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. afavour · 1789950647 · focus · HN ↗

      Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.

      One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

      1. thaumasiotes · 1789951854 · focus · HN ↗

         > One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.

         What alternative are you imagining?

         1. dghlsakjg · 1789952338 · focus · HN ↗

            That the buying company keeps the debt on their books instead of offloading it onto the company that they bought.

            1. alex43578 · 1789956974 · focus · HN ↗

               So form a shell buying company A and secure the debt of company A with the assets of the newly purchased company B? Congrats, you added about 5 minutes of paperwork.

               1. dghlsakjg · 1789958880 · focus · HN ↗

                  How would that be an example of what I described?

                  If you are putting the debt on a shell company’s books, you aren’t putting debt on the buying companies books.

                  1. alex43578 · 1789966249 · focus · HN ↗

                     The buying company is the shell company.

                     Are you proposing that only an established company can buy another business with profits from their operations or something?

                     If I start a company with a loan and want to buy 3 HVAC companies in my area, is that allowed under your rule?

                     1. dghlsakjg · 1789998262 · focus · HN ↗

                        I’m arguing against the practice of leveraged buyouts. You aren’t describing all of the steps of a leveraged buyout. You are just describing a buyout. Buyouts are fine. Leveraged buyouts are what I think is not. I cannot be more clear or keep explaining until you go learn the difference since you aren’t understanding what I’m saying.

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