6 ms·

Has the trend of PE owning things increased in the last decade? Has PE gotten more money in the past years so that they can hoover up companies?

by dpflan 2y ago

cpach 2y ago
I don’t know but I guess it’s cyclical?
manifoldgeo 2y ago
For a more long-form answer to your question, I recommend checking out "Plunder - Private Equity's Plan to Pillage America" by Brendan Ballou [0]. He gives some insights into the tactics used by private equity firms to acquire, gut, and destroy existing companies and profit by doing so. Refs: 0: https://www.plunderthebook.com/ https://www.plunderthebook.com/
- criddell 2y ago
  What solutions does he propose?
bdavisx 2y ago
The tax cuts passed during the Trump admin have funneled a lot more money to people who were already rich.
ipqk 2y ago
Absolutely, especially healthcare. Nearly everything PE touches gets worse. The only ones that benefit are those that work for PE companies (and esp. the partners).
ants_everywhere 2y ago
IPOs have been declining for a while, which leaves private sale as a more attractive alternative. Here's an article from last year, but if you search "IPO drought" in a news search engine you can find a lot of more recent articles https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/01/the-current-ipo-market-factors-in-its-decline-and-reversing-the-trend/?sh=445d619a2c31 https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/0...
- throwaway5752 2y ago
  Squarespace is going private, it is already public: https://finance.yahoo.com/quote/SQSP/ https://finance.yahoo.com/quote/SQSP/ The lack of IPOs is not from market demand, it is just easier to be private. If there are venture firms willing to invest or the debt market is accessible, then there is no need to for a company to go public. Generally speaking, private equity sales are not more attractive than IPOs.
gzer0 2y ago
The current state of the markets and private equity is deeply troubling. Gone are the days when companies like Microsoft went public at reasonable valuations, allowing everyday investors to participate in their massive growth. Now, companies like Uber and Airbnb debut on the stock market at sky-high valuations, leaving little room for the average investor to profit. Worse still, the concentration of wealth has enabled large private equity firms to gobble up what were once thriving small businesses across various industries - from veterinary clinics to engineering firms. This trend stifles entrepreneurship and limits opportunities for employees to rise through the ranks and become owners themselves. America has lost half its public companies since the 1990s. The count of publicly listed companies traded on US exchanges has fallen substantially from its peak in 1996. Back then, the number exceeded 8,000 companies. Today that count has dropped by more than 50% to just 3700 [1]. [1] https://www.cnn.com/2023/06/09/investing/premarket-stocks-trading/index.html https://www.cnn.com/2023/06/09/investing/premarket-stocks-tr...
- njovin 2y ago
  I would hope that this results in a reduction of companies seeking to go public in the first place. We've seen many cycles of: innovation -> growth -> IPO -> happy customers + employees -> not enough growth -> PE -> layoffs -> product/user decline. The demand for ever-increasing a growth demanded by the markets is not sustainable for a majority of businesses. IMO the employees, customers, and general public would benefit from companies growing to a healthy size and then maintaining that plateau. SquareSpace has ~44% of the self-hosted website market. Shouldn't that be enough?
  - JumpCrisscross 2y ago
    > SquareSpace has ~44% of the self-hosted website market. Shouldn't that be enough? They’re making hundreds of thousands of dollars of profit on hundreds of millions of dollars of gross profit [1]. Most of the cost is marketing & sales. Private equity is actually about focussing less on growth and more on sustainability; the logic of this acquisition is that 44% is enough. [1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f7-541b-45e6-989e-ac8bd043eae5.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f...
airstrike 2y ago
in Tech in particular, the QE period (post-GFC through covid) with low interest rates has seen massive PE activity. most of the "highest multiple ever" or "highest premium ever" or "highest X" have all happened in this time span as the current rate hike cycle started, PEs were less willing to transact at higher rates, companies were less likely to transact at lower multiples and M&A markets cooled off I'm not out of the industry, but from the outside, it seems like most parties are in a holding pattern waiting for the soft/hard-landing that is yet to come. I suspect sellers are still holding their breaths for valuations to go back to where they were I know of at least two companies in the billion+ range that could have sold at 20%+ premium to their current valuations but walked away thinking those offers were too low, only to see markets melt in the 6-12 months that followed...

Has the trend of PE owning things increased in the last decade? Has PE gotten more money in the past years so that they can hoover up companies?

by dpflan 2y ago

Has the trend of PE owning things increased in the last decade? Has PE gotten more money in the past years so that they can hoover up companies?

cpach 2y ago

I don’t know but I guess it’s cyclical?

manifoldgeo 2y ago

For a more long-form answer to your question, I recommend checking out "Plunder - Private Equity's Plan to Pillage America" by Brendan Ballou [0]. He gives some insights into the tactics used by private equity firms to acquire, gut, and destroy existing companies and profit by doing so. Refs: 0: https://www.plunderthebook.com/ https://www.plunderthebook.com/

criddell 2y ago
What solutions does he propose?

bdavisx 2y ago

The tax cuts passed during the Trump admin have funneled a lot more money to people who were already rich.

ipqk 2y ago

Absolutely, especially healthcare. Nearly everything PE touches gets worse. The only ones that benefit are those that work for PE companies (and esp. the partners).

ants_everywhere 2y ago

IPOs have been declining for a while, which leaves private sale as a more attractive alternative. Here's an article from last year, but if you search "IPO drought" in a news search engine you can find a lot of more recent articles https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/01/the-current-ipo-market-factors-in-its-decline-and-reversing-the-trend/?sh=445d619a2c31 https://www.forbes.com/sites/forbesbusinesscouncil/2023/02/0...

throwaway5752 2y ago
Squarespace is going private, it is already public: https://finance.yahoo.com/quote/SQSP/ https://finance.yahoo.com/quote/SQSP/ The lack of IPOs is not from market demand, it is just easier to be private. If there are venture firms willing to invest or the debt market is accessible, then there is no need to for a company to go public. Generally speaking, private equity sales are not more attractive than IPOs.

gzer0 2y ago

The current state of the markets and private equity is deeply troubling. Gone are the days when companies like Microsoft went public at reasonable valuations, allowing everyday investors to participate in their massive growth. Now, companies like Uber and Airbnb debut on the stock market at sky-high valuations, leaving little room for the average investor to profit. Worse still, the concentration of wealth has enabled large private equity firms to gobble up what were once thriving small businesses across various industries - from veterinary clinics to engineering firms. This trend stifles entrepreneurship and limits opportunities for employees to rise through the ranks and become owners themselves. America has lost half its public companies since the 1990s. The count of publicly listed companies traded on US exchanges has fallen substantially from its peak in 1996. Back then, the number exceeded 8,000 companies. Today that count has dropped by more than 50% to just 3700 [1]. [1] https://www.cnn.com/2023/06/09/investing/premarket-stocks-trading/index.html https://www.cnn.com/2023/06/09/investing/premarket-stocks-tr...

njovin 2y ago
I would hope that this results in a reduction of companies seeking to go public in the first place. We've seen many cycles of: innovation -> growth -> IPO -> happy customers + employees -> not enough growth -> PE -> layoffs -> product/user decline. The demand for ever-increasing a growth demanded by the markets is not sustainable for a majority of businesses. IMO the employees, customers, and general public would benefit from companies growing to a healthy size and then maintaining that plateau. SquareSpace has ~44% of the self-hosted website market. Shouldn't that be enough?
- JumpCrisscross 2y ago
  > SquareSpace has ~44% of the self-hosted website market. Shouldn't that be enough? They’re making hundreds of thousands of dollars of profit on hundreds of millions of dollars of gross profit [1]. Most of the cost is marketing & sales. Private equity is actually about focussing less on growth and more on sustainability; the logic of this acquisition is that 44% is enough. [1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f7-541b-45e6-989e-ac8bd043eae5.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/d08174f...

airstrike 2y ago

in Tech in particular, the QE period (post-GFC through covid) with low interest rates has seen massive PE activity. most of the "highest multiple ever" or "highest premium ever" or "highest X" have all happened in this time span as the current rate hike cycle started, PEs were less willing to transact at higher rates, companies were less likely to transact at lower multiples and M&A markets cooled off I'm not out of the industry, but from the outside, it seems like most parties are in a holding pattern waiting for the soft/hard-landing that is yet to come. I suspect sellers are still holding their breaths for valuations to go back to where they were I know of at least two companies in the billion+ range that could have sold at 20%+ premium to their current valuations but walked away thinking those offers were too low, only to see markets melt in the 6-12 months that followed...