4 ms·

Leveraged buyouts are not like mortgages

18 points by severine 2y ago

RicoElectrico 2y ago
Everything that the financial industry does, increases the economic inequality in the long term, change my mind.
sanswork 2y ago
If this story is right and PE firms just plunder why would banks keep giving them loans? The author mentions red lobster but that wasn't PE that ran them into the ground it was a fishing company that bought them from PE. They also seem to think PE only goes after public companies when that seems to be by far the exception. This is just a poorly researched rage bait rant. If you want something to complain about in PE look at tax treatments.
- FireBeyond 2y ago
  > The author mentions red lobster but that wasn't PE that ran them into the ground it was a fishing company that bought them from PE. No, it wasn't PE that ran them into the ground. But PE didn't buy Red Lobster to even attempt to salvage the business. It was far more akin to "how much can we bleed out of this before it dies".
  - gruez 2y ago
    This doesn't seem to match up with the timeline. From wikipedia: > Golden Gate Capital was Red Lobster's parent company after it was acquired from Darden Restaurants on July 28, 2014.[7] Seafood supplier Thai Union acquired a 25 percent stake in the company in 2016 for a reported $575 million, and in 2020 purchased the remaining portion from GGC.[8] >In 2024, Red Lobster closed many of its restaurants[9] and then filed for Chapter 11 bankruptcy protection [...] 4 years is quite a bit of time before they actually went bankrupt, and that's not including the 4 extra years before that when they sold a 25% stake. Pinning the bankruptcy on the PE firm makes little sense here.
  - SR2Z 2y ago
    Isn't that the point? PE doesn't build businesses, they decompose them. They're the fungi of the financial world and their role is to extract as much value as possible from the existing business. Sure it's really annoying if you're a customer, but it's a godsend if you're a business owner looking to get out.
- devilbunny 2y ago
  Banks that loan to PE firms get paid back. Those that loan to PE-controlled firms may not.
  - gruez 2y ago
    >Those that loan to PE-controlled firms may not. Who are these firms? Why would they be extending massive amounts of unsecured credit to those PE bought-out firms?
  - sanswork 2y ago
    And why would banks keep giving loans to PE-controlled firms if the likelihood is high of no repayment? They're going to know the firm is PE controlled going into the deal.
    - devilbunny 2y ago
      Ask a bank.
      - sanswork 2y ago
        The answer is that your beliefs on how PE works/what they do is wrong.
        devilbunny 2y ago
        But you won’t bother me with the correct answer.

18 points by severine 2y ago

Everything that the financial industry does, increases the economic inequality in the long term, change my mind.

If this story is right and PE firms just plunder why would banks keep giving them loans? The author mentions red lobster but that wasn't PE that ran them into the ground it was a fishing company that bought them from PE. They also seem to think PE only goes after public companies when that seems to be by far the exception. This is just a poorly researched rage bait rant. If you want something to complain about in PE look at tax treatments.

FireBeyond 2y ago
> The author mentions red lobster but that wasn't PE that ran them into the ground it was a fishing company that bought them from PE. No, it wasn't PE that ran them into the ground. But PE didn't buy Red Lobster to even attempt to salvage the business. It was far more akin to "how much can we bleed out of this before it dies".
- gruez 2y ago
  This doesn't seem to match up with the timeline. From wikipedia: > Golden Gate Capital was Red Lobster's parent company after it was acquired from Darden Restaurants on July 28, 2014.[7] Seafood supplier Thai Union acquired a 25 percent stake in the company in 2016 for a reported $575 million, and in 2020 purchased the remaining portion from GGC.[8] >In 2024, Red Lobster closed many of its restaurants[9] and then filed for Chapter 11 bankruptcy protection [...] 4 years is quite a bit of time before they actually went bankrupt, and that's not including the 4 extra years before that when they sold a 25% stake. Pinning the bankruptcy on the PE firm makes little sense here.
- SR2Z 2y ago
  Isn't that the point? PE doesn't build businesses, they decompose them. They're the fungi of the financial world and their role is to extract as much value as possible from the existing business. Sure it's really annoying if you're a customer, but it's a godsend if you're a business owner looking to get out.
devilbunny 2y ago
Banks that loan to PE firms get paid back. Those that loan to PE-controlled firms may not.
- gruez 2y ago
  >Those that loan to PE-controlled firms may not. Who are these firms? Why would they be extending massive amounts of unsecured credit to those PE bought-out firms?
- sanswork 2y ago
  And why would banks keep giving loans to PE-controlled firms if the likelihood is high of no repayment? They're going to know the firm is PE controlled going into the deal.
  - devilbunny 2y ago
    Ask a bank.
    - sanswork 2y ago
      The answer is that your beliefs on how PE works/what they do is wrong.
      - devilbunny 2y ago
        But you won’t bother me with the correct answer.