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The market can stay irrational longer than you can remain solvent. Yes eventually customers will go to better firms who will beat out the short sighted competit
by jjk166 1y ago
The market can stay irrational longer than you can remain solvent. Yes eventually customers will go to better firms who will beat out the short sighted competition, but that could take years and there's no guarantee your firm will survive to see that day. A risk free lump of cash in hand right now is tough to pass up. Even if you are personally willing to take the risk, other stakeholders like stockowners, partners, or key employees may not. Indeed seizing the disgruntled customers after they become fed up doesn't actually require you to remain in business during the dark times - you could start a new firm with a clean slate, optimized for the situation that exists then with a war chest filled by the very PE firms that demonstrated to your customers how valuable you really are.
- sokoloff 1y agoI doubt a PE buyout would allow the principal to compete within an X mile radius for Y years post-sale. (PE firms may be a lot of things, but utter idiots is not one of them.)
- throwaway48476 1y agoA principal yes, but the deputy could always take the rest of the staff with them. Principals usually sell for retirement reasons anyways.
- sokoloff 1y agoSure, but my loyalty to our vet is to the main vet, not his deputy or staff. Those people may or may not be great, but they’ve got no (or very little) automatic transference of loyalty from the original vet.
- jjk166 1y agoWell if Y years is less than the expected time for PE firms to lose their customers, then it's a non issue. If Y is longer, then the PE firm is overpaying for their acquisition and will presumably be acquired and gutted by a more efficient PE firm.