that private equity is dominated by institutional investors. One reason for this is that the investments are generally deemed too complicated, illiquid, and risky for retail investors (although the Trump administration is trying to change this).

Additionally, if we added the kinds of regulations, reporting requirements, standardization, etc, that would be necessary to scale this model to hundreds of thousands or millions of investors participating in an informed manner, we would simply recreate public markets.

Freakonomics recently did an episode on this that I thought was pretty good: https://freakonomics.com/podcast/is-the-public-ready-for-pri...

They've done some pieces on private equity in the past too: https://freakonomics.com/podcast/are-private-equity-firms-pl...

Re: Private equity bought America's essential services

#430

Post by djoldman »

What's rarely addressed in these articles is the question: if the product/service is so bad relative to the cost, where's the competition? Specifically in this article about fire trucks, they say that margins have tripled... ok, why isn't anyone jumping on that?
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