I think Kmart and Sears are in this list, too, along with Bed, Bath, and Beyond and even some hospitals. There's nothing private equity forms won't do to make a buck at the expense of a once thriving company or even people's healthcare.
Also Red Lobster.
Often private equity is invested in their competitors. One of the problems of rich people having ungodly sums is they like to "invest" in competitors and sell them for parts so they can raise prices.
"Millennials are ruining the [_] industry! How dare they-"
Oh right, it was capitalist greed all along. Excuse me while I shed a tear for your precious local Applebee's as you keep voting for the people who enable these acquisition monopolies, lmao
TIL: stock buybacks were considered insider trading before Reagan made them legal
Is there anything that Reagan hasn't fucked?
He died before Epstein Island was a thing, presumably.
The entire investor community is filled with shitbags.
I generally feel like leveraged buyouts for numbers into the billions are just inside jobs for those selling.
Stay with me for a sec.
So the seller makes a closed door deal with the "buyer" to funnel money back to them personally after the sale is done. So in this case, say, they commit 3.6bn to the "buyers" and pocket 3bn for themselves. Almost the entire purchase is leveraged, with the expectation that it will become unsustainable and go bankrupt shortly after the purchase.
The buyers don't really give a shit, they'll write it off, collect whatever they can from insurance, etc. They didn't really want to company anyways, so they let it fold.
The money they took home from the deal with the seller is entirely theirs, the company bears the weight of the debt and the consequences of defaulting on the debt, so the execs that made the move are basically free and clear.
Everyone wins, except, you know, the poors who work at the purchased company, the banks, who don't give a shit, and insurance people, which... Nobody gives a fuck about them...
At the end of the day, the execs of the purchasing company get rich, the sellers get rich, and that's the fucking point.
If the sellers instead just closed up shop, they would get maybe a fraction of the money they would from selling it, mainly in selling off assets... It would be a pittance compared to this scheme.
All they need to do is find someone they can buy out the morals of, to complete the deal. This is surprisingly easy in the corpo world.
This kind of buyout should be made illegal.
below is a reply to a comment I made below, pasting here as I find it crazy how this went down and is allowed.
For those curious I did a little digging. I’m on mobile so won’t be going in and out to add company names etc.
Basically, the private equity firms got together and said let’s buy Toy R Us for $6.6B but we only want to use say 300M of our own money and get a loan for the rest.
Then they bought Toys R Us but made them sell all assets to equity firms which then leased them back to Toys R Us so they could pay back the loans. This means Toys R Us are paying hundreds of million a year to cover loans and can’t put that money into making a better business.
The private equity firms also made Toys R Us issue dividends in the hundreds of millions so private equity can make money.
In the end private equity walked away with over $1B in profit whilst Toys R Us declared bankruptcy with $5B still left to pay.
What a fucking insane system. Like how many people lost their jobs so these ghouls could make some extra cash off its downfall.
And people think I’m crazy for making my life harder by not shopping at places like Amazon or being a pirate and not giving money to Netflix etc.
I feel I am living in crazy land. Like the Uk has all our pensions and shit tied to the damn stock market, ensuring we can never really leave this system.
Sweet jesus. How is this not some kind of hyper mega ultra fraud?
I have no idea and it seems insane to me.
I was looking for the same thing in my country, UK, thinking we can’t be as bad as America, but nope many of the companies that have died during my life have been due to LBOs. The world is insane and I don’t see how we can change it.
In the UK I learnt that Asda one of our largest supermarkets is in a similar place due to two brothers doing an LBO to buy it. Now it’s saddled with debt meaning it won’t be able to innovate like Tesco or Sainsbury’s and thus will likely just bleed customers. Makes me wonder why these two brothers with more money than God would want to carry on, like I literally can’t comprehend wanting more than you need. Perhaps I have different motivations as I see time as my most precious asset and will earn less money than I could just for the easier life of being able to chill more and do the things I like.
Why did they have to pay off the loans that were used to buy them? That’s something the buyer should be responsible for.
Probably because the C suite assholes who negotiated the buyout agreed to place the burden of the loan on their own company and shaft their employees. It's basic capitalism, really.
Basic? It seems this kind of wizardry only happens to companies who are in their own kind of abomonative category. I've never seen this happen to small to large businesses. They are also capitalism, that doesn't make sense
The exact workings im not familiar with but it's called "leveraged buyout" where the net worth of the firm which is bought is the collateral.
So .. you buy firm A with money you lended. When the sale gors through all belongings of firm A are yours! So you sell them off, you know what? You want to make a profit so you sell EVERYTHING.
Now firm A is but a husk of it's former self. So now is the time to put it in some holding company or something. Now the husk of firm A is indebted to you.
Oh noes! It goes bankrupt! With your investment firm as the biggest lender to it!
should
Yep.
What will really shift your thinking is finding out that they have done this to almost all the hospitals in the United States, which is part of the reason healthcare costs have skyrocketed.
Hospitals need more to pay their leases, health insurers need to pay more to feed the hospitals machine, premiums go way up/more services restricted/more cost share (copay etc)
If you think it’s shitty that consumers can’t own anything anymore, they stole your wellbeing services while you were bitching about how little is still on Netflix these days
This is enough reasoning to say that capitalism is the single greatest enemy of mankind. The search for endless profit will kill everyone.
Careful now, they're about to classify criticism of capitalism terrorism.
This is one of those situations where it once again shows that:
Selling property to rent it back should also be super illegal. Is there ever a time this makes sense. If you want to sell land to profit, close the fucking place, there’s no way it’ll suddenly be more profitable while renting.
This is like me taking out a loan to buy a car and then expecting the car to make the payment.
And since all the debt is on the company and not the people/organization who bought the company, they don’t suffer any of the repercussions of defaulting on the loans. Why this isn’t illegal is beyond me.
This is like me taking out a loan to buy a car and then expecting the car to make the payment.
It's even worse than that. Imagine you bought a car from a dealership and were making monthly payments on it. I take a loan to buy your debt from the car dealership, sell your car to pay my loan off, and then expect you to continue making your monthly car payments to me. You file bankruptcy to get out from under the debt, but by then I've pocketed months or years of your car payments and come out with a tidy profit.
And then I do it to hundreds of other people, over and over again, as long as other rich people are willing to loan me money. Which of course they are, because running companies into bankruptcy is incredibly profitable.
Something something road to serfdom.
The fact that they can buy a company by going into debt and immediately transfer the debt to the company is fucking insane. Maybe we need to figure out how we as individuals can do that and just fucking crash the lending industry entirely? Can I make my house buy itself for me and then "whoopsie, the house can't pay the bills, guess it will file for bankruptcy and hand me a big ol' stack of cash".
That's how landlords work.
Take loan, buy houses, house has to pay back loan via rent, rent is paid for by renter.
Landlord gets house for free, everything paid by renter.
I watch the YouTube channel "Company Man" that does a bunch of interesting business stories. 95% of the "Decline of (brand)" or "Rise and Fall of (brand)" videos are because of leveraged buyouts.
A group of idiots borrow billions of dollars, throw the unrecoverable debt onto the books, slowly killing the company, and then it's dead.
Who loans this money? How does that work? I understand the rest of it about being a bastard who collects millions in salary and bonuses while driving a company into the ground. I just don't understand where the money comes from, or why.
It may be U.S. plutocrat strategy to weaken political enemies by killing their companies.
Consider Microsoft destroying Nokia and their Linux phones to benefit fellow American companies Apple and Google.
Consider the Destruction of OkCupid as an attack against its liberal-skewed user base.
Oh it is real simple. Imagine you have a really nice truck that is all jacked up with a lift, big tires, light bar, supercharger, etc.
I want to buy it and you want $10k for it since it is an older model and most of it's worth is from the accessories. The problem is I don't have $10k. I only have $2k.
This is where the magic happens. I find some someone who will buy all your accessories for $8k. I make a deal, let me strip your truck and I will pay you $10k for it.
You agree and I come over, take off all the accessories and then sell them for $8k and then buy your truck for $10k.
The truck is pretty worthless at this point without wheels or anything, but I can sell it for about $3k. Well, I ruined the truck and made a thousand bucks. This is a silly example of how they get the money.
A victim of the good ol leveraged buyout which should be fucking illegal right alongside stock buybacks.
Yeah, this is the case for most "public to private" company moves, and other types of private equity acquisition deals. They are all just a massive shell game to liquidate a company's value and transfer it to those private equity companies. Vulture Capitalism
Comical to read this when I just saw a $50 billion dollar sale of EA going private being bought by private equity firms, haha.
Did you know companies can take out loans to buy their own stock to raise the value.
The actions taken by private equity companies seem very similar to those taken by organized crime syndicates when THEY take over a business
Odd, don't you think?
And the same thing is happening to hospitals all over the US, which should fucking terrify you.
Back to the good old corporate raiders like Lorenzo. For a while there we kept them on a leash. Now with the Land of No Consequences and leashes becoming meaningless these leeches are free to buy and pillage as they see fit. The housing market is gonna be destroyed next, wait until they start selling the homes off to shell companies and taking loans to pay for the deteriorating properties and property taxes (which trump has floated getting rid of to keep these hoarders afloat even longer).
That's why the Canadian toys r us is doing great.
Too bad we can't say the same for Sears
Time to kill private equity…..with crippling regulation and accountability of course
It isn't the only company to die this way. Sears was cellar boxed the same as toys r us. It was what was intended for gamestop but the whole wallstreetbets thing happened and prevented it.
Pretty much nothing in "the economy" works like it does in theory. It's always way more complex so the people with the most power and money can squeeze more exploitation out of it. I really like how this guy explains it
https://www.facebook.com/reel/976701137942045
https://www.youtube.com/shorts/1LcJjd6Wosw
He's got a whole series on Private Equity
I think that's the natural outcome. that's the emergent behaviour of capitalism.
those with more money have more power and more influence to make the system better for those with money and power.
the rest, like almost all "economics" its just BS to hide that simple fact.
Should have paid them back in Geoffrey Dollars.
I highly recommend the book, 'Bad Company' by Megan Greenwell, which covers this exact topic. Great read.
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