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I see how that works for a case like Dell. I've also read about PE buying up smaller medical/dental practices and squeezing the price. Happened to my old denti

by edoceo 3y ago

I see how that works for a case like Dell. I've also read about PE buying up smaller medical/dental practices and squeezing the price. Happened to my old dentist in Ballard, WA -- and dang, they pushed me for x-rays on every visit (turns out there is good margin on x-rays). Dell is still run by the OG -- these PE folks are just trying to squeeze margin. And sure, they still have to follow some regulations -- but with much less oversight when you're not public. "expensive and onerous" is not a sufficient reason to not require a business to do something. Paying employees is expensive and onerous, should that stop?

scarface_74 3y ago
Why do you care if a private company has to follow financial reporting regulations? The reason that public companies have to is because the public buys shares in the company.
- edoceo 3y ago
  For a small company, a sole-prop dentist for example -- I don't. There is not enough motivation or sophistication or dollars on the table. For PE backed conglomerates I care because they can and do hide shady things in there. There is more motivation to juke the stats; more sophistication and dollars on the table. Sadly, because these companies are not public, when their anti-consumer operations are discovered there is little news about it. That results in a situation, for example, where folk don't think there is any reason to care about the issue.
  - scarface_74 3y ago
    Again why do you care as a consumer? If they aren’t getting money from the public market and no taxpayer money, how does that affect you? Whether the company is public or private they still have to follow the relevant laws for their industry.
    - edoceo 3y ago
      I care because these PE backed firms can (and do) screw the consumer (me, my family, my friends, you) and there is no visibility. Do you understand it's possible to follow the law and still use greed to screw the consumer? Are you being intentionally naive?
      - scarface_74 3y ago
        I’m asking you for a specific case where a PE firm could specifically screw you and you have no choice but to be a consumer in a way a public firm couldn’t?
        QuadmasterXLII 3y ago
        He gave a specific case of PE attemting to scam him in a way that not only steals money from him, but would literally irradiate his face
        scarface_74 3y ago
        And what does that have to do with how the company is financed? Public GAAP disclosures have absolutely nothing to do with whether the company is harming people or following applicable laws for their industry.
        BobaFloutist 3y ago
        When you learn a company has been purchased, you adjust your priors on their behavior (based on past behavior, reputation, etc). When Amazon bought One Medical, I expected the product and the customer service to be slowly watered down. If it happens invisibly, I'm operating on historically established trust that is outdated, and I have no way to know it.
massysett 3y ago
At least in US society, the general idea is that there should be a reason to require a business to do something. Not that there needs to be a reason to not require a business to do something. Public companies are subject to some requirements for good reason. Those reasons may not apply to private companies. Companies pay employees because if they don’t, they won’t have employees and therefore will lack labor, a critical input.
robertlagrant 3y ago
> "expensive and onerous" is not a sufficient reason to not require a business to do something. I don't know where you're getting this from. The reason to not require it is that the regulations don't apply. However, it's also true that making it cumbersome to do business, while making the big four consulting firms endless amounts of cash, is a real problem for all other public companies.
anthonypasq 3y ago
why not get mad at the dentist for selling out then? people are acting like there is only 1 side on all of these deals.
- TeMPOraL 3y ago
  Because those deals are targeted "offers you can't refuse", by design. Consider: surely there is a price for which you would be willing to sell me your business, or your house, pretty much on the spot. The current value of your assets could be X. Maybe you're reluctant to sell for anything under 120% X. Maybe you know your neighbors will hate you if you sell it, so you really won't do it for less than 140% X. I come to you and offer you 160% X. At this price, I can be certain you'll sell. It's a deal of a lifetime. It would be stupid not to. The trick is, as a PE firm, I can make this profitable for me all the way to say 250% X. I can just keep repeating that deal with every other person like you in the neighborhood, certain they'll all individually agree. And by the time the neighborhood realizes some critical service or area is now owned by a profit-obsessed faceless corporation, it'll be mostly sold out already. The trick is to target a market segment when you're able to make offers the other side can't refuse. Then you can literally divide and conquer it.
  - anthonypasq 3y ago
    well the person CAN very easily refuse if they care about not selling out to some faceless corporation and fucking their customers, but obviously most of these people dont care about that, so again, seems like you should be getting mad at them. i just dont understand exactly what is the problem here. do you think people shouldnt be able to sell their businesses for what they are worth?
    - TeMPOraL 3y ago
      > well the person CAN very easily refuse if they care about not selling out to some faceless corporation and fucking their customers, but obviously most of these people dont care about that Those people aren't spherical cows in an toy ethics thought experiment. They are real people, with complex lives and many things competing for their care (like e.g. families). They all care about not selling out or hurting their customers... to some degree. Some to larger than others. The simplified algorithm the PE companies are doing is: - Estimate the upper bound of how much most - say, 80% - of the owners of targeted businesses care about things; - Express that upper bound in dollars over the value of business, call that number X; - If you can still make a profit while overpaying by up to X for each bought business, start making offers; otherwise, find a different target. There's little point blaming the business owners, because the transactions are initiated by the PE companies, and they specifically target businesses they know they can get anyway. They're taking advantage of the idea that people should be free to sell their business for a fair price if they want to.

by edoceo 3y ago

scarface_74 3y ago

Why do you care if a private company has to follow financial reporting regulations? The reason that public companies have to is because the public buys shares in the company.

edoceo 3y ago
For a small company, a sole-prop dentist for example -- I don't. There is not enough motivation or sophistication or dollars on the table. For PE backed conglomerates I care because they can and do hide shady things in there. There is more motivation to juke the stats; more sophistication and dollars on the table. Sadly, because these companies are not public, when their anti-consumer operations are discovered there is little news about it. That results in a situation, for example, where folk don't think there is any reason to care about the issue.
- scarface_74 3y ago
  Again why do you care as a consumer? If they aren’t getting money from the public market and no taxpayer money, how does that affect you? Whether the company is public or private they still have to follow the relevant laws for their industry.
  - edoceo 3y ago
    I care because these PE backed firms can (and do) screw the consumer (me, my family, my friends, you) and there is no visibility. Do you understand it's possible to follow the law and still use greed to screw the consumer? Are you being intentionally naive?
    - scarface_74 3y ago
      I’m asking you for a specific case where a PE firm could specifically screw you and you have no choice but to be a consumer in a way a public firm couldn’t?
      - QuadmasterXLII 3y ago
        He gave a specific case of PE attemting to scam him in a way that not only steals money from him, but would literally irradiate his face
        scarface_74 3y ago
        And what does that have to do with how the company is financed? Public GAAP disclosures have absolutely nothing to do with whether the company is harming people or following applicable laws for their industry.
        BobaFloutist 3y ago
        When you learn a company has been purchased, you adjust your priors on their behavior (based on past behavior, reputation, etc). When Amazon bought One Medical, I expected the product and the customer service to be slowly watered down. If it happens invisibly, I'm operating on historically established trust that is outdated, and I have no way to know it.

massysett 3y ago

At least in US society, the general idea is that there should be a reason to require a business to do something. Not that there needs to be a reason to not require a business to do something. Public companies are subject to some requirements for good reason. Those reasons may not apply to private companies. Companies pay employees because if they don’t, they won’t have employees and therefore will lack labor, a critical input.

robertlagrant 3y ago

> "expensive and onerous" is not a sufficient reason to not require a business to do something. I don't know where you're getting this from. The reason to not require it is that the regulations don't apply. However, it's also true that making it cumbersome to do business, while making the big four consulting firms endless amounts of cash, is a real problem for all other public companies.

anthonypasq 3y ago

why not get mad at the dentist for selling out then? people are acting like there is only 1 side on all of these deals.

TeMPOraL 3y ago
Because those deals are targeted "offers you can't refuse", by design. Consider: surely there is a price for which you would be willing to sell me your business, or your house, pretty much on the spot. The current value of your assets could be X. Maybe you're reluctant to sell for anything under 120% X. Maybe you know your neighbors will hate you if you sell it, so you really won't do it for less than 140% X. I come to you and offer you 160% X. At this price, I can be certain you'll sell. It's a deal of a lifetime. It would be stupid not to. The trick is, as a PE firm, I can make this profitable for me all the way to say 250% X. I can just keep repeating that deal with every other person like you in the neighborhood, certain they'll all individually agree. And by the time the neighborhood realizes some critical service or area is now owned by a profit-obsessed faceless corporation, it'll be mostly sold out already. The trick is to target a market segment when you're able to make offers the other side can't refuse. Then you can literally divide and conquer it.
- anthonypasq 3y ago
  well the person CAN very easily refuse if they care about not selling out to some faceless corporation and fucking their customers, but obviously most of these people dont care about that, so again, seems like you should be getting mad at them. i just dont understand exactly what is the problem here. do you think people shouldnt be able to sell their businesses for what they are worth?
  - TeMPOraL 3y ago
    > well the person CAN very easily refuse if they care about not selling out to some faceless corporation and fucking their customers, but obviously most of these people dont care about that Those people aren't spherical cows in an toy ethics thought experiment. They are real people, with complex lives and many things competing for their care (like e.g. families). They all care about not selling out or hurting their customers... to some degree. Some to larger than others. The simplified algorithm the PE companies are doing is: - Estimate the upper bound of how much most - say, 80% - of the owners of targeted businesses care about things; - Express that upper bound in dollars over the value of business, call that number X; - If you can still make a profit while overpaying by up to X for each bought business, start making offers; otherwise, find a different target. There's little point blaming the business owners, because the transactions are initiated by the PE companies, and they specifically target businesses they know they can get anyway. They're taking advantage of the idea that people should be free to sell their business for a fair price if they want to.