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So I'm just thinking here but I think leveraged buyouts can lead to moral decay. Like consider a business. It's making 9.5m profit per year. By engaging in vari

by im3w1l 3y ago

So I'm just thinking here but I think leveraged buyouts can lead to moral decay. Like consider a business. It's making 9.5m profit per year. By engaging in various unethical practices that could be increased to 10.5m per year. But why bother? Why give up your morals when it barely makes a difference? Now someone does a leveraged buyout. The business has to pay 10m a year to service the debt. Now it's suddenly losing 500k a year. If things continue they might have to shut down. Think of poor Joe, his wife just had a child. Could he find another good job in this economy? But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it?

JumpCrisscross 3y ago
> making 9.5m profit per year. By engaging in various unethical practices that could be increased to 10.5m per year This is orthogonal to leveraged buyouts or even capitalism; it’s maximising personal gains without thought to broader effects. > But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it? This is a fairer critique. LBOs impose pressure. But this also happens in any other constrained environment. It’s difficult to say why that leads some people to innovate and become disciplined and others to cut corners. The difference between an LBO and unlevered buyout is the financing. That, in turn, means who can finance it. Arguing leverage causes moral decay is, at its core, an argument that ownership of these businesses should be constrained to the already wealthy; it’s aristocratic morality. Grounding my scepticism of your claims is that most LBOs create value. They create employment. And for many businesses with low or no growth prospects, they’re the only way for them to persist. That said, they’re daring and glamorous and that means they get written and talked about more than e.g. municipal bonds.

by im3w1l 3y ago

JumpCrisscross 3y ago

> making 9.5m profit per year. By engaging in various unethical practices that could be increased to 10.5m per year This is orthogonal to leveraged buyouts or even capitalism; it’s maximising personal gains without thought to broader effects. > But... if we bend the rules just a tiny bit, we could turn that loss into a profit... It's for the greater good, isn't it? This is a fairer critique. LBOs impose pressure. But this also happens in any other constrained environment. It’s difficult to say why that leads some people to innovate and become disciplined and others to cut corners. The difference between an LBO and unlevered buyout is the financing. That, in turn, means who can finance it. Arguing leverage causes moral decay is, at its core, an argument that ownership of these businesses should be constrained to the already wealthy; it’s aristocratic morality. Grounding my scepticism of your claims is that most LBOs create value. They create employment. And for many businesses with low or no growth prospects, they’re the only way for them to persist. That said, they’re daring and glamorous and that means they get written and talked about more than e.g. municipal bonds.