I listened to this audiobook called “Plunder – Private Equity’s plan to pillage America”.
Wow. What a title.
While I sense the author goes a bit too far at times in being critical of basic smart business decisions, I found the book on point in its basic idea. Private Equity thinks short term. And when you think short term you only care about the money, not the work (product), your customers, your reputation (relationships), or your employees. Bad things come from short-term thinking. But PE firms isolate themselves from loss, liability, and blame with debt, other people’s money, non-compete agreements, and lawyers – and even help from the government.
I feel like I am crossing my own line by going negative like this on Think Daily – but I can’t be silent anymore. I’ve seen and heard too much. Private equity is not business – it’s business manipulation.
Does it provide an exit for business owners who have reached their retirement age or the limit of their ability to grow any further? Yes. But the ones left behind will likely suffer, and when the business is flipped a few years later, then new leaders don’t even know the employee’s names – if they are even still there. And when everybody is new and there is nothing to fight for, customers suffer.
Have PE firms done any good? For some – but win-win-win is not in their playbook. If you hurt people, it doesn’t make you a good person if you helped a few others. At least that’s the way I think of it. Winning financially at the expense of customers and employees is not winning.
Check it out and let me know if it matches your real-world experience. It sure matches mine.
Look at the town where the great outfitters of Cabela’s was headquartered. So sadly true
I agree and dont think you are out of line for stating your opinion. I have seen what they do to a perfectly good business. within a year the employees are all gone and customers are looking for a new contractor to take over the work. Not long term business model when you will flip the business every 3 to 5 years. That is short term. Period.
I appreciate the comment and it is enlightening to see your thoughts. I trust you over a PE firm that is trying to tell me they are different and they want to help me grow.
Larry,
Your message today hit me right between the eyes. I was involved in PE for a couple of years – until I realized their motive. Made me very sad. Profits before People every single time -no exception. I have been in the home service industry for 25 years – and I LOVE the hard working, ethical, caring people in it. They are getting a sell job with PE’s with a lot of buyers remorse afterwards. Heartbreaking.
I agree 100% with your statement. I sold my company to an investment group last year. The company reputation of being a premier company does not matter to the new owners. It’s only the bottom line. Me selling was and is my retirement plan. I am more thankful that I choose to name the company a generic name vs my name. Even though I am known to own the company…they are not changing my name. Their investment will be short term were mine was long term….but I’ll Be Back!
100% agree! I was the grunt in building a business from nothing, a main player without equity. I saw this happen with my own eyes after we hit about 50 employees. I understand wanting to retire but at the expense of you employees and customers? The relationships are burned into their retirements in a way and just thrown away.
My business will stay employee owned.
I agree. We receive inquiries at least weekly to sell the business. Our employees are very dear to us and have been with us through thick and thin. Our retirement plan has yet to be solidified but our preference would be to keep it in the “family”- our employee family.
You are dead on target. I have seen company buyouts ruin otherwise good businesses and as a result it leaves the lives of the employees and customers in an upheaval. How much talent have we lost because someone “retired” from their profession before they should have and others were left hunting a different profession due to non-compete agreements? This happened to a friend of mine just recently and he was essentially pushed out of his old firm and forced into a completely different industry by the non-compete agreement. It’s like starting all over in life when you are in your 50’s!
It’s an absolute sick feeling when a PE firm comes into an organization and destroys it, usually they advertise to the newly acquired organization the idea that they are there to help and are the good guys. Employees tend to buy in out of fear of losing everything they have ever worked for. Having experienced firsthand working for one, I can tell you that they are full of lies and manipulation and will chase you down to try to destroy your life if you “fire them” and go to work elsewhere with the experience you had prior to them even knowing you. The winners are the sellouts, anyone left afterwards is treated like a piece of equipment as opposed to being treated like a human being that means something to the company. They don’t go after broken industries; they go after the easy targets. Let that sink it! I’m really tired of watching it happen to good people!
Yes, this matched my experience. I will spare you all the details but I lost my job in 2009 because the founder of my company took a large PE investment from SAC Capital in Stamford and ten years later the PE put pressure on him to sell the company. A lot of good people lost their jobs and what was once a great company starting in 1988 was officially gone by 2010.
I have lived through and witnessed this in Australia, they should be called ‘destroyers of value’. Poor governance, poor ethics, not interested in people, they are poor business people yet have such high opinions of themselves
My experience is that private equity buyers only focus on squeezing the numbers/ profits with little disregard for the employees, customers, or the underlying business structure. They only focus on plumping for the next sale and hope that the next group of buyers don’t figure out how badly the functionality of the business is damaged. The Private equity managers rarely have the skill sets to understand how to build the widget/provide the real service like the entrepreneur who started the business. They can’t grasp the ‘secret sauce” that made the business what it became.
There is lots of collateral damage not only to the employee group and customers but ultimately to the community they operate in. The Equity guys really don’t care about the local community and normally don’t support it like the local entrepreneur who built the business did.