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Companies rarely ever get PE because the people running it were doing a good job, it’s usually a bad option among bad options, so it’s not surprising PE is asso
by dmix 3y ago
Companies rarely ever get PE because the people running it were doing a good job, it’s usually a bad option among bad options, so it’s not surprising PE is associated with vultures looking to “ruin” a good thing. Most people aren’t privy to how shitty the finances are at some companies, that could put it in such a position. Usually employees are oblivious to it because the executives hide it then all of a sudden a new owner is chopping it up for parts.
That said apparently the track record for companies that succeed after getting PE is higher than the straight up losses where it gets sold for assets. At least that’s what I remember reading in some pop business/finance book I read long ago. Maybe someone could correct me here.
- agentgumshoe 3y agoYeah, exactly, the PE vultures come in to a bad company, carve it up (sell and refinance their assets, debt-raise to pay themselves, cut staff), extract a bunch of money and then sell and leave them for dead with no accountability.
- dmix 3y agoBut usually only if they can’t turn it into something better. Anyone betting millions on a company goes in aiming a bit higher than selling off real estate or whatever asset. That’s usually the back up plan after a short play to turn the company around. It’s just not pretty when it doesn’t and people who care about the business naturally see them as shortsighted opportunists.
- JumpCrisscross 3y ago“Private equity catalyzes the creative destructive process in the labor market, with only a modest net impact on employment” [1]. (Service and retail do worst, in terms of employment.) https://www.nber.org/system/files/working_papers/w17399/w17399.pdf https://www.nber.org/system/files/working_papers/w17399/w173...
- robertlagrant 3y agoA friend does business turnaround. He's seen both: a predatory buying of a company with a semi-fake promise of investment from one guy who just accelerated it into the ground charging management fees, but also a PE firm that airdropped my friend in to analyse it, and he turned a dying business into a profitable one that they decided to keep on the books as it's doing well.