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They gonna increase prices

njovin 2y ago
...likely while worsening the customer experience (less hands-on support, less engineering, less reliability). For a company like SquareSpace unless they're massively overspending and they are rife with inefficiencies I don't see how this works out for the PE firm.
xyst 2y ago
not just increase prices but likely saddle the company with mountains of debt (which happens to be owned directly or indirectly by the PE firm). red lobster acquired by Golden Gate PE in cash deal in 2020 [1] red lobster subsequently squeezed for any value at all costs (cuts in labor, switching suppliers) [2] [1] https://www.restaurantbusinessonline.com/financing/asian-investors-buy-control-red-lobster https://www.restaurantbusinessonline.com/financing/asian-inv... [2] https://www.cnn.com/2024/05/03/food/red-lobster-seafood-restaurant-bankruptcy/index.html https://www.cnn.com/2024/05/03/food/red-lobster-seafood-rest...
- throwaway5752 2y ago
  https://www.nytimes.com/2023/04/28/opinion/private-equity.html https://www.nytimes.com/2023/04/28/opinion/private-equity.ht...
- mason55 2y ago
  Yes, that is the core PE playbook. 1. Acquire loan to buy company 2. Take money that was being spent on growth and use it to make the payments on the debt 3. Try to decrease operating costs while maintaining revenue or increase revenue while maintaining operating costs (or some combination) 4. Sell the company for more than you paid based on the improved profit margins The key is finding a company who's still spending on growth but isn't really growing. If the company is actually still growing then you're going to have trouble making your money back if you cut growth activities (because your initial price would be higher due to implied growth in the future). The challenge is in step three. Can you increase revenue or decrease operating costs without sacrificing too much goodwill? If you do too much to scare away suppliers or customers then step 4 is hard and the whole thing blows up.
rchaud 2y ago
..and fire people ...and have more site downtime

...likely while worsening the customer experience (less hands-on support, less engineering, less reliability). For a company like SquareSpace unless they're massively overspending and they are rife with inefficiencies I don't see how this works out for the PE firm.

xyst 2y ago

not just increase prices but likely saddle the company with mountains of debt (which happens to be owned directly or indirectly by the PE firm). red lobster acquired by Golden Gate PE in cash deal in 2020 [1] red lobster subsequently squeezed for any value at all costs (cuts in labor, switching suppliers) [2] [1] https://www.restaurantbusinessonline.com/financing/asian-investors-buy-control-red-lobster https://www.restaurantbusinessonline.com/financing/asian-inv... [2] https://www.cnn.com/2024/05/03/food/red-lobster-seafood-restaurant-bankruptcy/index.html https://www.cnn.com/2024/05/03/food/red-lobster-seafood-rest...

throwaway5752 2y ago
https://www.nytimes.com/2023/04/28/opinion/private-equity.html https://www.nytimes.com/2023/04/28/opinion/private-equity.ht...
mason55 2y ago
Yes, that is the core PE playbook. 1. Acquire loan to buy company 2. Take money that was being spent on growth and use it to make the payments on the debt 3. Try to decrease operating costs while maintaining revenue or increase revenue while maintaining operating costs (or some combination) 4. Sell the company for more than you paid based on the improved profit margins The key is finding a company who's still spending on growth but isn't really growing. If the company is actually still growing then you're going to have trouble making your money back if you cut growth activities (because your initial price would be higher due to implied growth in the future). The challenge is in step three. Can you increase revenue or decrease operating costs without sacrificing too much goodwill? If you do too much to scare away suppliers or customers then step 4 is hard and the whole thing blows up.

rchaud 2y ago

..and fire people ...and have more site downtime