Thread

1. NegativeK · 1789944184 · focus · HN ↗

   Can someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.

   I already hear the downsides frequently from someone whose work is directly affected.

   1. Panzer04 · 1789947752 · focus · HN ↗

      Easy to imagine practices where the primary owner is going to retire and looking for an out.

      Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.

      Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.

      I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.

      1. sandeepkd · 1789951940 · focus · HN ↗

         A structure to run business efficiently using practiced methods is always a good thing. However from what little I have understood, the goal of Private Equity is to maximize the dollar value on their investment. Somehow they have settled with the playbook that running a business even profitably isn't the best idea. Instead its much more profitable to take over the struggling business at good price, squeeze everything possible from the assets (thats where PE seem to be investing their expertise unfortunately) over duration of time. Update the books in a manner that it saves money on taxes and carry forwards the loss, making money in the process.

         1. phkahler · 1789954912 · focus · HN ↗

            My favorite is to sell the building(s) to their private real estate company and lease back. Then IPO the company and keep the rent coming on a 25 year lease.

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