> The rest of the shareholders (eg. pension funds, insurance companies, endowments, family offices) can be assumed to behave like ruthless capitalists chasing the highest returns, regardless of whether the company is public or not.

Right but they are seeking the highest returns as equity holders typically, usually through things like stock buybacks.

Private equity firms have much more devious ways of looting the companies, like management fees, acquiring other portfolio companies, and various other tricks.

If you’ve ever seen the Goodfellas scene where they bust out the nightclub, that’s quite literally their business model.

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gruez a day ago | parent [-]

>Private equity firms have much more devious ways of looting the companies, like management fees, acquiring other portfolio companies, and various other tricks.

"looting the companies" is non-nonsensical when they also own it. It's like saying a scrap yard is "looting" the cars it bought by taking out the valuable parts to resell or whatever. The rest of the stuff might make sense in the context of the LPs getting screwed over, but not in the context of portfolio companies that they own.

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andrew_lettuce a day ago | parent | next [-]

PE puts very little of their own money into the deal though, while they own it they don't buy it. They use incredibly high leverage and often saddle the company with monstrous debt, then loot the assets to pay the interest and take management fees while doing all this. Red lobster is a great recent example. They sold off all the real estate, then had stores lease it back, turning profitable locations into losers. They often do the same thing with manufacturing, goodwill, brandnames and sales channels.

Think of this like an oil well. If you pump off all the gas, you depressurize the reservoir and can never get the oil. You need to slow your production to get the oil first, but private equity is happy to skim the cream and leave the milk to spoil.

	▲	mbesto 12 hours ago \| parent [-]
		> PE puts very little of their own money into the deal though, while they own it they don't buy it. This is simply untrue. A typical PE firm creates a GP fund using LPs money. This GP fund typically does a management buyout (which means 50.1% of more) of several companies using a mix of equity (e.g. GPs capital) and debt (banking lenders). So by every definition of the word, they absolutely own the company.

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CPLX a day ago | parent | prev [-]

What you’re saying just isn’t true.

Looting the companies is accomplished by stacking up debt and then giving themselves the money. Occasionally there are a few variations like looting a pension fund or taking a high quality product and making it horrible and selling that until people notice.

It’s literally their business model, it’s happened thousands of times and is a very clear fixture of the modern American business climate.

If you don’t know this it’s because you aren’t looking or it’s in your interest to say you don’t know this.

	▲	mbesto 12 hours ago \| parent [-]
		> It’s literally their business model It's literally not. It happens to be the business model for a subsection of private equity (usually large cap) and its the one that gets most headlines. There are roughly ~5,000 M&A events per year (often involving PE) and yet you'll hear about 5~10 at most cases where the company gets loaded with debt and stripped of assets. The large plurality of PE groups are buy and hold for 4~7 years and are largely focused on EBITDA expansion. > If you don’t know this it’s because you aren’t looking or it’s in your interest to say you don’t know this. No offense, but you clearly don't know what you're talking about.