Private Equity Bought America's Essential Services(rubbishtalk.com) |
Private Equity Bought America's Essential Services(rubbishtalk.com) |
That would also be legal. But if you take the assets out of the daughter company you would go to prison for https://web.archive.org/web/20141030194421/http://www.sfo.go...
> The result is a backlog that reads like a financial opportunity in earnings calls and a crisis in every fire station in the country. As of 2025, REV Group’s backlog stands at $4.5 billion. Wait times for a custom fire truck run to four years. Prices have doubled in a decade: a pumper truck now costs around $1 million; a ladder truck runs over $2 million. Profit margins in the industry have tripled — from the historic 4-to-5 percent range to over 13 percent.
The article goes on to talk about how a backlog is actually genius. Here's a quote from a senator:
> “This didn’t just happen to you accidentally. This is a business decision, isn’t it? You keep these backlogs like this. […] Another word for this would be a heist. This sounds to me like private equity came in; bought up all of these small companies; combined them; shut down their production; rolled up a huge backlog; massive profits; stiffed these guys; and now you’re making out like bandits.”
So you make money by ... not delivering? I'm missing something.
> The fire truck industry is the most publicly documented case, but the underlying playbook — acquire, consolidate, reduce supply, extract margin — appears across essential sectors with alarming consistency.
Sure, anyone can reduce supply and increase prices if they're a large enough supplier. But companies don't produce up to the point where marginal price is equal to marginal cost out of the goodness of their heart. It's the profit maximizing level. This is economics 101. The article doesn't even try to explain beyond hand waving. No one cares about profit margin, they care about maximizing profit, and you don't do that by creating backlogs. So something is off here and the author is either too incompetent to ask basic questions or just wants to write another PE bad article
> So you make money by ... not delivering? I'm missing something.
Precisely. Let's review imperfect competition. Although it's you who so unpleasantly insists on framing the discussion in econ 101 terms, it's your comment that is sunk by a misunderstanding of elementary economics.
What you're missing is evidently the things one learns when they go past chapter 1 of an intro textbook!
> It's the profit maximizing level.
Not all markets match the assumptions of the simple "perfect competition" ideal you learn about first. The efficient equilibrium you describe requires an assumption that there are no barriers to entering the marketplace as a producer. An extreme example breaking this assumption is the "monopoly market", where there is only one seller of the good because barriers prevent other sellers from viably entering the marketplace. That's why the consolidation in OP is relevant to the discussion...
In the extreme case the market equilibrium is reached when a monopoly jacks up the price and produces less than it would in a competitive market. Deliberate scarcity! The (single) producer makes more money in this kind of market. The consumer is worse off. But the every extra dollar the monopolist makes in profits takes more than a dollar away from the consumers. Deviating from the perfectly competitive equilibrium results in a market inefficiency called "deadweight loss".
The article also nodded to the price-inelastic demand for the equipment enabling emergency services. Inelastic demand makes this phenomenon more extreme. It's pretty intuitive that fire departments' demand for firetrucks would be price-inelastic.
So anyway. Your comment implied that you don't want to be mad about the consolidation and price gouging for e.g. firetrucks if you're in the "woohoo go free markets" tribe. Couldn't be more wrong. You should be just as mad if you're in that tribe. The extraction of monopoly rents from emergency services is not just dangerous, and not just unfair, but also a textbook case of market inefficiency.
But such a big backlog suggests that they're underpricing. So it may be as simple as increasing price and ramping up your production, even though it would likely mean higher marginal costs.
Overall no one wants a backlog. It's not good business
The buyer (who PE sells to) is "thinking about" collecting on the backlog.
Obviously, the backlog is "fake".
EDIT: The backlog is fake or worthless in the sense, that dollars worth of reputation (a.k.a. Brand) were given away to get pennies worth of backlog. Customer satisfaction is real, even in a business valuation sense.
1. No one forced these people to sell. Is the idea that you can’t sell to an entity with more money? If you block that good luck with the world economy.
2. If above is ok is the idea that the new owner is inherently worse because they have more money, whereas as the smaller would be OK then where are the new entrants?
3. Going to the article it is clear enough. These industries just are not lucrative to begin with. PE buys them and raises prices, but this only works because people complain instead of starting rival business.
4. Somehow leaving money on the table in the form of a backlog is bad? Why don’t others start a business and take those orders? Why don't they? Not profitable or worth the hassle.
Well there you go.
Separately, American manufacturing just seems very uncompetitive.
If you just keep gutting companies with leveraged buyouts, you're not taking on any real risk.
If you're buying up firms that deliver "essential services", you're likely engaging a monopoly. Again, low risk, high reward. A direct violation of the rules of how investments should work. Regulate the monopoly and this goes away.
And that debt financing bears an interest proportional to the riskiness of the asset's cashflows.
There are lots to hate about LBOs but they aren't entirely devoid of value
Why would the retiring dentist selling their practice be a trust or collusion problem?
That’s the whole math of it. That cash out comes from the future business increasing profit, which is over the longest term cutting service quality.
Start small biz > be successful > want to retire > find someone to buy biz
There’s a lot of pathways with a giant c corp, almost none for the local successful small biz.
I had a acquaintance sell three local trash companies to LRS which is exactly what happened.
How would you know this attention is getting paid or not unless you are consuming local news from the places this is happening?
Why would anybody expend time reading something that is probably full of hallucinations? And what's crazy is clearly only a few of us have enough experience with Instruct Mode LLMs to even spot it. The rest of these guys don't even know they're reading slop.
Ultimately the influence of rent seekers has grown and the category of people who can take risks by starting a business was the first to collapse, leaving only the wealthy who don't care and the people who can't risk their own survival.
You need a street legal product, which takes certification You probably need multiple firefighter associations, which takes not only meeting criteria but politicking with associations (don't know about firefighters but some associations are themselves captured and limit approval to their friends/connections).
This reads like fiction. When they corner the market it's of course trivial to just jump in and take that share. No way they will try to be disruptive to you or sue you to hell and back and of course the bank will loan you the pile of money to start a new company since there is no giant corporation to compete with who can squeeze you out in an instance.
Sue for what exactly? Of course they will be disruptive, that is what competing means.
My family doctor underwent that along with several of her local peers and got out from under it and started her own practice. I'm obviously not her only patient, so yes, heightening stress on caregivers by demanding more work to drive profits higher is justifiable of a bad reputation.
Leaving things like medical care, food, water, shelter at the mercy of for-profit dynamics leaves the possibility open that those services stop being provided because it is unprofitable at the expense of the population.
America is deciding it likes profit over its population.
1. In the 90s, I had a struggling one-man Mac ISV, and would do gig programming on the side. I did a lot of work for boutique investment banks, and also for a "consulting" firm that did about 75% of their business with the finance industry. The owner of that firm praised me, but didn't like that if my business took off, he'd lose me.
"What would it take to get your commitment to this firm?"
50%
"Where will you get the money to buy half my company?"
A loan from the firm?
When the dust cleared, the business loaned me the money to buy in, and I paid it back with 50% of my profit sharing payouts. This is not some weird financial alchemy, a lot of partnerships are run this way.
———
2. My Duathlon racing buddy was a mold-maker, very specialized and good at his trade. He worked for an elderly entrepreneur who had built his mold business up over decades. Said entrepreneur sent his own kids to university to become "professionals."
What to do about succession when he was ready to retire? My buddy literally photocopied my own arrangement, bought 50% so the business would have a successor it could count on, and bought the remainder when the founder retired. He is now a comfortably wealthy automotive sector entrepreneur.
———
The huge LBOs in the news always seem like space-age deals, but little LBOs for succession purposes are remarkably common.
Why do we need antitrust laws? Why do mergers need government approval? Or are you a libertarian who believes in unfettered capitalism?
Where does it end? What if I threatened you with violence to sell your business? Is that OK? You might correctly say "that's illegal". If so, does that stipulate we do need laws? How far can coercion go while still being legal? What if I also own your key suppliers? What if you run a veterinarian practice and I jack up the price of all your meds, radiological film, etc if you don't sell? What if I own the major pet insurance providers and decide that your practice, if you don't sell, is no longer covered by my insurance?
> 2. If above is ok
It's not.
> 3. Going to the article it is clear enough. These industries just are not lucrative to begin with
They're engaged in anticompetitive behavior but on a local level so it tends to escape scrutiny. Unfortunately, if you dog is sick and you like in Cincinatti, you don't really have the option to go Reno where there's (for now at least) a cheaper option.
This is all just rent-seeking behavior. Nothing about this is productive. The people who engage in this should be treated the same way profitters are in wars and natural disasters, which historically hasn't been a fine or legal sanctions. I'll put it that way.
> 4. Somehow leaving money on the table in the form of a backlog is bad?
That's what rent-seeking is. It's unproductive extraction of wealth by removing all other options.
Wait until PE comes for your ISP and suddenly a 1gig fiber connection is $300/month. What are you going to do then? Start your own ISP? Good luck with that.
1.Shareholder primacy. Under Delaware corporate law (which governs most large U.S. public companies), once a board decides to sell, directors have a fiduciary duty to maximize the price shareholders receive. A premium cash offer from a PE firm is hard to refuse without legal exposure.
2.Interest deductibility. The tax code lets companies deduct interest payments but not dividends, which makes debt-heavy capital structures more tax-efficient. LBOs exploit a feature of tax law that exists for many reasons unrelated to private equity.
3.Freedom of contract and limited liability. Sponsors can put a thin equity check into a holding company, have that company borrow on the target's assets, and walk away if it fails, because limited liability is the foundation of corporate law generally.
The point of the exercise is not to suppose what other things could have been different to allow these two hypothetical companies to end up in the described state. The point is to actually freeze everything else, do not allow it to vary, and look at the backlog in isolation. Obviously such a situation would never actually arise. Even if things were trending in that direction, the two companies would very quickly diverge from ceteris paribus.
Obviously having a backlog is better than no backlog because unless you make a new sale tomorrow, you have a problem. You will have idle capital and labor resources. Which company do you think has easier access to credit?
Private equity is very much interested in the margins. That is one of the key differences between private and public companies. Public companies are under pressure to grow at all costs. PE would probably be satisfied to make half the profit and double the margin, especially if it also happens to position the company for a more favorable sale. Would you rather buy a business that's at 5 or 10% margin?
The depth of the backlog also happens to be a pretty decent proxy for how much competition there is the market. A deep backlog means there isn't another firm around to fill that demand. That makes your company look better.
Let's go a little left/up the funnel. Imagine two startups, all things equal, their sales funnel goes wide > qualified > sale. They consistently convert 5% of qualified leads into sales. Do you want to be the company that has zero qualified leads, or $4.5b of qualified leads?
There's only one company: the one with the backlog. The other company either went bankrupt or was bought out and consolidated into the first company.
Unfortunately people are mortal and everything ends. Even if a someone didn't sell their business to PE, the trusting relationship is over once they retire. There's no guarantee that someone new - even if vetted - is going to be as good as the previous owner.
... they sold the original business to retire??
Conjecture unsupported by article
You will not find any investors.
The investors that want to invest in fire trucks already invested in the PE fund and will give them money over any new start
That’s the point
There’s no money elsewhere.
This is the insidious part: small markets that grow organically over about 10-20 years are specifically what PE investors look for because they are cash heavy but don’t have desire to expand.
So the owner gets 3M cash out for property worth 4M. PE bundles similar businesses (boba tea shops are a popular one) and then uses the net cash to get a loan to expand.
They expand, cut corners then cash out on the net profit and then sell the skeleton in the pink sheets or go bankrupt.
I’ve had to deal with investors and finance for almost 15 years now. My company was bought by a PE backed company and I knew fund owners
this is how the economy works
Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone would scream bloody murder. But with the higher returns from PE they have 40-50 year runways and people can pretend everything is fine.
So PE firms exist to extract value from basically all high quality goods and services to show a high ROI to prop up pensions. They extract wealth by buying up companies and gutting the “extra” things in them - for luxury goods, it’s quality, customer service and warranties (like my venta humidifier or reformation dresses), for services it’s stripping the underlying excess risk management and quality control. One can argue that PEs make the business more efficient but in my opinion they just turn worker or consumer related benefits into profits (stakeholder and business benefits). It’s a transfer of value from worker and consumer to business and asset holders at a massive scale.
But sadly it’s not some evil dudes at the top doing this transfer, the market force behind it is because we promised old people way too aggressive paychecks when they retired. Pensions need to invest massive amounts of money into higher rates of return and PEs just happened to be the medium that is the most successful. Sure the people running the PE firm extract a ton of value drying up all luxury quality and robust services from the daily lives of working families, but their take home is a tiny fraction of the wealth they extract (but yes they take home a massive amount of wealth for an individual). Instead the wealth extracted shows up on a 1400$/m for some old person probably living in a retirement home somewhere.
So if you wanna fix or ban PE, solve pensions.
We solved pensions. People have defined-contribution plans now. I would expect insurance float to dwarf pensions as a source of PE funding.
The real reason PE exists is because it charges high fees. The financial industry does not make products to serve customer needs, though by happy accident that sometimes happens. It makes products to charge fees. Index funds removed a big chunk of the fees that active mutual funds used to charge, so financiers went looking for a replacement.
Even if you snapped your fingers and all remaining pensions (and insurance float?) disappeared, PE is aggressively going after individual retirement accounts, now. Most insidiously, trying to work their way into the "target date" funds that are the defaults for most plans. So "solving pensions" will not make PE go away.
Like millions upon millions?
They need to be paid out somehow.
I've seen PE make businesses more efficient by reviewing all contracts and dropping or renegotiating ones that no longer align. Closing product lines that aren't profitable. But that is year 1-2. By year 3 they start the squeeze, layoffs, asset selloffs (stripping), and lowering quality, raising prices. That is where the real teeth of wolf are shown.
In principle, I don't think there's anything wrong with this. All investment expects a ROI over some time horizon. Public companies do the same thing. Anyone who founds a start-up is doing it too. The only real distinguishing feature of PE is how successful they have become at aggressively optimising for market value.
The issue is that the sale value at the end of the cycle can be massively influenced by cynical financial engineering. This seems to me to be more of an issue with how every institutional investor apparently now prices companies purely on reductive metrics like EBITDA x the industry standard multiple.
The cause of the rot is widespread over-confidence in dumb financialization models shaping the system.
(Or, since it's HN: if your machine learning model is training well, but misaligned with real life: do you blame AdamW?)
The irony goes way deeper than that.
A large part of PE clients are university endowment funds.
Harvard for instance has close to $60B in its endowment fund, 40% of which is invested in PE. At this point, Harvard is more an investment fund, with a university as side business.
But… if you were to say hey we need to pay our old people and we desperately need some way we can deploy massive amounts of money at higher rates of return, people will say… hmm well it’s broken but the alternative is worse so we’ll ignore it.
But now imagine you have a way to deploy large amounts of money and get large returns off that money. Every large amount of money (endowments basically) will jump on it because why not? That’s literally an endowment dream scenario.
So pension funds are the moral reason these other huge chunks of money to get large returns. PE firms have become a streamlined business model because they continue to improve what they are good at doing, and it’s insane that we haven’t passed laws against it yet. Except of course we can’t mess with it because it touches government workers.
So yeah even if we wanted to policy it out of our society it’s practically impossible from a social point of view.
Pensions fund PE because PE can do a short term cooking of the books in order to smooth out the growth curve. So the return is usually positive each year, not raising problems.
Also what does significant mean? Pensions are the main mechanism non-wealthy people are investing in PE. Being that millions are involved, you would expect pensions would have a sizable portion of the market, but family offices and high net worth offices dominate. If it offers above average returns, why would they not invest? PE is like every other asset class other than housing, the top 1% own a large chunk, the top 20% own the majority, and the bottom 50% own very little. Decisions are not driven by sone fireman, they are driven by the wealthy like everything else. And the origin and continuation of pushing for retirement to come from capital investment comes from the wealthy as well.
https://www.psprs.com/uploads/sites/1/AIC_PublicPensionRepor...
Some interesting details:
- "Nearly 50 percent of the private equity investment dollars that make their way into American businesses come from public pension funds", which substantiates OP's thesis.
- "U.S. public pension funds invest 9% of their portfolios in private equity, on a dollar-weighted basis." 46% is in public equity, so obviously the lion's share is in still in public markets.
Effectively it’s burning all of the trust built up with consumers as firewood by tricking them into buying mediocre products at high prices.
If a company being purchased by PE meant that they lost the vast majority of their customers as soon as contractually possible, then the possible value extracted by PE would drop off a cliff.
This isn't necessarily the fault of the customers - we're all dealing with a lot of information to process.
And, up until recently, it was reasonable to attach reputation to brand instead of to owners.
And I think that's a lot of what PE exploits - the gap between people's belief about a brand's reliability/reputation, and the fact that the actual reliability has been a function of who the actual owners of the company are for many years - but people are still attached to the old mental model.
(there may also be some value for PE to extract from assets aside from customer relationships and the higher-order "brand value", but I suspect that that's secondary - if I'm wrong please correct me)
How so?
And like FIRE devotees, maybe they should model a lower withdrawal rate.
They moved around the year 2000 to accounts that don't have the AT LEAST clause, and they earn what they earn, but due to the backlog of people still retiring that were grandfathered in, its wrecking our state.
My city has a huge budget deficit, but 24% of its total payroll budget goes to the public retirement system to 'catch up' from years when it did not make 8%. Next year or two, that is supposed to jump to 28% of payroll.
Problem won't start getting better until something like 2034 when the boomers start 'leaving the retirement system'
Mass index fund investment is basically socialism but stupid. My retirement money is going to get invested in the SpaceX IPO against my will. The market is not efficiently allocating capital, it's structured to allow elites to skim off the top while forcing middle class people to subsidize them.
1. If you assume that P.E is uncorrelated/has a low correlation to the stock market (subject of many years of diatribes), then you decrease volatility of your portfolio by adding it.
2. Because a pension fund has a lot of years until they need start to paying out, then it is natural for it to attempt to harvest the illiquidity risk premium.
3. The (edit: removed extra words) "high required rate of return problem" is really a defined benefit problem. A DC plan can (and probably should) just be in mostly straight indices unless it's so big it can negotiate a good fee with asset managers for other classes.
(it's a blog summary of a much longer, and rather esoteric, academic article)
Who do you think is buying .. everything? They're holding substantial fractions of both the whole stockmarket and national debt.
It's the corporate businesses that have gotten rid of pensions in favor of 401k plans.
Isn’t this just what happens when you have an inverted pyramid (older population is larger than the younger population)?
> One can argue that PEs make the business more efficient
I’ve never seen it (I agree with you). To improve something they’d have to understand the business and do a bunch of work. Mostly they show up at quarterly meetings and want spreadsheets that measure some number that will go up (regardless if that number means anything).
> if you wanna fix or ban PE, solve pensions
How does one solve pensions?
I was thinking that Covid and widespread antivaxxer mentality would have.
But no. This will be the latest ladder-pull by the boomers and silents to extract the last bit of wealth from all the younger generations. And this will impoverish gen-x and all younger generations even more so than we already are.
People have to eat. They need water. They need a roof over their head. Nobody has to buy out all the veterinarians in an area at rates they can't say no to, have them sign non-competes and them jack up all the prices by 300% because, hey, you now own all of them. Nobody has to buy up all the trailer parks, which are normally peopple's last stop before being homeless, and then jack up the ground rent because, hey, where else are they going to go? Nobody has to buy up utilities, spend big on capex because legally you can pass on that charge and effectively double people's electricity bills.
Hannah Arendt coined the term "banality of evil" [1] decades ago and, in all honesty, I think it applies to the predatory nature of PE. It also goes for working for Palantir and a bunch of other companies. "I need to pay my student loans", "I'm just doing data science", "I'm just writing AI software that identifies when somebody is home" and on it goes.
PE serves no useful function in society. It's pure rent-seeking and incredibly predatory in many cases. ~15 years ago, there was a story about Goldman Sachs invented a derivative on the price of wheat and then essentially conspired to jack up the price of wheat [2]. This wasn't just manipulating a ticker on a Bloomberg terminal. It had real-world consequences. People starved and died because of this decision.
Yet I'm sure there were people who argued "I'm just doing legally allowed financial engineering here".
[1]: https://aeon.co/ideas/what-did-hannah-arendt-really-mean-by-...
[2]: https://theecologist.org/2011/sep/13/how-goldman-sachs-start...
[0]: https://fixedincome.fidelity.com/ftgw/fi/FIYieldTable?popupM...
> The first ever Roman fire brigade was created by Crassus. Fires were almost a daily occurrence in Rome, and Crassus took advantage of the fact that Rome had no fire department, by creating his own brigade—500 men strong—which rushed to burning buildings at the first cry of alarm. Upon arriving at the scene, however, the firefighters did nothing while Crassus offered to buy the burning building from the distressed property owner, at a miserable price. If the owner agreed to sell the property, his men would put out the fire; if the owner refused, then they would simply let the structure burn to the ground. After buying many properties this way, he rebuilt them, and often leased the properties to their original owners or new tenants.
I wonder if the incidence of fires increased during this time.
sigma
In my area PE is gobbling up mom-and-pop apartment complexes, plumbing companies, restaurants, and generally making customers and employees alike pretty miserable.
Hard-working founders should be able to cash out, but there has to be a better system than this one. Succession, maybe. Not that we should push an unmysterious destiny on our children, but maybe more ought to consider pulling one?
I (and leaders at my PE-owned company) cannot say enough bad things about private equity. How anyone who managed to make money in their life decides PE is a good investment blows my mind.
We are now on our 5th PE firm in 10 years, and just completed a "PE lifecycle" of buy -> merge -> sell -> part out -> merge.
None of these PE firms bring anything to the table. Even the hundreds of billions AUM giants. They have zero interest in tangibly improving the company, and lots of interest in cheap window dressings meant to fool other PE firms. Not that they could do much else, because it's mostly business grads with minimal real world exposure, and hunger to be rich above all else.
The most critical thing to understand is that they pay themselves "advisory and oversight fees" for the incredibly difficult work of increasing sales targets 300%. These fees can eat 10% of our revenue, and is one click above theft. Trust me, they will lay-off 75% of the company before even considering cutting back their personal take. Never mind the fees they take from investors too. They bill both sides.
Also, if they kill some of the companies they acquire, it's the investors loss. It is not their loss. They still collect all their fees just the same.
There is a total misalignment between investors and PE firms, where PE firms just want to maximize their looting while investors think they are actually trying to improve the acquired companies. If the invesotrs do see gains, it's mostly because the firm successfully conned another firm into overpaying.
Run from investing in PE, run as fast as you can. Recently they changed the law to allow regular people to have PE in their retirement. They are running out of useful idiots, and want access to the general public. DO NOT FALL FOR IT
https://www.thebignewsletter.com/p/did-a-private-equity-fire...
What keeps a newly graduated Veterinarian from opening her own clinic and undercutting the PE competition? With no massive loans on her books, she can profitably offer lower prices than PE can. She may even drive the local PE clinic out of business.
Depends entirely on fixed vs variable costs. Rollups (which are very common now) work mainly because most "mom and pop" businesses can easily be "unlocked" by pooling the treasury, HR, accounting, commercial banking, supplier negotiations etc.
Who would have guessed that turning social human constructions into businesses that 'have to make profits' could result in such deaths!?
What on earth could be next?
Defining margins again and again until these businesses suddenly actually are totally compliant and suddenly there are even more deaths?
Oh how will we ever solve this strange behaviour!?
/s^s
Quote (from article) “This didn’t just happen to you accidentally. This is a business decision, isn’t it? You keep these backlogs like this. […] Another word for this would be a heist. This sounds to me like private equity came in; bought up all of these small companies; combined them; shut down their production; rolled up a huge backlog; massive profits; stiffed these guys; and now you’re making out like bandits.”
The last part never made sense to be. Where do they find willing buyers for these debt laden, hollowed out husks?
This just seems wrong. The buyer takes out a loan, how does that become the responsibility of the company they purchased? I thought loans used to buy a business treated the business as collateral, like a home mortgage. What lender would participate in this? and why?
Because the company they purchased is now a part of them.
As for why a lender would agree to it, it's because these transactions are not as simplistic or universally disastrous as they are usually described. A lender will obviously only make that loan if it has a reasonable expectation of being paid back, and most of them are. They may get additional collateral like parent/affiliate guarantees and the loans will have covenants relating to financial performance etc.
Nobody has that kinda cash lying around, banks can't justify such high liabilities, and VCs are not interested in "stable", businesses.
The UK high street has been a notable victim. Gradually, over the past couple of decades, company after company has been snapped up by PE. Not just shops, but restaurants too. Suddenly you realise that the 5 or 6 high street chains that were competing are now owned by the same fund. Quality collapses, prices rise, not just at one chain but everywhere. People stop going, the chain collapses, another empty unit, the fund moves on. It's easy to point at Amazon and internet shopping as having degraded the British high street, but there are several other factors, and PE is a big one.
https://www.thebignewsletter.com/p/did-a-private-equity-fire...
Does anyone know about the source?
https://rubbishtalk.com/media-kit/
Whoever put this together couldn't even be bothered to compete the template they were using.
The new PE overlord will do things like send you a bill for inspection after you inquire about their pricing ("Well, our guy was in the area so he took a look!") while billing you for gas from their home location.
This is disgusting on so many levels—no competition here at all, just oppression by those with a lot of money.
Cost insensitive customers with bizarre business requirements, what could go wrong?
0. https://www.slashgear.com/1890538/why-american-fire-trucks-b...
1. https://www.pulsara.com/blog/why-does-911-send-a-fire-truck-...
2. https://sf-fire.org/our-organization/division-support-servic...
Now they are buying fire stations, dentist offices, ski resorts, whatever the fuck they can think of and then raise the prices. Something needs to be done to stop this.
https://en.wikipedia.org/wiki/List_of_colleges_and_universit...
The large PE buyouts that came from the ridiculous ZIRP period could deliver better financial stability than handing the business down.
I know two families with businesses that attracted huge PE offers in the past few years. One of them took the buyout and the family members slowly left their jobs at the company because they effectively been early retired by their buyout.
Now the kids are looking at new businesses to buy and start for themselves with this new financial freedom that has come to the family. One of their considerations is starting another business in or around their old line of work that was sold off. They have to wait until the contractual non-compete expires, but if the PE owners are really making both the employees and customers miserable then it becomes a golden opportunity for experienced operators to come in and run a good business in the vacuum. Even many of the old employees have expressed a desire to join.
The bad PE phenomenon buyout is annoying, but businesses that become miserable for the customers and employees are not stable long-term businesses. When they decline because competitors show up to do a better job and retain better talent, it becomes a transfer of money from the lenders to the old owners and an annoying churn in the local business scene. As we see more of these failures, the willingness of banks to lend for these buyouts will go down.
Instead of succession, I wonder if there is a way to make it easier for these people to sell their company when its time to retire to someone who is looking to start the next step of their career. A lot of software engineers joke about becoming farmers, but if they could instead make an easy transition into a small business by buying a small business, we could prevent PE from raiding things.
This leads to them pushing their kids to be employees even though that's...really contradictory to their actual lived experience.
And that’s before you even make it to the question of “can the person that manages to buy it actually live off of it as a lifestyle business?”
Why? Operating a successful business should be remunerative on its own, or else it's not successful. Owners who don't want to do it anymore can let it become worker owned. If they don't want it, it can dissolve. What else do you need? The very concept that the end of a successful business is a big payday for its creator is itself the poison here. There is no end just another workday, success is ongoing not final. This is natural and correct.
When they retired they didn't have any money in the bank besides the proceeds from their final harvest, but all their loans were paid off. That's where the profits went -- paying off the loans.
The farm was their retirement savings. They sold it off for high six figures, and that's what funded their frugal but comfortable retirement.
The neighbor's son bought the farm; I hope he's pretty much paid off the loan he took out to buy it.
It's the same with gentrified zones: yes there are some dark patterns going on as well, but mainly is previous, smaller owners that want to make big bucks by selling to someone with money from outside rather than someone local like themselves for less money.
My guess is owner-operator selflessness is a key ingredient in a lot of beloved small businesses. I don't know for certain that the winning personality for getting a business off the ground on all the bad days is the same one that raises rates proportionally with their success.
So it becomes all-or-nothing. It's my friends and neighbors when I'm working, when I sell-out it's purely business. No in-between.
The door refused to open. It said, “Five cents, please.”
He searched his pockets. No more coins; nothing. “I’ll pay you tomorrow,” he told the door. Again he tried the knob. Again it remained locked tight. “What I pay you,” he informed it, “is in the nature of a gratuity; I don’t have to pay you.”
“I think otherwise,” the door said. “Look in the purchase contract you signed when you bought this conapt.”
In his desk drawer he found the contract; since signing it he had found it necessary to refer to the document many times. Sure enough; payment to his door for opening and shutting constituted a mandatory fee. Not a tip.
“You discover I’m right,” the door said. It sounded smug.
From the drawer beside the sink Joe Chip got a stainless steel knife; with it he began systematically to unscrew the bolt assembly of his apt’s money-gulping door.
“I’ll sue you,” the door said as the first screw fell out.
Joe Chip said, “I’ve never been sued by a door. But I guess I can live through it.
- Philip K. Dick, Ubik
"In developing countries, everything is possible and nothing works. In developed countries, everything works and nothing is possible."
The "consumer harm" standard is idiotic.
Most of the R&D that laid the future of the world happened during that period. The middle class grew to its largest portion during that period.
I don’t think the economy was hamstrung in the least
The US economy generally did very well with those standards, maybe the best it ever did, especially considering distribution of benefits.
I am somewhat more inclined to some socialist policies now though.
For the record: national economic policy shouldn't revolve around Y Combinator classes and similar startups.
I'm totally fine if it turns out a sensible antitrust policy completely destroys the acquisition exit pathway for tech startups. I'm not saying one will, but I'm saying that's a cost I'm willing to pay.
https://hn.algolia.com/?dateRange=all&page=0&prefix=true&que...
As a business owner, if you want cash today because you are done with a business. You could go to a bank and get a loan to pay dividends. This is a bad deal for the bank as you have no incentive to operate the business after you cash out the loan. A private equity firm comes in and operates the business on the model that they still keep some of the profits after the loan value.
The crappy side comes in as a customer, the PE firm can do this to an arbitrary number of firms in the area and raise prices on each/cut services. PE firms can trivially build out monopolies. Many of these monopolies will be invisible as they leave the existing branding etc. in place.
> As a business owner, if you want cash today because you are done with a business. You could go to a bank and get a loan to pay dividends.
If you are a business owner you could borrow yourself using the business as security.
One correction is that it’s not like paying for the company with money from the company you’re buying, because that obviously wouldn’t benefit the sellers. The money comes from a lender and they get terms to take the business if the loan terms aren’t meant. The lenders are the effective new largest owners of the company with the PE firm being a smaller owner but the expected primary operator.
Even 3% or 0% down mortgages?
That's why the parent is saying "It is like paying for the company with the money from the company you are buying.".
It’s possible to “understand” mortgages by understanding that conditions for stable home markets don’t arise by themselves—we collectively make them possible because the outcome is desired—then wonder WTF because what social function is creating conditions for private equity getting us.
Assuming you had $$$ for some supplies but couldn't afford to lease a commercial building, you could provide small mammal services from your vehicle, driving to people's homes to give vaccinations and well care.
Being mobile would also allow you to serve a larger market than a fixed clinic; you could serve a couple small towns on Monday, a couple others on Tuesday, and server a larger metro on the weekends.
Once you're consistently profiting $$$$/day you'll be able to start saving for the equipment you'll need for a commercial lease somewhere because you have both the cash, cash flow, a loyal customer base, and critically, a good sense of where a good location would be to serve them from.
Except every newly-graduated veterinarian does have a massive loan on their books, in the form of student loans. And even if she didn't, where does the startup capital for her clinic come from? Whether in human or animal medicine, starting your own practice--especially as a new grad--is usually the course of action with the highest-risk-to-lowest-pay ratio.
I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell?
When PE takes over medical practices, my understanding is there just isn't enough capital available for a dentist to "cash out". The options are either they find another dentist to buy it, the close the practice, or they sell the private equity...
Talking to a single buyer is easier than arranging an IPO and I would imagine the diligence far less onerous.
You can’t just IPO because you want out of the business. There’s lots of reporting and regulatory requirements to ensure you aren’t screwing investors.
Owner gets old or want to quit the business and a PE offer of 2-8x Revenue comes in.
Owner making $200k instantly cashes that $4MM check and walks away.
PE takes contracts, guts all the expenses and cuts staff in half, and purchase price is recovered in <2 years.
Suddenly there is only one HVAC or dentist company that can maintain licenses and insurance.
Shifting private ownership to a publicly traded company is an awful lot of paperwork (especially for accounting) and upfront costs, you need to time it properly, you need to find banks willing to cooperate.
In contrast, selling a private company to a PE is a pretty much straightforward transaction.
PE is often just legalised larceny.
Same for Amazon vs going direct to the manufacturers, which is more often than not, China.
That comes with a bunch of problems. Taxes, import duties and import refusals are the biggest one. With Amazon, at least as long as it's sold or fulfilled by Amazon, no matter what, you are going to get the product in a reasonable time frame (1-3 days IME).
Shipping... depends. If you're in bad luck, the seller doesn't ship Fedex or DHL, but Yanwen or another one of the usual bunch of "aggregators" that bundle weeks worth of shipment to forward it to the US or Europe and unbundle the shipments there.
Assuming your product shows up at your doorstep, legally, you are now the importer and fully responsible for anything related to that specific product - say, an electrical appliance that sets your house on fire. You can't hold anyone accountable but yourself.
And finally, if there's defects, you only have to deal with Amazon. Free shipment back, done. With anything straight out of China, you are now responsible for shipments.
Huh? Why is there nothing wrong? Yes they wouldn’t make the investment if they didn’t think they had a way to get ROI, but how does that entitle them to one at any cost or make it necessarily moral?
As an extreme example, If I invest to create a company that is clearly exploitive and addictive, nothing is wrong in principle and I’m entitled to my roi?
They use money to turn value into money, which they then use to turn more value, into more money. And in the end, they have a lot of money, and all of the value is gone.
Not only is that politically attractive, I think it’s more good than bad as public policy.
Turning back to PE/LBOs:
Having limited liability entities (companies) also serves good public purposes. Having companies being able to borrow money also does. Having companies being able to own other companies also does. I think that’s the only three ingredients you need for the PE model to operate and I don’t think that the public is helped by barring any of those three things.
I guess what I would like to see is a pathway to making it easy to buy or start up crucial businesses like a plumbing business, HVAC company, etc. As the current generation of owners want to sell and retire, we should make it easier for people to be able to get in there and buy these companies before PE can.
The stressing part is when they are at their peak, so people would like to use regulation to short-cut right to the collapse part.
The only example we have a true free market victor that hasn't collapsed is humans, who have totally and completely dominated all other life on Earth, but man, it's certainly not looking good for us right now.
And most of these types NEVER read past, say, page 20 of https://www.gutenberg.org/files/38194/38194-h/38194-h.htm , Adam Smiths treatise on capitalism. Here's a few failures that Smith wrote back in his initial treatise in 1776. I think so far, we're failing every one of these, and basically speedrunning all the terrible warnings Smith wrote about as accomplishments.
Gross inequality was even mentioned there as something to significantly avoid. Book I, Ch. X, Part II; ~p. 50
Principal-agent problems in joint-stock companies. Managers of other people's money "cannot be expected to watch over it with the same anxious vigilance" as owners, leading to waste and negligence. Book V, Ch. I, Part III; ~p. 312-313
Mercantilist policy distortions. Protectionism, export bounties, and import restrictions enrich narrow merchant interests while reducing national wealth by intentionally misallocating capital. Book IV, Ch. II-V; ~p. 183-213
Underprovision of public goods. Markets fail to supply infrastructure (roads, bridges, canals, harbors) and institutions that benefit society broadly but yield no direct profit to private actors. Book V, Ch. I, Part III, Art. I; ~p. 303-305. https://www.independent.co.uk/news/world/americas/us-cities-...
Dehumanizing effects of extreme division of labor. Repetitive specialized labor "renders [the worker] as stupid and ignorant as it is possible for a human creature to become," impairing civic and moral capacities. Book V, Ch. I, Part III, Art. II; ~p. 324 . Even in the 1800's this got so bad that Karl Marx wrote about this in both of his critique of capitalism AND the communist manifesto.
Merchant collusion and monopoly power. Smith warns that "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices". Book I, Ch. X, Part II; ~p. 54 . Hello, eggs, meat packers,oil products (gasoline), grocery chains, electronics (RAM), health care. Collusion after collusion, and almost no enforcement.
Im not communist, and probably not socialist. But its clear as day as to the failures of capitalism. And as a stopped clock is right 2x a day, capitalism does handle some problems better than any previous system. But we can do better. Lots better. But the entrenched power holds on to capitalism as fervent as a religion, and not dispassionate analysis.
And it should also prevent the acquihire.
But that's not what you're talking about, is it?
How about doing what America used to do? Provide seed funding for a new fire truck company in trade for condictions. Can we agree to do that? Fund 3 companies to make fire trucks, fast-track whatever certification and approvals they need. Create the companies we need, risking (and in fact expecting to lose) a bunch of the capital used for this.
People always give these vague guidelines (and even the guidelines in the 80s were) and wonder why they are easily circumvented.
If the company wasn’t able to borrow money for itself, a wrapper company could which would still have very closely the same effect as being an asset-poor borrower.
Which would increase the rate of defaults (if they are authorized in the first place) and in turn increase interest even further. I guess the PE is always maxxing out the leverage on every deal at _just_ the projected break-even point for loan repayment? But that leaves no room for error or changing market conditions which also increase the rate of defaults and so on.
And everyone gets their management fees until people start asking their money back...
Great another financial crisis.
Pure parasitism.
Note that from the lender's perspective, the risk is the same and in a perfect-information universe could be mitigated by charging higher interest. The problem for society is the externality that the business's services get worse.
Sounds like a problem for whoever is providing the financing. Not really my concern unless you're saying there's some systemic problem it causes like with mortgage securitization during 2007. The lender will charge a high interest rate if what you're saying is true.
It’s literally a way to extract revenue from our broader social institutions by spreading the pain across so many people that individuals don’t complain (or, in some cases, don’t even understand how it harms them).
Has everyone forgotten the social contract? We do not exist as communities to make a small number of people richer. If the trade doesn't work for all involved, we change the rules.
No, because if we had proper anti-trust they already would have both been broken up years ago.
That's pretty unfair. IIRC, Standard Oil was on of the companies that was the impetus for antitrust law (and broken up by it), and AT&T was broken up (famously) in the 80s.
Basically, your "argument" is a troll or a deep and basic misunderstanding. Especially in the case of Standard Oil. You're basically saying the law doesn't work because it didn't work before it existed (Standard Oil became dominant in the 1870s or 1880s and the Sherman Antitrust act wasn't passed until 1890).
How are you allowed to continue to post every 2 seconds? dang
I've read enough of the pre-Borkian (ie, pre-1980s) history of antitrust law to know this was very actionable.
They were not easily circumvented in that it required decades of funding and activism to nerf the Sherman Antitrust Act and its successors.
The information is captured the same way as most policy - via statute and precedent, and guidelines for enforcement agencies.
None of this is confusing, or even hard, except insofar as it's hard to fight against well funded opponents.
Antitrust enforcement can be done retroactively as well, if it appears that a large company abuses its financial firepower to undercut competitors or a marketshare gets too dominant.
Montgomery Ward thought it was "too big to fail" and too powerful to regulate.
So, what happened?
If the US government wants to, and it has in the past, it just takes your business at gunpoint.
4 soldiers walked into the ultra-conservative owners office and made him leave. Two of them picked up his arms and legs, took him outside, and deposited him on the sidewalk.
> a major U.S. CEO being physically evicted from his own company by armed troops became one of the most famous news photos of the home-front war
Even if they are lucky enough to have no debt, I don't think the average graduate has $10,000+ in the bank to spend. I have never started a business so I honestly have no idea how hard it is to get a small business loan for something like this, maybe it's easy, but even so it's certainly risky.
It's a shame that even highly educated populations do not understand a basic fact of immunology.
No one ever said the vaccine would prevent transmission. What they said was that it !could! prevent transmission. But no one would know before studies were done. What they did say is that it would lower mortality rates. Which it did in fact do. But the factors of transmission and spread were dice rolls. And everyone with first hand knowledge knew that from day one.
But, you are in fact correct, you were lied to. But not by anyone with knowledge of the vaccines, but by the grifters you hold up has being "a beacon of truth". The grifters who read "Vaccine has a chance it could slow or stop transmission" and turn around and say "They are promising it will stop transmission!" just so they can tear it down later as "another victory for TRUTH!".
I'm willing to accept my memory is wrong here with evidence, but I remember a very strong narrative in the early period claiming that the vaccine did in fact prevent contraction and transmission, to the point where it was supposedly surprising when "breakthrough" cases started being reported.
It's possible there was some loose language around "prevent" as I did see that especially later on, but I have trouble finding reliable information on what they actually believed and if they actually reported this accurately to the public.
There is the unfortunate mark against where they knowingly promoted misinformation around masks - persistent through today - that they were ineffective, in an effort to direct uncontrolled distribution of masks to medical professionals most in need.
And because the capitalists run the show in a lot of countries, https://ruinmyweek.com/wp-content/uploads/2020/07/live-laugh... is a good image that explains why lots of things kept going on as usual.
A world-level 6 week pause would have burned covid and a whole lot of other diseases out. But no. Poor capitalists need their 3rd yacht, 13th vacation home, etc etc etc.
As for me, my SO worked in health care. And Covid is a SARS. We have decades of effects and response. The shit's airborne. WHO knew that. CDC knew that. But they lied and lied and lied.
We take our healthcare in our own hands. I'll critically listen to the "experts" and deal with med doctors for prescription drugs. And Im definitely interested in my own manufacture of pharms https://fourthievesvinegar.org/ . But yeah, the wider and general the message, the more propaganda it likely is.
And we also have a good stock of PPE now, including a few tyvek suits. And everclear is 95% alcohol and $30 here for a handle. Best sanitizer you can easily acquire and food safe to boot.
EDIT as comment to WarmWash:
No. The WHO and CDC lied about Covid being an airborne infection. They refused and refused, up to then redefining what an "airborne infection" is.
https://www.bmj.com/content/385/bmj.q985
Covid is a SARS. Airborne. SARS requires BSL3 to handle properly. https://en.wikipedia.org/wiki/Biosafety_level#Biosafety_leve... "Biosafety level 3 is appropriate for work involving microbes which can cause serious and potentially lethal disease via the inhalation route."
I dont need international experts to tell me a stream of bullshit, when I can look at the type of disease and go "wellll fuck, airborne. time to wear masks outside the home and no parties or events. and go to store when its not busy."
Was Covid as bad as SARS? No. But is SARS response something that can be compared to what we should have did for Covid? Hell yeah.
The policy in question (as stated) should have prevented Ma Bell and Standard Oil from getting to the point of being broken up.
2. You don’t have to prevent every case before it happens so much as just stochastically go after the worst ones to make it less economical for people to go take on debt to have huge swaths of consolidation. Letting the market work, after pricing in that egregious monopolies will be broken up, is kinda great and better than minutely scrutinizing every tiny deal for long-term consequences.
Frankly this stuff is impossible to talk about in the abstract. The details of every individual case matters. If you're actually curious (instead of just playing a shell game), you can go look up the types of analysis that FTC does to evaluate market dominance and whether a given transaction will excessively consolidate a market.
It's like taking out a mortgage on a house, but letting the house owe the debt.
Isn't that a non-recourse loan, which in some states is the default for the initial loan to acquire the housel
*Coverage of 1:1 is an accident waiting to happen, but otherwise sure.
If PE firm A wants to buy company C using an LBO, it could do so by having C borrow money and then A purchase C, or by creating an entity B that borrows money and then purchases C. Whether B or C owns the debt doesn't change anything meaningful for A, and it's pretty clear that you're allowed to form company B (and really hard to imagine how you'd make that illegal without effects that would be worse than current).
2025 numbers: https://www.sec.gov/Archives/edgar/data/796343/0000796343250...
2026 Q1 numbers: https://mlq.ai/stocks/ADBE/q1-2026-earnings/
Lots of success during the last admin for those paying attention.
https://www.ftc.gov/news-events/news/press-releases/2025/01/...
https://www.economicliberties.us/press-release/lina-khans-tr...
https://www.economicliberties.us/our-work/factsheet-the-ftc-...
I would prefer that! I'd prefer even more strongly that the debt be owed by someone else entirely, so a default isn't associated with me at all. If you're up for it I'd also prefer to use your credit card number to buy stuff on Amazon. But for whatever reason the law doesn't always seem to follow my preference.
I'm sensitive to your point about restricting formation of new corps. The system can't just be changed randomly without extremely careful thought. And often not even then.
Nobody likes this state of affairs so we are asking you to stop strawmanning and start steelmanning the posts you are responding to.
You are clearly not dumb, so stop responding to the dumbest possible and easiest to dismiss interpretation of other people’s comments and instead go deeper
Your cause and effect is wrong.
The US doesn't fail to attempt to enforce, the gov representatives often get paid to not enforce by said corporations who have been allowed to put money into their campaign for election/reelection.
