Why Does Everyone Hate Private Equity?

[@ThePlainBagel]

Correction: It has come to my attention that Red Lobster was sold a few days ago to new owners and has exited bankruptcy. Sorry for failing to include this very important update.

[@rpm773]

So, endless shrimp is back on? I'll get my fork

[@swaggery]

Yay, I can still eat 16,000 calories in one sitting and sleep at the table.

[@stefthepef]

HERE FOR THOSE BISCUITS LIKE MY NAME WAS FRED DURST

[@JMise]

Turned out to be a Red Herring instead :)

[@Robyn-Hood]

As you know it was still open in Canada 🎉🎉🎉

[@karlstrauss2330]

“Private equity don’t inherently need their companies to succeed to make money… there’s not much financial liability that the funds face for their company failings… companies are often to able to dodge responsibility for the actions of the company they effectively run.” There you go Plain Bagel, now you know why so many people distrust private equity.

[@adoe2305]

​@@vonb2792 which country is this?

[@tonywilson4713]

I didn't need 18 minutes I didn't need even need 1 second *_Its simple they buy something with the express goal of EXATRACTING as much money as possible, as fast as possible, by whatever means possible without caring about any consequences to anyone else while telling everyone how fantastic they are._*

[@ScottyE515]

@@vonb2792

[@acceptablecasualty5319]

​@@adoe2305Sounds like Greece.

[@HesderOleh]

I just don't understand how this is legal at all. A company and its directors have to act in the best interest of the company, not of the investors.

[@averagewhiteguy2]

Filing bankruptcy just to get out of paying a pension liability, and re-purchasing the company is just so scummy. That's abominable.

[@samsonsoturian6013]

If they don't have the money, they don't have the money

[@TiredBush]

​​​@@samsonsoturian6013 Yes, but the problem is private equity choosing to get out of the situation using a method to the heavy detriment of other stakeholder groups - the employees (which can arguably be classified as vulnerable), consumers (which are vulnerable when talking about the healthcare industry) and perhaps the corporation itself.

[@hypothalapotamus5293]

It should be illegal to take huge risks, distribute the consequences of the risk to a bunch of other people, and then hoard all of the benefits... but aparently, it is not.

[@maxweinbach3996]

Not sure about the US, but that is not how it works in Canada. The courts will rank creditors, and taxes and payrolls are high up there.

[@dirtyblueshirt]

That's why pensions are a bad idea. They're essentially a promise, and promises sometimes can't be fulfilled. It's much better for workers to have the money that they can invest in their own accounts than to have a pinky swear from their employer. Of course, managers can play all kinds of games with contributions to the pension fund and assumptions of returns to let them get away with spending less on a pension than on a defined contribution for the same nominal benefit.

[@Dan-uo9fw]

Some of the strategies you described as being problematic are straight up evil. Intentionally destroying the livelihood of other people.

[@lenOwOo]

And yet they are legal

[@jamesodell3064]

Bankruptcy courts should be allowed to claw back money private equity firms have stripped out of companies.

[@samsonsoturian6013]

Most PE firms can't do that, and even so judges recognize affiliated entities

[@cisium1184]

You don't actually know anything about bankruptcy, do you? You just heard someone say that and it sounded good. News flash: _clawing back money is half of what bankruptcy courts do._ It's like saying "pies should contain crust," as if crust were some underappreciated component of pies that cookbook writers had never thought to mention. What luck! We were having trouble making pies, and you saved us! 😉

[@jamesodell3064]

@@cisium1184 I know they often claw back money but they do not do it when private equity strips companies of their assets and then sets them loose and a couple of years later go broke and have to declare bankruptcy.

[@sor3999]

@@cisium1184 Really smug are you? You actually don't know how they hide away assets from a bankruptcy do you? The reason why it's called "vulture capitalism" is because they strip the company for parts, sell it to themselves through web of phony shell companies to protect from it being claimed in bankruptcy. Case in point: Red Lobster's real estate was sold off (at a discount of course) and then leased right back to them. There's no reason to do that unless you planned to tank the company and move the assets off it's books.

[@lonyo5377]

​@@jamesodell3064then the lenders should learn a lesson not to lend to those investors, because lenders are usually the biggest losers in bankruptcy

[@frequentfrenzied]

A private equity firm bought the local high-speed internet provider in the town where I lived. After the acquisition, they did exactly what you explained in the video. Fired almost all of the staff, sold anything of value, and stopped all maintenance on the internet infrastructure that allowed them to deliver service to their customers. They were the only game in town when it came to high-speed internet, so customers were forced to stick with them even though their service was essentially non-functional. That's just the way it was for six years, until another local internet service provider got the funding they needed to build out their service into town. As soon as that happened, everyone switched to the new service provider that was locally owned and operated, and the PE firm sold the old internet service provider that they had looted to the first company that was dumb enough to put in an offer for it.

[@honkhonk8009]

Yea definitely not blatantly fraudulent lmfao. Bro people need to understand that just because they have a suit, doesn't mean their any different from your avg contractor. Like their gonna scam you if you arent careful. Publicly tradeable companies always end up as shitshows in general. Short sighted low IQ people infest the decision making space, and usually just run it to the ground. Like they dont even make money at the end of the day. It just fucks everybody over.

[@Norsilca]

I love how their strategy just boils down to "maximum evil mode". It's nothing clever; their competitive advantage is simply the lack of a conscience.

[@honkhonk8009]

@@Norsilca Its not maximum evil mode. Its just being grilled at from the top down, to the point the dude at the very bottom of the command-chain, gets DESPERATE. And cus their desperate asf, they just do anything to keep their job. Thats how companies end up doing dumb shit in general. But also how they end up doing insane shit too.

[@Norsilca]

@@honkhonk8009 Interesting point. But still, sounds pretty evil to me 😄

[@IncognitoSprax]

​@@honkhonk8009 Pretty evil as it's greedy and hurts everybody besides them

[@Erok9]

The difference between creating wealth and simply extracting it.

[@samsonsoturian6013]

It's called a ponzi scheme

[@sor3999]

Which is basically stealing. They are thieves.

[@aygwm]

Just another way to “juice” the system 🧢

[@JD-fd1rl]

Bingo. They largely operate a zero-sum game. For them to win, others have to lose.

[@LunaticTheCat]

Exactly right

[@ieuanhunt552]

Leveraged buyouts are pure insanity. A private equity firm can take out a loan. Buy a company. Then saddle that company with most of the dept from that loan. Insanity

[@Liverpoolaussie21]

A mortgage is an LBO… . Company’s have optimal cap structures. No harm with LBO’s

[@tmallot]

​@Liverpoolaussie21 I feel that is a false equivalence. In a mortgage there are 3 parties, seller of a house, buyer of a house, lender to the buyer. The lender takes the risk up front, the buyer slowly pays back that risk over time, seller get most of the house value. In an LBO, the buyer is a PE firm, the seller is "a collection of shareholders" who own the company, and then there is the lender, once again a bank. But the employees are the tenants of the house, who have no say in the matter. This is a landlord buying up a tenement building to raise the rent on everyone who works there, and doing so with only a 10% stake.

[@samsonsoturian6013]

The loan is on the owner, not the company

[@Yura135]

@@Liverpoolaussie21 only if I could take out a 1.5 million mortgage on a million dollar home, pay myself 500k. strip the wiring, sell it, pocket that too. then restructure the loan so that the home has to somehow pay its own mortgage, while I am free to pocket my winnings and do it all again.

[@sor3999]

@@Yura135 Or buying a car, stripping it for all it's valuable parts, don't pay the car loan and let the bank repo what's left. Though I guess your credit will go to shit really fast, I wonder does the same happen to these private equity firms if they pull off this vulture capitalization over and over? I'm pretty sure if I default on my car loan my credit will tank and I won't get another car loan.

[@Fireclaws10]

My problem with private equity is that they’re allowed to do leveraged buyouts, which is insane, and mostly lead to the death of the company they saddle with debt. Also that they aren’t regulated on the industries they can take over. As you’ve pointed out, they have disastrous effects on healthcare. They need rules, instead of being able to operate in a wild west of strapping a company with insane debt, firing half the employees, and ruining the pensions of the rest when it inevitably fails. No risk and no consequences.

[@angelainamarie9656]

The real problem with private equity is that effectively maybe a few dozen people in this country are pretty much in control of everything that's the real problem. Because you know all of those private equity firms well they're all the owners of practically everything in this country none of our industries are independent anymore they all feed up into these private equity companies so it's just a giant oligopoly with a handful of people running everything and that is the real problem. I don't even know who those people are or what the hell they do. I also don't know if any of them are qualified to lead in any of these areas and yet they are effectively in charge.

[@JollyGiant19]

@@angelainamarie9656 And Blackstone in turn funds teacher pensions and other firms that buy and sell their stock for retirees

[@cedricl.marquard6273]

Yeah it sound like the companies can just extract money with no real risk. They make a mistake? Company they own bankrupts and they get to go on and keep making money

[@johnroberts3824]

I lost a 17 year job as a result of a private equity acquisition. They ruined the company and eventually bowed out, and the company is now owned by the banks. It's a mere shadow of what it once was. Many jobs were lost.

[@MattbyNature]

That is kafkaesque. I'm so sorry for you! 😕

[@carterwgtx]

I don’t think it’s that private equity exists - it’s that private equity moves into otherwise perfectly fine businesses and switching the entire business into a machine to extract profit to the benefit of the equity firm. Away goes any care for workers, the community, broader society at large, the environment, and even their customers. Upon PE acquisition nothing matters except the bottom line and everything simply boils down to lines in the spreadsheet set up to maximize the next quarters profits. People hate them because they are the classic men in suits who show up with a checkbook and immediately start running the town.

[@carterwgtx]

Oh and did I mention it’s really only people who are already ultra wealthy who invest in PE firms? And oh yeah, they’ve lobbied the government to get extremely preferential tax treatment. They have turned into a major source of inequality in our society.

[@honkhonk8009]

People dont hate them because their the classic men in suits. Its because it doesn't actually make economic sense what they do. They dont actually grow these companies, or make any long term decisions. They just milk it.

[@boslyporshy6553]

​@@honkhonk8009Buying up floundering companies and using them as meat shields for debt and cost so you can dick around or experiment for personal profits doesn't make economic sense?

[@maganashaker167]

@@honkhonk8009it makes economic sense for how they’re making money for their clients, but PE doesn’t even produce much better returns than the broad index funds for how much damage they cause

[@geldan]

Because they've bought out all of the veterinarians in the area and increased prices 5x+ while severely reducing the quality of care.

[@samsonsoturian6013]

Liars get scalped

[@rmo9808]

There's a couple companies currently gobbling up all the veterinary clinics. They are paying more than they are currently worth just so they can turn around and do this.

[@SissypheanCatboy]

@@samsonsoturian6013 lmfaooo, you think you sound so badass right now, don't you? You're over here simping for massive corporate entities who'd happily bury you alive for an extra 1% annual profit.

[@QuantumConundrum]

I really don't unslderstand what's going on, what's preventing local vets from opening a clinic that undercuts them. They could sell 2x the price and make a killing. And if someone buys them out just make a new one. Either you undercut or are forcing the malicious entity to spend 10x what they should to buy the businesses

[@Tuppoo94]

Why did the original owners decide to sell to these people? Let me guess, they got offered mad stacks of cash. They deserve part of the blame.

[@Zilkat]

When even The Plain Bagel piles onto PE without really having anything positive to say, you know it's just a bunch of bloodsucking thieves. To me, it sounds like the leveraged buyout is basically a legal way of butchering a company. While the current owners cannot liquidate the assets and take the money (that would be embezzlement), what they can do is sell it to PE, who saddles the debt for the buyout onto the company and absorbs it by liquidating its assets. At the right price, both the previous owners and the PE firm win, while everyone else at the company (shareholders and employees) loses.

[@stevenglowacki8576]

Embezzlement is when management takes the company's money. The owners can take the company's money no problem. It's their money.

[@reappermen]

​@@stevenglowacki8576that is not exactly correct. They can take the companies resources, but they can't just have the company take out a loan and then take that money, as loans usually come with additional restrictions. Plus, if it is a limited liability company of any kind, there are additional rules as well

[@addanametocontinue]

Pre-PE, you might have gotten a $5,000 raise a year because the company does well and they appreciate loyalty. When PE comes into the picture, fuck that, they pay you the market rate and nothing more--who cares that the company made tons of profit the prior year, the company's profit belongs to the company, not you. Am I biased? No. I worked at a company that was acquired by PE and got taken public and I was given a good number of shares to stay during this period. So, I made a good amount of money, thanks to PE, but there's no question the company is no longer the nice place to work at that it used to be.

[@xTRUExiNsANiTYx]

Because a non PE owned company is owned by actual people. With emotions, and feelings, and empathy. The owners and managers interact with you regularly, or at least semi-regularly. When PE gets involved, there is no more personality. Everything is just a number on a spreadsheet. The people running the company and making decisions will likely never meet one of their employees in their entire lives.

[@skylinefever]

This is why I joke about coke snorting MBAs in charge.

[@proy3]

You know PE is bad when even The Bagel Man is like "Yeah... the populists have a point."

[@samsonsoturian6013]

Liar

[@lookoutforchris]

I’m reminded of Warren Buffet’s comments on Private Equity: close to fraud.

[@siiiiiiiiiimo]

THE BAGEL MAN HAS SPOKENNN

[@SEAZNDragon]

I was waiting for Plain Bagel to explain either the evil PEs are a small but oversized number or they had a legitimate role.

[@nailil5722]

he's trying so hard to justify their operations though that it doesn't feel sincere. He knows the sentiment of the majority and he gravitates towards it, but by his doublespeak you can see he really thinks PE is actually quite cool and not problematic

[@PXAbstraction]

Almost like big business can't be trusted to regulate itself. 🤔

[@samsonsoturian6013]

Found the bum

[@PXAbstraction]

@@samsonsoturian6013 Found the dumbass.

[@Seth9809]

You think?

[@montypython5521]

Ironically they get away with it because regulations prevent others from stopping them, at least providing a better alternative.

[@tylertass9983]

There is no incentive to do so

[@jameskeefe1761]

Oh i dont know, perhaps buying a company with its own debt then to bleed it dry and extract as much as possible from it as possible, screwing over its employees and customers, to make a few wealthy people who own it wealthier, is a little bit vile. Its contrary to how publicly traded companies should be run which is to make the company more successful, so that the public who can buy shares and benefit can grow their wealth by the companies success rather than by bleeding it dry.

[@KathyClysm]

I think the problem largely is not the fact that private equity exists, but that they are getting involved in sectors that should really never have been privatised in the first place. Nursing homes, hospitals, prisons, public transport, etc. should never be a "for profit" type business as they are a public institution/service/etc.

[@BasicUniversalEconomics]

governments are just as bad, only a little more held responsible for their bad practiced

[@franknuzzo2576]

Funding things through voluntary means is much better than funding things through coercive taxation. Don’t be a useful idiot.

[@grumioiscool6190]

Yeah from what people say, you would think that everyone would have free homes if blackstone stopped existing What’s stopping more people having homes isn’t just one “bad”company and pretending that the reason is doing more harm then good

[@IMS-4]

@@grumioiscool6190THE GOVERNMENT!!!!

[@water2770]

I mostly disagree. For sure if you want the government to provide their own version then that's fine, but you want to have competition to drive better products and/or lower prices. Haven't done that much research into nursing homes, and prisons are somewhat unique since they require government to function at all, but it feels like most of the issues with hospital/medicine prices along with public transportation has been the government meddling so much that I can't put the blame on open markets. And if a major issue with the way these private industries are being handled is government regulations/interventions I don't see how giving the government more power is going to help the problems.

[@ap9929]

The returns appear good because a lot of them are not risk-adjusted and a lot of them don't consider leverage. Once adjusted for those, the return differences aren't material. The low volatility is a lie, it just looks that way due to liquidity smoothing. I worked in PE for a year and couldn't stomach it. Most pitches were about expanding the multiple through layoffs and BS synergies.

[@DesertObserver491]

Shows you have a heart. These people are just heartless. Greed over the greater good.

[@laturnich9507]

@@DesertObserver491 Or just willfully ignorant. I work in accounting and have had some PE clients. The general sense I get is that most of these people don't really think critically about the impact of what they're doing. When you're just sitting in an office building in New York you're so far removed from the reality of that stuff that you really don't have to think about it if you don't want to. And why would you want to when it's so much easier to just smile for the client, make number go up, and collect a pay check. I don't doubt that there are some sociopaths in the mix who understand exactly what they're doing and just don't care, but I think the vast majority don't even get that far and are just oblivious or rationalize it somehow.

[@skylinefever]

When someone goes on trial for bringing 1789 France to the USA, I will be doing jury nullification.

[@sav8976]

I like how he casually just says "saddling the debt" onto the already declining business like thats not messed up.

[@ophthalmophobicnpc8002]

Should 100% be illegal to do that.

[@arronalt]

he is so nonchalant saying it but I legit lost my sh# hearing it

[@SolomonTibbey]

@@arronalt, you understand investors sell their stake to allow this to happen, right? This is often a company's only choice as they are already heading towards delinquency.

[@samsonsoturian6013]

It's called a ponzi scheme

[@aeroandspace]

​@@SolomonTibbeywell leveraging debt against the company can surely raise the offer price beyond what an investor would expect, rise

[@LAG09]

Company that I interviewed had a somewhat happy ending to their private equity story. American private equity firm bought them and in the first meeting they just flat out told staff that their #1 job was now to grow the business. Really just came off like slave drivers so people just stopped doing unpaid overtime. European labor laws stopped them from just firing people willy-nilly. They spent years trying to find "synergies" with whom to cut down costs, but being a medical device company you have standards that you can't ignore. Basically everything they suggested was met with "No, that would be illegal" so obviously they couldn't do much. Even offshoring their manufacturing was a bust when the equipment needs to be made in tightly controlled, certified factories because customs opening up their devices could lead to contaminations that can kill people. Eventually they just gave up, sold the company at a loss and as far as I know American private has since generally stayed out of my country.

[@desiv1170]

Blackrock/Blackstone: We just don't see why people have so much of a negative initial reaction to us... Consultant: Could be your names... They are a bit dark/goth sounding... Have you considered some other names that are a bit more bright? Blackrock/Blackstone: We could go back to the names we were going to start with... Consultant: Great... What are those? Blackrock: Blackheart... Blackstone: Blacksoul... Consultant:

[@sor3999]

Don't forget Bain Capital. What next? Cartoonish Twirly Mustache Villain Capital?

[@bagustesa]

who would invest in "Pinky Promise We Will Pay The Loan" private equity company?

[@robertwarner-ev7wp]

And if you just want to straight up kill people for money call your firm “Blackwater”.

[@SangoProductions213]

I think the lack of liability for loans taken is the most scummy part of everything.

[@SangoProductions213]

Who are the ones putting down loan plans that are getting passed to the subsidiary business? It seems like an unusually risky prospect, given part of the business plan is bankruptcy.

[@samsonsoturian6013]

That's the definition of equity investment. All the risks are on the lender. That's fine when you're lending to blue chip firms, but your average startup......

[@lauriebarns9901]

Not just scummy. Taking loans that they transfer to the target company means there is no thought or consequence to the long term impact by those taking out the loans. PE borrowers should be held liable for the loans they extract.

[@JaredAuch]

Every time someone explanes private equity to me my response is "Oh so crime." sounds a lot like crime. They just call them fees instead of protection money.

[@samsonsoturian6013]

Liar

[@SissypheanCatboy]

@@samsonsoturian6013 LMAO YOU'RE UNDER SO MANY COMMENTS. Its like a corpo-simp scavenger hunt.

[@clarkeysam]

A company I previously worked for was bought by a US private equity firm. We thought it was strange, as they usually bought struggling retail companies and tried to turn them around (Pizza Hut, American Golf, etc) but we were not a struggling company or a retail company. We posted profits every year and we were in the oil industry. They bought us for $4m (which was low, due to our accounts not being audited, they were audited at the parent company level). In the first year we made $40m profit and then they shut us down and ran away with the money!! 100 people lost their jobs, some of which had worked for the company for 40 years!

[@michaelborst5476]

Not saying this is BS, but something isn’t adding up. Why would they just “shut down” such a profitable investment? If it’s as you say, and they made 10 times their investment back in only the first year, why wouldn’t they keep that cash cow going? Or at least sell it for a huge return on the initial $4MM? Makes no sense that they would just turn off the lights and walk away.

[@Quicksilvir]

Private equity did that to my grandmother's company. Ended up driving them to the brink by selling off their assets to another holding. It's still around today thanks to ruthlessly cutting expenses (aka employee jobs and benefits). Corporate histories today just gloss over that period🙄.

[@FordFourD-aka-Ford4D]

@@michaelborst5476​​⁠ To *write off* the *imaginary losses* and keep more money overall. It's the same reason that landlords of retail spaces would rather raise the rent so high that a store has to close. On paper they make more money writing off the loss every month of the new artificially inflated rent than if they continued to actually accept less rent. (There's a certain ratio of vacant to filled units that is more optimal than 100% tenancy, depending on your location and your cash flow.)

[@timedone8502]

​@@michaelborst5476it is BS as simple as that.

[@samsonsoturian6013]

Those numbers are some level of bullshit. No one is posting profits 10x market cap.

[@fleabag2mr.151]

Blackstone bought the company I worked for and stripped it clean and sold off parts. Wages and benefits were destroyed while CEO made hundreds of millions over 10 years. Greed at Blackstone is impressive at the very least!

[@pedalesmexicali]

Which company was this?

[@jk_22]

Because we have or know people who have worked at companies acquired by private equity firms

[@calebplumleeoutdoors]

Because we should dislike flippers. Buying something (or hoarding), rebranding it, and turning it for a profit isn't very honorable work. It only inflates costs (look at housing). Meanwhile, to ensure max profits, they fk over their employees and gut the companies down to bare minimum. What a lousy thing to do for profit... couple people get rich while leaving a trail of frustration and destruction and rarely is any actual value added

[@CreepahKillahRSA]

It seems to me like leveraged buyouts should not be legal in their current form. Saddling a company with debt used to buy it makes no sense.

[@IndexInvestingWithCole]

Why not?

[@CreepahKillahRSA]

@@IndexInvestingWithCole Because the risk associated with a loan should be held by those taking out the loan. Allowing the borrowers to exit the loan without consequences is a perverse incentive.

[@Ollig999]

I’m curious who is lending and at what rates for these leveraged buyouts. It seems like a really risky loan to say the least

[@RR-et6zp]

@@CreepahKillahRSA your comment applies to everything in life. Responsibility comes with authority, results come with risk etc. People always want to dance around and separate them

[@135k]

​@Ollig999 notice how Private Credit is one of the fastest grpwing asset classes in the past 5 years? *hint* they're related **

[@PhiloxenusTitanic]

I think you did a pretty balanced review here, but the damage that these strategies is hard to understand through quantitative analysis alone. They are literally making the lives of millions of people worse in order to enrich thousands, the suffering needs to be understood on a subjective level. They literally will kill your grandma and make your sandwich taste like sawdust while costing you more and helping to depress your wages.

[@blackcoder97]

Here is an example of how PE has f ed up my life personally. About an year ago one of the PE funds with name starting with C convinced my CTO to outsource most of the tech jobs promising lower costs and same output. Now and a year later we barely have any tech staff cuz they couldn’t fulfill the promise and I have to be up at 7 AM to start my day with an offshore sync. All while making less money than before cuz the company I work for Is doing terrible in part due to the entire product roadmap needing to be scrapped to bare bones. PE is just terrible from my perspective

[@999timepass]

Debenhams in UK was founded 240 years ago, totally destroyed by P/E.

[@getpaid.gohome4506]

As someone who also works as a professional in finance I think I could not have said it better myself. You were much more gentle than I would have been though 😂. The private equity landscape is riddled with straight up scams and I would urge people to proceed with caution.

[@aeroandspace]

One of my closest friends lost her job due to the private equity albatross. She had trained her coworkers in her skills, her job was verifying that new antennas could be safely added to cell towers, which meant that she was the most highly paid person at her skill level. Naturally, when the PE firm started squeezing the engineering firm for this-quarter cash, she was dropped. From what her friends still there told her afterwards, she may have actually been lucky. To get out when she did. At the very least, though, she learned the lesson to not uplift her coworkers, even if her job seems secure at the time.

[@karlstrauss2330]

Corporations used to view employees as investments for long term growth, innovation and success. Thanks to delusional and myopic MBA grads they view employees as pricey liabilities.

[@carpelunam]

damn the classic "training your replacement"

[@AnneDunning-s3c]

I firmly believe in raising skills of all around me. If I continue to learn myself, I will always have something new and unique to add. If management sees me as redundant, that management was only going to impede the future potential of what I can do. Separation from such management is a disguised gift. That said, separation is still painful. My heart goes to your friend for the pain of separation. My joy goes to her for the potential she has unlocked for new future paths.

[@stefthepef]

That's just such a depressing takeaway, though. I don't know where I'd be without the mentoring of more senior coworkers, and I find it really fulfilling when I can pass what I've learned on to new people. Then again, I got cut from my PE-owned company as one of the higher-paid writers on staff where I was doing just that. The cowards never explained why they cut who they did, but I feel like it probably had to do with me pushing for higher pay that would bring me in line with senior employees at other companies vs. anything I did to help coworkers do their jobs. Higher-paid employees already have a target on their backs the moment a PE firm steps in. Further proof that private equity firms can destroy everything, I guess - even our ability to help each other learn new skills at work. It's all just beyond depressing.

[@gwky]

@@AnneDunning-s3cnot everyone can afford to be let go, especially in this job market.

[@smacktalk964]

i think right now in generally.investing has an accountability curve to it where there’s a huge disconnect in between who owns what and who’s accountable for what. Private equity is near the top where they have major controls or abilities and the players are few and far between. Where as for mutual funds, everyone can be a player but the levels or accountability for the actions is near zero where mutual funds do not have as much leverage or capital influence because they are the market.

[@cyclopsboi]

taking on massive debt to buy a business and dropping the debt onto the business you just bought should be illegal. I took out a giant loan to buy your house, sell all your possessions, rent you back the house, and made you responsible for the loan . And if you default, oh well i already got my money out of it.

[@bificommander7472]

And, depending on the country perhaps, they also use the new company balance sheet to avoid paying tax. After all, the company is suddenly massively indebted and either that debt or the down-payment on that debt can often be a tax deduction.

[@jordank249]

Better discussion on PE than virtually all of financial KZbin. (Which is essentially "Blackrock controls everything! WAKE UP SHEEPLE!(TM) remember to buy my book."

[@jasminenoack]

I worked at a cap table management company for 3 years and they constantly manipulated their value(for sales & compensation packages not the legal audit value). They would report the share value for employee packages at the last price their shares sold for in the market place they ran. But then when they did a sale they would set a floor price that was higher than the last price it sold for. This would cause many fewer shares to sell than would at a lower valuation but let the company tell the employees the shares went up in value. Then Covid hit and they just didn’t do any sales for years (they were supposed to happen once a quarter). Likely because they would have to lower the price and then reprice and issue additional stock to all the employees.

[@davidbentley4731]

Terrific videos. I work right in the middle of all this and this is a very thorough analysis.

[@arjunkhanna7383]

Thank you for giving insight into PE! This topic seems to attract a lot of confusion about what PE is. Also, I know I am late, but congratulations on speaking with the Canadian PM! An amazing milestone!

[@AlixBomolo]

Bring Stephanie Janis Stiefel on the show. She changed my life Financially I managed to grow a nest egg of around 120k to over a Million. I'm especially grateful to Stephanie Janis Stiefel, for her expertise and exposure to different areas of the market.

[@AnthonyAlves-dm5sd]

I know this lady you just mentioned. Stephanie Janis Stiefel is a portfolio manager and investment advisor. She gained recognition as a former employee at Goldman Sachs; a renowned investor she is. Stephanie Janis Stiefel has demonstrated expertise in investment strategies and has been involved in managing portfolios and providing guidance to clients.

[@HansJoachimMüller78]

How can i reach her, if you don't mind me asking?

[@AlixBomolo]

Well her name is 'STEPHANIE JANIS STIEFEL'. Just research the name. You'd find necessary details to work with a correspondence to set up an appointment.

[@Helgarichter567]

Been debt free for two years thanks to Stephanie Janis Stiefel. So sad to see my friends in their 40s with car loans, mortgages and credit card debt.

[@IliasRetsas]

The thing is people often doubt the prospects of financial advisors like Stephanie Janis Stiefel in business/markets today. Well it gives me more time to get ahead while they stew in their own pity and doubts as they childishly complain about those spreading the word

[@Elemblue2]

I haven't watched the video yet. I would just like to respond to the title and confirm that I hate private equity. The ability to detach responsibility from debt but still take in cash flow isnt a financial vehicle. Its called robbery.

[@Yura135]

"detach responsibility" that's basically what is wrong with the whole system. everything that happens in "the economy", from layoffs, to bankruptcies, to supply chain issues and rising prices is a result of decisions made by someone in a room somewhere. but the system has been designed to insulate the decision makers while pushing the consequences onto everyone else. it need to instead diligently figure out who exactly messed up and doll out consequences: remove bad decision makers from decision making etc. every social/economic problem has to come with a set of people who are responsible for it, and the bigger the problem, the higher up these people have to be.

[@sor3999]

Exactly, they don't create wealth or value, they "extract it" i.e. exactly what a thief does.

[@damiant.8340]

Thanks Bagle. Even as a finance professional, I learned something here. Keep up the good work

[@timogul]

I think leveraged buyouts should be illegal. If you want to buy a company? Fine, you can do that, but the debt has to be on _you_ and cannot be transferred to the company you're buying. The company you're buying would _make_ money, not lose it.

[@sirrathersplendid4825]

Yes, but can’t they just do a merger with a shell company or something similar, then saddle the shell company with the debt? There are always loopholes. And it takes years to close such loopholes thanks to the influence that can be bought with the profits.

[@timogul]

@@sirrathersplendid4825 Currently? Yes. But I think they should be able to make sure shell transactions illegal as well. I was just watching a video about the Alex Jones trial, and the decision in that case had a lot of "anti-loophole" wording to it, to try and prevent shuffling assets away from where it could be accessed by the plaintiffs. I think that if congress really wanted to seriously stop this problem, they could involve wording that would prevent any chain of liability that could be broken and escaped. As an aside, I also think that this is why recent SCOTUS decisions weakening the power of federal regulators to decide things on their own is so dangerous. These systems are way too agile for congress to keep up with them using legislation alone, which is why they need to legislate executive branch actors the power to move on their own to solve these loopholes in realtime.

[@Kornheiser10]

Investor Beware is the caveat for PI or really any investment. Many of these public companies need private investment and turnaround. A lot of misunderstandings about PI, but these types of episodes are helpful as a primer to the issues.

[@Lhorez]

Private equity’s main goal is to increase return to investors by increasing revenue and reducing costs. And they will take any legal means to do so. They’re not immoral. They’re amoral. They really can’t consider the consequences of their actions unless it directly affects their bottom line. They’re at least two steps abstracted from seeing what they do. It’s a feature of laissez faire capitalism unfortunately. People don’t know how to put on effective guard rails on it yet so these things will continue.

[@jacobmiskomusic]

If they COULD consider the consequences of their actions, they wouldn’t be in their line of work. Doing the work is amoral by design. Choosing the profession is immoral.

[@richardwagner6359]

You spoil us with great contents on here! You give the very best and spot on advice and ask thought provoking and unbiased questions that help listeners like myself become better. More importantly, thank you for recommending Stephanie Janis Stiefel my investment portfolio with her has been quite sustaining.

[@keylanph]

The issue with PE firms and single family homes is that they are purposefully driving up the prices through unfair business practices. Both PE firms and high net worth investors are buy multiple homes in a neighborhood at market rate or maybe even under rate because they pay cash and then they’ll buy a couple homes at 15-20% premiums. That causes the comps in the neighborhood to skyrocket. It is market manipulation and it’s monopolistic on a local scale. The fact that they can then 1031 exchange those properties and pay no tax on the gain is why homes have doubled in price in half a decade. I work in real estate and I see this on a literal daily basis. Maybe 30% of the homes I work with are actual buyers who plan to make it their primary home. Paying for a home in cash makes a 500k home cost 500k. But a normal person using a mortgage would end up paying north of a million over 30 years for the same home. We need to remove the 1031 exchange for corporations, LLCs or any other business and we need to make taxes on real estate sales that aren’t a primary or secondary residence exponentially higher.

[@Donkeyearsa]

You don't have the slightest clue what its like being a landlord. I was a landlord and I was so very happy to of sold off my couple of houses to the exact people you so despise. I got fed up with all the out right garbage that are tenets. They don't pay the rent then then you may have to take up to six months to evict them just for them to have totally trashed the place doing tens of thousands of dollars of damage. I say let the mega corporations buy all of the houses and have them start doing to the outright garbage who are tenets what they where doing to us small time landlords like my self. Tenets are getting exactly what they where begging for to chase off all of the small guy landlords so only mega corporations are the only ones who can make a profit being landlords as they can afford to employ the large banks of lawyers to deal with all of you scumbag tenets. Like the saying goes "be careful what you ask for because you might actually get it" Well tenets have been out right begging for this to happen and congratulations you are now getting exactly what you have been begging for for decades!

[@ZZWWYZ]

@@Donkeyearsa jeez thanks for your opinion ethical landlord

[@SissypheanCatboy]

@@Donkeyearsa Damn that sucks maybe you should've gotten a real job.

[@AkukAkuku]

​@@DonkeyearsaYou're like a leech complaining that the leg it's sucking blood from is dirty. 🤮

[@highfivegh0sth5g25]

​@SissypheanCatboy this dumbfuck can't spell tenant. This "landlord" can shove it up his ass, I hope he gets fucked more. Slimeball.

[@TonyRealTalk07]

Richard you are the aspiration for when I get to be a FA too. Top tier your ethical standards and your ability to communicate.

[@greenredblue]

I'd be very curious to know why leveraged buyouts shouldn't be illegal.

[@accountsequity5587]

😂😂😂😂😂😂😂🫵

[@jacobmiskomusic]

@@accountsequity5587I bet you actually think you’re about to be rich.

[@jayzee4097]

We need a government that isn't afraid regulating industry will tank the economy.

[@notting2640]

Your mistake is thinking that they are afraid. They aren’t afraid, they are in cahoots.

[@strings1586]

America is not a communist country.

[@Echelon030]

The regulators are almost totally captured by the industries they're supposed to regulate. They routinely impose regulations on industry, but it's onerous bullshit meant to choke out small businesses, because only large companies can absorb the cost of compliance.

[@timedone8502]

So you admitted that PEs actually help growing the economy and regulating them would tank the economy?

[@samsonsoturian6013]

This idiot thinks rich people can do that

[@dmcarstensen]

Sounds like the few success stories of PE companies saving some failing companies doesn't nearly overcome the amount of damage the other do.

[@morkzorckerborg5000]

generally speaking, brand groups race to the bottom cost sacrificing quality and service while charging a premium for a brand name. normally this would be fine as their short term financial gains would result in long term losses in marketshare to competitors who maintain some level of quality; however us law does not prevent monopolies or duopolies as one would think, the companies are usually competing against their own brands. another reason we are all doomed is bankruptcy pays out debt largest to smallest in full, not an average; so holding companies will buy a brand to bankrupt, pay themselves leaving other investors high and dry.

[@niravsavla1470]

I think when Mike Ross(from suits) joined a private equity firm, I saw how soul-less they can be, lack of regulation, and PE firms able to lobby and use lawyers to get their way around is the major problem

[@DesertObserver491]

It was good peek indeed but it'd be great to know how much of it is accurate. Wall Street was a simpler display of what these guys do. Just looking for cash pots, usually at the expense of people.

[@samsonsoturian6013]

Not sure how good Hollywood is at depicting these guys, but in the interviews I saw these guys appear to sexualize wealth. They're young men who want to get rich quick, have fancy degrees, but have no idea what they're doing

[@niravsavla1470]

well hollywood might have tendencies to over-exaggerate stuff and go with the populist opinion, but in this particular case about PE firms looking to make a quick buck, while not caring about absolutely anything, i thought that scene contained some level of truth

[@accountsequity5587]

Lmaooooo

[@h.ar.2937]

I’ve worked on fund admin side of things with private equity firms and they are a pain in the butt to deal with😂

[@JuanPerez-cs1gx]

Short and simple (and comprehensive enough). Thank you.

[@nb6525]

Very informative. Thank you for your time and efforts in putting this together. I’ll probably need to watch it couple more times to understand better.

[@tommymaddox6785]

They wouldnt even know what private equity is if it didnt (negatively) impact numerous indispensible areas of their lives. The homes they rent or try to buy, the restaurants they eat at, the stores they frequent, the hotels they stay at. It touches all areas of the general public's lives and has for most of them, imparted a significantly negative experience.

[@MattbyNature]

I'm really interested in hearing more about the whole VC world

[@luisfilipe2023]

PE discussions remind me of the famous “capitalism is about profit and loss when you bail out the losers there’s no end to the cost”. When people can take all the reward and outsource all of the risk that’s a recipe for disaster

[@idrathernot_2]

When you get big enough you completely escape any natural market force checks and balances. Monopolies shouldnt be just based on market share but aimed towards fiscal capture too.

[@jabberwockytdi8901]

It's one thing to genuinely find spare fat in a company and take care of that , But mostly it's just "optimizing" the bottom line now at the expense the future growth and innovation of the company.

[@smody121]

I covered the alternative and traditional asset management sectors for 6 years through 2023 as an equity research analyst, this is largely accurate with some points not as much. Best thing the industry can do in my opinion is lobby for a fair regulatory structure that the public would accept. It would be a bit painful for them at first (which optically would benefit them), but the large-cap publicly traded PE firms would benefit the most given their scale.

[@cmdr1911]

Private equity is short term gains. They look for maximum return not maximum efficiency. A company to be built on a solid sustainable model will always be at private equity in the long run.

[@SissypheanCatboy]

I think the simple fact of the matter is that anyone who, for even a second, prioritizes profit over human wellbeing, should not be allowed in society at all, let alone be in control of things like housing, healthcare, and education.

[@mike9512]

For anyone that says socialism is bad or governments can't be trusted, I would love an explanation for why they believe private ownership is suddenly better? Do you honestly believe a person working with Blackstone is more likely to be a virtuous, ethical, or good person than a government worker? Because I would argue the core of the problem with private equity is people. Private ownership is bad sometimes because people are.

[@stonekidman2306]

You gotta ignore those GameStop people, they’re basically stock market Qanon

[@IndexInvestingWithCole]

There’s no difference

[@sor3999]

Dan Olson, who did Line Goes Up, also did a video on the whole GameStop thing post-crash and man, it is a literal secular cult.

[@maciejgrenda216]

​@@sor3999that was really shocking

[@TheFounderMysteries]

The use of leverage in private equity transactions can amplify returns, but it also increases the risk of financial distress. It's crucial for investors to understand the potential drawbacks and carefully evaluate the risks associated with private equity investments.

[@aenorist2431]

Because they are leeches that add no value (beside the arguable value of "showing how flawed the system really is").

[@samsonsoturian6013]

It's called a ponzi scheme

[@lastspring]

Saw a statement about PE firms. In the beginning, the GP has experience and the LPs have capital. After the fund closes, the GP has the capital and the LPs only have the experience. 😑

[@agsbxnskqbwjakq]

I dont really care on paper, its the loopholes that allow harm is the problem. This should be regulated better so people dont die so random guy somewhere whose already wealthy can make a extra buck.

[@samsonsoturian6013]

These guys aren't rich. The fund managers are wallstreetbets guys who leverage to the tits by investing other people's money. The investors are sometimes rich, but a lot of these firms will take investment online which is of questionable legality. It's called a ponzi scheme

[@honkhonk8009]

If you can somehow make a net profit from driving a company to the ground, then that means your stealing money somewhere. Its essentially an economic virus. The problem with our information ecosystem, is that if it actually did its job, they wouldv been outed as snake oil 10 years ago. Thankfully because of the internet, its become increasingly obvious these companies have glaring faults, and have basically defrauded all their customers. The initial premise of these companies is valid and interesting. But the fraud they been pulling makes it bad.

[@qjsharing2408]

Why would you lend to a leveraged buyout, if the company itself is likely to fail

[@samsonsoturian6013]

If there's collateral and the price is right.......

[@toxicitysocks]

I’m not a fan of private equity because I worked at a company that was publicly traded and taken private in a leveraged buyout. Myself and a lot of other folks were laid off shortly after. We were given a few months notice and were told our job was to train our near shore and offshore replacements. If we chose to leave, it would be considered voluntary and we would not receive severance.

[@djlethal]

i really appreciate your videos. high integrity and very informative

[@purpleemperor8554]

What those funds are doing is so similar to what old oligarchs in Eastern block and Yugoslavia were doing after fall of communism. They bought state factories, sold all equipment of value, went into massive debt and than filled bancrupy and with some legal loopholes kept all money.

[@santiagocorrea5679]

Richard, why do banks or other financial institutions agree to loans for LBOs? It seems like an incredibly risky side to take on a transaction where the owner's incentives don't align with the survival of the business.

[@samsonsoturian6013]

It doesn't matter. If there's collateral and the price is right, they will lend. Your credit card won't stop you from borrowing to buy stupid stuff

[@_Ekaros]

It is all fine as long as they can find buyer for that loan. Remember the whole sub-prime mortgage, sometime the banks or loan initiators don't keep the loans around, but instead sell them forward. Quality does not matter if it only takes a few months to flip whole thing.

[@sirrathersplendid4825]

@@_Ekaros- It sounds like a bubble is forming - just like the bubble that burst in 2008.

[@babyimHOME]

Dont get mad at lax investor protections for PRIVATE markets. Thats why they're not public investments. Also, keep in mind lenders that give them loans to buy a company out are not mom and pop investors. They are aware of the risks. If all goes well everyone profits.

[@Obsidi0n]

Richard Coffin is the coolest name ever

[@magalengo]

Best description I heard of L.B.O. firms, if the acquired company fails the lbo firm does great, if the company succeeds they do even better.

[@DataRae-AIEngineer]

Fantastic video! Probably the best video you've ever made. Thanks!

[@alejandrooceguera4656]

The faces Mr.bagel makes when talking about Private Equities tells so much

[@lesdickson9765]

I'm not sticking up for PE in anyway [as there are some investors that don't always know what they're doing when they acquire businesses] but I think part of the hate is misdirected imo, some of the people who talk about PE have a fundamental misunderstanding of what it is. People talk about this like it's a conspiracy theory, and that's what I don't like.

[@gargab2714]

Almost confused Blackstone with BlackRock. Would love to see a video on the differences and similarities between hedge funds, private equity, and asset management firms.

[@valiant971]

The reason we hate private equity firms is because they have no soul. Companies that actually make something or provide a valuable service must have some passion about what they do. Nobody likes people whose only passion is making money. It's just rich people getting richer so what is there to admire or respect?

[@purplecat4977]

I wish he'd covered the question of what, if anything, happens to non-billionaires if private equity is a bubble, and that bubble pops? From an uneducated perspective, it seems like the only people who'd take a hit are people who can afford to take a hit (and probably deserve some karmic payback), but I also know these things tend to have ripple effects.

[@RandomVenezuelan]

>SEC >Protecting smaller investors Yeah, I'm not sure if those currently check out

[@samsonsoturian6013]

Shut up. Get drafted

[@kajpaget3180]

Huge problem I think, I live in Canada, we saw a private equity firm blow out the pensions of people who worked for Sears.

[@theculturedev]

Hey major props on making this video, you are a massive asset to this community! Something to add here. I work in private SBE biz dev-as a consultant not as a fund. No one is forcing these businesses to sell to a particular buyer (yes there’s the distressed asset space but I’ll leave that be). Certain sellers put their business up for auction because their top priority is getting the highest price possible. And you know what, PE firms can meet that because of their 3 to 5 year strategy. When a seller’s top priority is how the business will be handled post-sale they probably won’t sell to a firm employing high failure rate tactics.

[@danicoleb5394]

I feel like this is common with SaaS. Every techbro and their mother and father are reinventing the wheel in hopes their shit sells for millions after a few years.

[@nexii_vr]

Recently, Inspired Education Group bought private education institutions from the King's Group in 2019. This was thanks to the Warburg Pincus PE firm. Ever since, students have noticed a decline in the quality of the classrooms, teachers, food and etc.

[@HasPotato]

I’m from a country that regained independence from USSR in 1991. All state owned businesses that survived the collapse of the empire were privatised. A lot of those new owners eventually ran those businesses in to the ground, almost every year there are news about another big company either filling for bankruptcy/protection or being declared bankrupt. Except for those that were bought out by PE’s. Those that were bought out by PE’s over the past decade have survived and are thriving. People kept their jobs. So basically in my country it’s either a big business going bankrupt or a foreign PE fund making a buyout, because local businessmen can’t afford or won’t risk buying out these businesses. I am not saying PE’s are without their faults, but in my country we truly benefited from them.

[@zmack1830]

A legend demystifies private equity!!

[@Rock_Appreciator]

Most of these facts and points just cement my hate for the PE system lol. All of these investments and profits seem to almost always come at the cost of the local economy or workers.

[@mscotthowell1]

There are many public pension funds invested in these companies. I don't care how they carry out their private business affairs, as long as U.S. taxpayers are not forced to bail them out.

[@Lonovavir]

Because the Doctor's Office went from having 4 Doctor's who could prescribe opiods to 2 and people now to have to schedule appointments 6 weeks in advance when it used to be 2. Any other silly questions?

[@daarom3472]

literally paying 18K a year for child care in the Netherlands (2 days a week) because the government liberalized it and its now owned by private equity.

[@sirrathersplendid4825]

@@daarom3472- That’s truly disgraceful.

[@FameyFamous]

You didn’t mention labor arbitrage. I work for a small software company which was bought by a conglomerate. The conglomerate was owned by PE for almost a decade, and then we were sold to a bigger public conglomerate. The first conglomerate laid off people in the US, UK, and Canada to move work to India. In the PE era, Indians were too expensive. Work started moving to Tunisia and Indonesia. They continue to squeeze money from customers while spending less on maintaining and improving the products.

[@sirrathersplendid4825]

Yep. Wife used to work for a major US firm that sold an entire division to an Indian firm. One year to the day after the deal she got made redundant. During that year she was babysitting Indian workers, who were still incompetent when she left.

[@bubba99009]

It's a win-win game for them. Even if the business fails due to their mismanagement (which they often do)... they still win because they make sure they extract their investment through loading them up with debt and making them use their other portfolio companies as vendors to buy overpriced services stripping assets etc.

[@brianronan1905]

The influence of the Fed keeping interest rates artificially low for the last 10-15 years is a huge factor in the rise of this industry. Extremely easy borrowing is the only thing allowing these companies to leverage small principle and buy huge mature companies in the first place. They will never allow the free market to decide US bond rates though, since boomers retirement in stocks depends on low interest rates pushing people into more risky asset classes. The result though is that even more risky asset classes like private equity also benefit

[@ronjohnson2760]

Because Private Equity is awful. The proof as they say is in the pudding. Many of the biggest problems that plague the country right now are a result of private equity. They are irredeemable, extremely dishonest, and are immensely destructive in many, many ways. Products get worse because of them buying up companies. Huge numbers of jobs are cut, costs to the end consumer skyrocket, and in general they makes the lives of everyone effected by them much, much worse. What private equity is doing to society is so harmful in fact that the case against them practically makes itself.

[@michaelreavey4527]

I would love to see a study of the management teams installed by PE firms after a takeover. I think it would be very telling to see the profile of age, experience, schools, birthplace, personal connections, etc.

[@Gummiees]

Very informative as always!

[@aygwm]

I blame business owners for selling out to private equity.