It's very popular on here to attack PE--which I'm not going to especially defend. But it's also the case that PE also tends to come in when a company is already troubled in some manner. One answer I guess, is just go out of business on your own which many companies do.
> One answer I guess, is just go out of business on your own which many companies do
Yes. One of the genuine services (in an economics sense) PE provides is to do the dirty reputation-ruining cash-grab tricks that original founder/owners don't have the stomach for.
> But it's also the case that PE also tends to come in when a company is already troubled in some manner.
The problem is that PE also has a nasty habit of coming into a business that is marginally profitable but not spectacularly so, saddling it with giant amount of debt to vacuum up the cash flow, and killing the business.
There is nothing wrong with a sustainably profitable business. Investors, however, want returns from the lottery ticket that they fund.
Yup. They'll borrow huge sums on the credit and good basis of the company, and then "charge it" all to themselves as "management fees", vacuum it dry, and dump the company.
If you are a large business, you likely have multiple lines of credit already establish, potentially into the hundreds of millions or more range. Those are backed by the organizations credit and assets, and aren't likely to be yanked just because the organization has a new owner.
Private Equity has been buying up vets in the UK and jacking up prices massively, causing all sorts of knock-on negative consequences. Vets in the UK were not failing before.
Unfortunately our competition authorities are toothless. Their proposed remedy is that vets will have to publish prices on their websites from now on. Woohoo.
