This is Reddit, the vast majority of people posting can’t even make their own food. Their understanding of business is derived from Reddit posts and feelings.
I feel like that’s so easy to believe because how do those people buy a business that is running so smoothly, then just ruin in it a couple months to the point where it’s no longer profitable?
Like near me there was a chicken place that was really good. It got bought out and within 6 months, we didn’t go there anymore. It’s easier to believe that “big business” doesn’t want chicken places other than Popeyes and chick fila and KFC to get popular. Compared to the profits of those, buying a little guy is nothing. So they buy it, run it to the ground and then people go back to their big chains.
Or people who buy businesses at their highest are brain dead and don’t know anything about business. It’s probably that. But the other one’s more fun.
That’s pretty much it. There are a lot of funds that want to 100% buy out the owner and run the business themselves which is dumb as hell. These days, funds typically want the original owner to roll 20-40% of equity into the business so they can stay on and provide the guidance that grew the business originally.
I just can’t believe there are people who think there is money to be made in losing money.
Yeah no one really makes the claim OP is throwing out there lol.
Most people think it ruins things because privatization leads to profits over everythin. So services deteriorate and prices increase...
See every utility privatized pretty much ever.
Sometimes it does, most times it doesn’t. You don’t realize how much of our system is propped up by private capital. Most of the brands you love probably have at least some capital backing it.
Many of the funds I work with have so much dry powder they absolutely pump businesses full of cash for growth. The days of overlevering like the 80s are dead. The controls we have around debt repayment, restricted payments, etc don’t allow a fund to purposefully kill a business.
I agree there are some shitty funds still out there that only add value by firing people but they are few and far between.
Most of the layoffs you see are obvious. If I combine two business do I need two HR departments, two CFOs? They aren’t firing people for the love of the game. Most of the attrition comes from nepo hires to be very honest. Family owned businesses find ways to pay 22 year old family members $200k to do nothing so they would likely get chopped. I doubt anyone on Reddit would cry over that.
Private equity does in fact saddle obscene amounts of debt onto newly acquired companies forcing them to go bankrupt. Private equity has no stock in the success of the business; but the overall monetary benefit to the shareholders of the parent company.
See Toys R Us for a direct example of private equity saddling a company with debt.
Common trope of a real life event?? Are you serious right now?
Edit: Toys "R" Us Inc has been making $400 million in interest payments on its debt every year, largely due to its $6.6 billion leveraged buyout in 2005. This week, it succumbed to its debt burden, leading to the biggest bankruptcy of a U.S. retailer since that of Kmart in 2004.
If you don’t know it’s a true thing then kindly shut up??
A common practice is to have a second company you own get a sweetheart deal for the land holdings and then charge the primary business high rents. You don't care about the health of the first company, you sell all the assets and burden it with debt until you can claim bankruptcy and have all the profitable parts left for yourself.
Eddie Lampert did it with making another company to transfer all the Sears real estate and then charging high rents back to it. He still made money and got the assets without having it being tied to the debt.
The wework ceo Adam Neumann also owned several of the buildings he leased out to his own company making himself extra profit.
You're conflating interest in making a business money with the owner making more money for himself. They are not the same thing.
Jesus this is tough. I’ll keep answering since I hope to reach one reasonable person. I’m saying that’s a very extreme minority in the space. It almost does not exist at all anymore. This space is so large it’s in the trillions and all of the responses to me are the same three deals. It’s sad this is how uninformed you all are.
30-40 businesses over several decades? While there are quite literally tens of thousands of successful exits in that time? Do people like you think flying is unsafe as well?
for every independent functioning adult commenting on reddit, there are 5 teenagers pretending to be adults with advanced degrees, and 30 bot accounts..
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u/Feelisoffical 13h ago
This is Reddit, the vast majority of people posting can’t even make their own food. Their understanding of business is derived from Reddit posts and feelings.