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They do really awful things, too, and they are rewarded outrageously for it with very little personal risk. Taking a 10x levered loan to pay for a company, tran

They do really awful things, too, and they are rewarded outrageously for it with very little personal risk. Taking a 10x levered loan to pay for a company, transferring the debt to them, and cutting the company loose after paying yourself a dividend that more that covers your loan principal has nothing noble about it at all. I don't want to be acquired by them, but I have much more respect for shops like Thoma Bravo that act as operators and acquire strategically for portfolio companies that places like Bain, for example.

dmix 7y ago
I personally don't care much for defending shitty Wall St companies nor LBOs, I just wanted to point out that a lot of FUD surrounding Private Equity is simply that, FUD. There are a lot of bad players or stupid businessmen and politicians in municipalities who have given it a bad name by making dumb exploitative deals. Which I do not condone or wish to defend. But PE has still done a lot of good turn arounds and has been proven via plenty of data to be a net-gain in terms of its economic contribution to society, saving plenty of jobs and American companies that were headed for certain death. Companies within all industries always vary in quality, but I think it's silly and dangerous to define entire industries merely by a small group of it's worst players - like the way people have been trying to pin the entire Silicon Valley industry to Ubers and Theranos, or Google/FB acting poorly, despite is otherwise countless success stories. This sort of thinking, political spin, and media coverage is what creates destructive gov policies aimed at the few small minority of big bad guys but often ultimately just harms the other 90% of mostly harmless good guys with needless hoop jumping or straight up banning of otherwise useful contributions to society (which there have been countless examples of such self-destructive - but of course well intentioned - policies driven by similar emotional reactionaryism). PE has been a punching bag for a long time. My only wish is that it is done rationally and using an evidence based approach. Politics has a habit of stirring up hysteria with stuff like this, disconnecting it from the reality on the ground, which LBOs and PE certainly has a longstanding legacy of, which you can see thoroughly in this thread. It's hardly new. But yes of course it is an industry notorious for its leeches and one that should be treated carefully, not with white gloves. Just remember the worst stories take up 90% of the headlines, the countless successful ones often happen quietly, or in less read retrospectives or books. The stuff that rarely tops Reddit or HN, so it's easy to assume that all companies doing LBO are evil blood sucking monsters if you don't pay close attention.
- throwaway5752 7y ago
  I don't entirely disagree with you and I'm not trying to score points by dunking on an unpopular boogieman. There are certainly poorly structured and operated companies, and acquisitions by companies that improve their management and capital structure are good. I just think that - in paricular, with the debt market we have right now, that leveraged buyout firms are on the net bad. I think it's maybe as much or more a consequence of poor yield options and gutted regulations, structured products are like buying sausage in the days of Upton Sinclair. There is too much capital out there, I hate to say. There is a lack of discrimination on the fixed income market that would have put brakes on lousy LBO operators, and there are enough of them because the funding is available. That is magnified by engineered bankruptcies and pension haircutting/offloading, which goes beyond the destructive business outcomes I see lately.

dmix 7y ago

I personally don't care much for defending shitty Wall St companies nor LBOs, I just wanted to point out that a lot of FUD surrounding Private Equity is simply that, FUD. There are a lot of bad players or stupid businessmen and politicians in municipalities who have given it a bad name by making dumb exploitative deals. Which I do not condone or wish to defend. But PE has still done a lot of good turn arounds and has been proven via plenty of data to be a net-gain in terms of its economic contribution to society, saving plenty of jobs and American companies that were headed for certain death. Companies within all industries always vary in quality, but I think it's silly and dangerous to define entire industries merely by a small group of it's worst players - like the way people have been trying to pin the entire Silicon Valley industry to Ubers and Theranos, or Google/FB acting poorly, despite is otherwise countless success stories. This sort of thinking, political spin, and media coverage is what creates destructive gov policies aimed at the few small minority of big bad guys but often ultimately just harms the other 90% of mostly harmless good guys with needless hoop jumping or straight up banning of otherwise useful contributions to society (which there have been countless examples of such self-destructive - but of course well intentioned - policies driven by similar emotional reactionaryism). PE has been a punching bag for a long time. My only wish is that it is done rationally and using an evidence based approach. Politics has a habit of stirring up hysteria with stuff like this, disconnecting it from the reality on the ground, which LBOs and PE certainly has a longstanding legacy of, which you can see thoroughly in this thread. It's hardly new. But yes of course it is an industry notorious for its leeches and one that should be treated carefully, not with white gloves. Just remember the worst stories take up 90% of the headlines, the countless successful ones often happen quietly, or in less read retrospectives or books. The stuff that rarely tops Reddit or HN, so it's easy to assume that all companies doing LBO are evil blood sucking monsters if you don't pay close attention.

throwaway5752 7y ago
I don't entirely disagree with you and I'm not trying to score points by dunking on an unpopular boogieman. There are certainly poorly structured and operated companies, and acquisitions by companies that improve their management and capital structure are good. I just think that - in paricular, with the debt market we have right now, that leveraged buyout firms are on the net bad. I think it's maybe as much or more a consequence of poor yield options and gutted regulations, structured products are like buying sausage in the days of Upton Sinclair. There is too much capital out there, I hate to say. There is a lack of discrimination on the fixed income market that would have put brakes on lousy LBO operators, and there are enough of them because the funding is available. That is magnified by engineered bankruptcies and pension haircutting/offloading, which goes beyond the destructive business outcomes I see lately.