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. mhh__ · 1789946857 · focus · HN ↗

      PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.

      I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.

      In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.

      1. cool_dude85 · 1789947081 · focus · HN ↗

         What does it mean in this context to be more intelligent and shrewd than the existing owners? Delivering better profit margins?

         1. csa · 1789953141 · focus · HN ↗

            > What does it mean in this context to be more intelligent and shrewd than the existing owners?

            Streamlining everything. Sometimes this is done in a bad faith way, but it’s often not difficult to do it in a good faith way.

            Some simple examples:

            - right-sizing staff (can be reducing, increasing, or changing roles)

            - improving marketing (e.g., simple things like customer reactivation, packaging the product/service better, or just plain, ol’ getting the word out better via stuff like before/after pics or success stories)

            - improving operations (e.g., better organization, better processes, better communication, better training, better logistics, etc.)

            > Delivering better profit margins?

            Improved profit margins are a byproduct of the things listed above.

            1. tavavex · 1789961651 · focus · HN ↗

               You're putting the cart in front of the horse. Their incentive and their job isn't about 'streamlining' anything, let alone in a good-faith way, and that just so happens to deliver some extra cash on the side in a pleasant surprise. Their sole purpose is the profit, and they will try absolutely anything to get it. Sometimes it may accidentally produce good outcomes, but in general there's no rule or incentive to ensure that happens. They can do anything, and if there's anything to go off of, every entity I see desperately chase profit over all turns utterly evil. Being evil just deepens your toolbox for getting the only thing that matters in the world - money - so of course they tend to win out over anyone who still actually cares about the underlying business or customers.
            2. BrenBarn · 1789965008 · focus · HN ↗

               In theory this is true, but in practice I am skeptical that it's generally possible to do this with generic "business" intelligence that is not accompanied by specific understanding of and genuine care for the actual substance of what the business does. That is, no matter how good you are at "business", you're not going to have a good hamburger stand unless you care about making good hamburgers. It's true that the importance of this varies from one business to another, but I don't see any particular tendency for PE to gravitate towards industries where it matters less. (Medicine is an example of an area where it would matter most.)

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