| ▲ | elephanlemon 3 days ago |
| Could someone (please not an LLM) attempt to steel man the following position for me: Private equity is overall good for society |
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| ▲ | selectodude 3 days ago | parent | next [-] |
| There are more PE firms than there are McDonalds in the US. Most of them exist to buy solid companies where ownership wants to cash out or fixing failing cash-poor businesses with good bones. PE has become shorthand for "thing I don't like", and admittedly there are a lot of horrible evil people in PE. As a concept though, it's pretty benign. |
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| ▲ | cloudbonsai 3 days ago | parent | prev | next [-] |
| PE is a very broad practice. It's kinda hard to make a single-blanket argument for it (it's like asking "Is Software good for society?" Yes, maybe?). So here are some positive things that I think PE funds can contribute: 1) Private equity serves as an exit path for small business builders. Suppose that you have built a small, profitable trucking company. Now you are old and want to retire. You kids have no interest in the business, and have already built different careers elsewhere than managing a fleet of Super Greats. Oftentimes, PE funds are only realistic buyers of your business. 2) At a more subtle level, PE can supply better management. For example, a supermarket owner I know accepted capital from a PE fund specifically to acquire better talent (his remark: "very talented people are rarely excited to operate a rural food & beverage shop"). 3) PE-backed companies are, arguably, structurally better than the public counterparts. The cliche is that many public firms are run like third-world fiefdoms (the board are focused on empire building; the executives are spending money lavishly on perks). Most of these concerns vanish once each director are given a shared, transparent objective set by the deal structure. (As Henry Kravis often remarks, PE is mostly about alignment of the interests) |
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| ▲ | triceratops 3 days ago | parent | prev | next [-] |
| Private equity is just a type of investment. It can be run by scumbags or regular people. The growing role of PE in everything and everywhere is IMO a symptom of wealth inequality. PE didn't invest in veterinary practices, retirement homes, or plumbing businesses 30 years ago. They're just running out of places to put all that cash. |
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| ▲ | JumpCrisscross 3 days ago | parent | prev | next [-] |
| Broadly speaking, private equity is used to describe anything leveraged we don’t like. When we like it, we tend to describe it as a start-up, family business or simply “firm.” |
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| ▲ | youarentrightjr 3 days ago | parent [-] | | Hey, it's you again! I was wondering if you would pop up in the comments defending private equity as you've done in the past. Continuing our discussion from last time, can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies? | | |
| ▲ | rkhleung 3 days ago | parent | next [-] | | I had worked with PE firms for over 6 years from the other side where we would invest in PE funds operating primarily in emerging markets, about 50 or so during my time and reviewed another 50 more that we did not invest in. Most of them are pretty benign. We invested primarily in transportation, energy and infrastructure but also hospitality and industry. There are many many poorly run private companies out there that PE funds buy out and rehabilitate. One major segment for a couple of funds is the purchase of poorly run family businesses where the founder was successful because they had drive and energy and built something at the right time (or sometimes, they knew the right people) but lacked the interest or vision to take it to the next level. Or the founder is getting old and the family has managed to turn the once successful business into a money loser. This is a long about way of saying, the majority of PE firms are benign and have invested in many successful businesses that many of us use. There are bad actors and more so in the US where corporations are allowed to eat the weak. It is not a case of PE bad but much more so that US business laws have relatively weak protections for consumers. | |
| ▲ | JumpCrisscross 3 days ago | parent | prev [-] | | > Continuing our discussion from last time I have genuinely no idea who you are or what we were talking about. > can you elaborate on why you think quoting Revlon is sufficient to excuse the practical differences between public and PE companies? Revlon duties concern hostile takeovers [1]. You’re confusing orthogonal concepts. [1] https://en.wikipedia.org/wiki/Revlon,_Inc._v._MacAndrews_%26.... | | |
| ▲ | youarentrightjr 3 days ago | parent [-] | | > Revlon duties concern hostile takeovers [1]. You’re confusing orthogonal concepts. No sir, it was you who were confused - you brought them up here: https://news.ycombinator.com/item?id=46186549 > > There is a legal requirement for directors of public companies to act in the financial interests of all shareholders > No, there isn't.
The whole point of Revlon duties is that they trigger "in certain limited circumstances indicating that the 'sale' or 'break-up' of the company is inevitable" [1]. Outside those conditions, "the singular responsibility of the board" is not "to maximize immediate stockholder value by securing the highest price available." I'll leave it up to you to recontextualize with the remainder of that thread if you want to continue discussing. | | |
| ▲ | JumpCrisscross 2 days ago | parent [-] | | > you brought them up here Within that context, what's confusing you? And where did I argue that "quoting Revlon is sufficient to excuse the practical differences between public and PE companies?" Revlon duties are a specialised duty that apply in certain circumstances. They don't in others. The other situation is what we were talking about; herego, those special duties don't apply to the other situation, which is part of the general situation. It's an old piece of rhetoric [1]. If you're consistently getting downvoted in a thread, and the other side getting upvoted, try re-reading it instead of presuming sanctity. Especially if you haven't worked in a field, are mixing up terminal and are e.g. citing legal argument about a private company to make arguments about a public one (Ford). [1] https://en.wikipedia.org/wiki/Exception_that_proves_the_rule... | | |
| ▲ | youarentrightjr 2 days ago | parent [-] | | > If you're consistently getting downvoted in a thread, and the other side getting upvoted, try re-reading it instead of presuming sanctity. Lol, what a humble take. We all know in this VC owned forum that only truth is upvoted, and lies downvoted, especially on topics like private equity. > Revlon duties are a specialised duty that apply in certain circumstances. They don't in others. The other situation is what we were talking about Again you're operating insincerely, because as I told you last time, and this time, Revlon does not relate to what I'm referring to. I even quoted you Dodge v Ford Motor Co as a jump off point for your education, which you refused to acknowledge due to it being "from over 100 years ago". Anyways I'm curious if you'll share your background, and why you're consistently in these discussions about private equity, rabidly playing defense? |
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| ▲ | charcircuit 3 days ago | parent | prev [-] |
| Private equity is good for society because it provides a financial incentive for owners of the equity to increase the value of a company. The value of a company is tied to how much value it provides society. Financial incentives do work in practice in affecting behavior in humans. Especially with the scale that some companies can reach. In conclusion the concept of privately held equity existing accelerates the betterment of society. |
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