5 ms·

Private equity takeovers are often just scams to convert customer trust to short-term profits, but labeled as growth. You can get away with cutting quality for

Private equity takeovers are often just scams to convert customer trust to short-term profits, but labeled as growth. You can get away with cutting quality for a little while, but eventually customers are going to lose trust and you're not going to get it back.

darth_avocado 2y ago
But that is the PE playbook. Take businesses and squeeze as many profits out of them before they die. https://www.nytimes.com/2023/04/28/opinion/private-equity.html https://www.nytimes.com/2023/04/28/opinion/private-equity.ht...
wnc3141 2y ago
the whole point is to flip the business in 5ish years.
- rnd0 2y ago
  So goodfellas, basically: https://www.youtube.com/watch?v=ZPtjyqgZAUk https://www.youtube.com/watch?v=ZPtjyqgZAUk
  - wnc3141 2y ago
    this is so funny. I hadn't thought about this movie in a while. Weird how many similarities there actually are
- Gormo 2y ago
  Sometimes it is. The more cynical version of this, though, is to engage in a protracted liquidation of the business, and get as much return on the assets as possible in the short term, with no intention of the business surviving into the long term. Optimistically, you could see this as a way of freeing operating assets from underperforming businesses and putting them back into circulation, clearing the way for superior competition. But that only works if there is superior competition to fill the gap, and the whole economy isn't saddled with dysfuction, perverse incentives, and bad leadership. Unfortunately, it seems like we're getting closer and closer to that latter situation every day.
  - wnc3141 2y ago
    I think your'e right that the playbook in reality looks more like a short term squeeze of cashflow with schemes far less imaginative than you'd think. Some recent news stories I have enjoyed on the matter *about Authentic Brands Inc - which in short parks on defunct retail brands and liscences out the manufacture while owning no capital themselves. https://www.npr.org/2023/11/02/1209684529/retail-bankruptcy-authentic-brands-forever-21-shaq-reebok https://www.npr.org/2023/11/02/1209684529/retail-bankruptcy-... Two part podcast on implications of private equity form Freakonomics (I find balanced, rigorous, and asks challenging questions of its contributors) 1) https://freakonomics.com/podcast/should-you-trust-private-equity-to-take-care-of-your-dog/ https://freakonomics.com/podcast/should-you-trust-private-eq... 2) https://freakonomics.com/podcast/are-private-equity-firms-plundering-the-u-s-economy/ https://freakonomics.com/podcast/are-private-equity-firms-pl...

darth_avocado 2y ago

But that is the PE playbook. Take businesses and squeeze as many profits out of them before they die. https://www.nytimes.com/2023/04/28/opinion/private-equity.html https://www.nytimes.com/2023/04/28/opinion/private-equity.ht...

wnc3141 2y ago

the whole point is to flip the business in 5ish years.

rnd0 2y ago
So goodfellas, basically: https://www.youtube.com/watch?v=ZPtjyqgZAUk https://www.youtube.com/watch?v=ZPtjyqgZAUk
- wnc3141 2y ago
  this is so funny. I hadn't thought about this movie in a while. Weird how many similarities there actually are
Gormo 2y ago
Sometimes it is. The more cynical version of this, though, is to engage in a protracted liquidation of the business, and get as much return on the assets as possible in the short term, with no intention of the business surviving into the long term. Optimistically, you could see this as a way of freeing operating assets from underperforming businesses and putting them back into circulation, clearing the way for superior competition. But that only works if there is superior competition to fill the gap, and the whole economy isn't saddled with dysfuction, perverse incentives, and bad leadership. Unfortunately, it seems like we're getting closer and closer to that latter situation every day.
- wnc3141 2y ago
  I think your'e right that the playbook in reality looks more like a short term squeeze of cashflow with schemes far less imaginative than you'd think. Some recent news stories I have enjoyed on the matter *about Authentic Brands Inc - which in short parks on defunct retail brands and liscences out the manufacture while owning no capital themselves. https://www.npr.org/2023/11/02/1209684529/retail-bankruptcy-authentic-brands-forever-21-shaq-reebok https://www.npr.org/2023/11/02/1209684529/retail-bankruptcy-... Two part podcast on implications of private equity form Freakonomics (I find balanced, rigorous, and asks challenging questions of its contributors) 1) https://freakonomics.com/podcast/should-you-trust-private-equity-to-take-care-of-your-dog/ https://freakonomics.com/podcast/should-you-trust-private-eq... 2) https://freakonomics.com/podcast/are-private-equity-firms-plundering-the-u-s-economy/ https://freakonomics.com/podcast/are-private-equity-firms-pl...