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Basically what the last thread said: the typical pattern is to buy a company, load it up with debt and cut expenditure to make all of the revenue graphs trend u
by dhsysusbsjsi 6y ago
Basically what the last thread said: the typical pattern is to buy a company, load it up with debt and cut expenditure to make all of the revenue graphs trend up for a few years then sell it to unwary public investors and walk away with a huge profit.
A lot of them end up collapsing under the debt a few years later, plus the heavy cutting of capital expenditure (“capex”) leads to a long term declining revenue as they are no longer investing in new products.
- staysaasy 6y agoExactly, and grandparent post was a great question. Another nasty dimension (in the LBO model referenced) is that by playing crazy financial games the PE firms can often wager very little of their own money AND take money off the table fast by issuing dividends. So it's basically a low-risk / risk-free way to suck the blood out of a company. In my experience whether you think that PE is lawful neutral or flat-out lawful evil tends to come down to your opinion on the most brutal forms of capitalism...
- Proven 6y agoThanks to the culture of fake money, risks are mispriced and money is cheap. How about somebody recognizes that and blames the Fed rather that capitalism? Also remember that firms can defend themselves from hostile takeovers.
- devalgo 6y agoYou might say the only reason it could even be lawful evil is because the PE firms spend lots of money on lobbyists to ensure it stays legal.