4 ms·

There's the rub: Private Equity represents the decomposers of business world. Healthy, thriving industries don't sell out to PE, in the same way most healthy, t

There's the rub: Private Equity represents the decomposers of business world. Healthy, thriving industries don't sell out to PE, in the same way most healthy, thriving animals don't get colonized by fungi. In the case of vets and dentists, historically the practice owner would sell to some young practitioner, and the cycle would continue. But what happens when the businesses are worth too much for the next generation to afford (or the next generation's too broke)? Enter PE. They buy out the old practitioner, hire the young one that would have ideally bought the place themselves, then proceed to gradually dismantle the business. Divest all the capital assets, fire all the institutional knowledge, and even convert the business's accumulated customer good will into cold hard cash by exploiting the hell out of them. Then it's just a matter of running the hollowed-out shell of business until a stiff breeze leads to complete bankruptcy.

xnx 1y ago
> Healthy, thriving industries don't sell out to PE Sometimes the owners want to cash in and retire after decades of operating their business. Selling to PE is one way to do that.
- ltbarcly3 1y ago
  PE carves out industries and runs them into the ground. That IS their business model. Of course the vet will sell to the highest bidder, but the PE bid is higher based on an economic pattern that is destructive and created by legal loopholes, not free market forces.
- OkayPhysicist 1y ago
  In theory, a business should be worth more alive than dead, so a young dentist looking to start their own practice should be willing to pay more than a PE that plans to break the bones and suck out the marrow. On an individual business scale, that's hit or miss. When entire industries start getting swallowed up? It's because something fundamental is wrong with the industry. For example, Family Dining restaurants (i.e, relatively cheap sit down restaurants where the appeal is more the service than the food like Red Lobster, Chili's, Applebees, etc) are doomed, and have been for a while. Millennials and younger, on average, value table service less than their parents did, preferring fast casual restaurants (restaurants where you order at the counter, but are a step up from fast food) with better food in the same price bracket. This trend is widely known, so there's a shortage of people willing to buy up family dining franchises. But there's a lot of capital tied up in these restaurants. So in swoops PE, to basically bet that they can make more money killing the business than its current owners are able/willing to.
  - SoftTalker 1y ago
    OK but there's a demand for vets and dentists. That hasn't gone away. If the PE model is to acquire all the clinics in an area and then jack up prices, at some point a dentist or vet should say "I can do this at a lower price, still make more money than the PE owners are paying me, and work on my own terms" and hang out a shingle.
    - OkayPhysicist 1y ago
      Exactly. All I'm arguing is that when you see PE swooping in, it means something is urgently wrong with the industry. My guess (as I alluded to in my earlier post) is that for private practice medical adjacent stuff like dentists and vets the issue is that the newer generation of people going into the field don't have access to the capital necessary to actually start their own business. These are relatively capital-heavy businesses (medical equipment is $$$$).
danaris 1y ago
> Healthy, thriving industries don't sell out to PE This may have been true in the past, but in today's world, normal people have an increasingly hard time affording the things that our parents took for granted (y'know, things like a modest house, a vacation every 2-3 years, decent food). If the owners of a small local business are offered the opportunity to cash out and retire with enough money that they can guarantee their reasonable comfort for the rest of their lives (barring total societal collapse), they're not going to worry about what's "healthy" or "thriving". And PE companies can afford to do that. Nor does the fact that they're struggling reflect on the industry that the local business happens to be in. It reflects on our entire system today.

xnx 1y ago

> Healthy, thriving industries don't sell out to PE Sometimes the owners want to cash in and retire after decades of operating their business. Selling to PE is one way to do that.

ltbarcly3 1y ago
PE carves out industries and runs them into the ground. That IS their business model. Of course the vet will sell to the highest bidder, but the PE bid is higher based on an economic pattern that is destructive and created by legal loopholes, not free market forces.
OkayPhysicist 1y ago
In theory, a business should be worth more alive than dead, so a young dentist looking to start their own practice should be willing to pay more than a PE that plans to break the bones and suck out the marrow. On an individual business scale, that's hit or miss. When entire industries start getting swallowed up? It's because something fundamental is wrong with the industry. For example, Family Dining restaurants (i.e, relatively cheap sit down restaurants where the appeal is more the service than the food like Red Lobster, Chili's, Applebees, etc) are doomed, and have been for a while. Millennials and younger, on average, value table service less than their parents did, preferring fast casual restaurants (restaurants where you order at the counter, but are a step up from fast food) with better food in the same price bracket. This trend is widely known, so there's a shortage of people willing to buy up family dining franchises. But there's a lot of capital tied up in these restaurants. So in swoops PE, to basically bet that they can make more money killing the business than its current owners are able/willing to.
- SoftTalker 1y ago
  OK but there's a demand for vets and dentists. That hasn't gone away. If the PE model is to acquire all the clinics in an area and then jack up prices, at some point a dentist or vet should say "I can do this at a lower price, still make more money than the PE owners are paying me, and work on my own terms" and hang out a shingle.
  - OkayPhysicist 1y ago
    Exactly. All I'm arguing is that when you see PE swooping in, it means something is urgently wrong with the industry. My guess (as I alluded to in my earlier post) is that for private practice medical adjacent stuff like dentists and vets the issue is that the newer generation of people going into the field don't have access to the capital necessary to actually start their own business. These are relatively capital-heavy businesses (medical equipment is $$$$).

danaris 1y ago

> Healthy, thriving industries don't sell out to PE This may have been true in the past, but in today's world, normal people have an increasingly hard time affording the things that our parents took for granted (y'know, things like a modest house, a vacation every 2-3 years, decent food). If the owners of a small local business are offered the opportunity to cash out and retire with enough money that they can guarantee their reasonable comfort for the rest of their lives (barring total societal collapse), they're not going to worry about what's "healthy" or "thriving". And PE companies can afford to do that. Nor does the fact that they're struggling reflect on the industry that the local business happens to be in. It reflects on our entire system today.