I work for an engineering company that was bought out by a private equity firm a couple of years ago. Since their purchase, we have had several rounds of layoffs, budget cuts, and members on the board suggesting we commit fraud by charging clients for work we haven't done to meet our numbers. Going from a company that was focused on engineering excellence to a stripped-down, shell of a company where shareholder profits is the primary driver has been very disheartening.
I work for an engineering firm who is a prime target for pe. I constantly tell the powers that be that I'd I get a whiff of a buyout my resume would be on the street same day.
Yep the big cities usually left leaning people who scream about the poor love to take money from the poorest and then virtue signal while they get mass immigration to come replace you at half the price gotta love commies.
The biggest problem with leveraged buyouts is that the private equity firm doesn't lose anything if they wreck the company. They get their fees and commissions after gutting the company and bear no responsibility. On top of it, they can write off any loss or pay 15% on the gains. The solution is to make laws that don't allow this, but good luck with that.
The fees and commissions are just to keep the lights on and pay the employers of the Private Equity company. When the company goes bankrupt the PE firm has to pay their investors first. Portfolio companies repeatedly going bankrupt causes PE firms to lose investors and lose money. Their goal isn’t to milk the company dry and then bankrupt up. They benefit when the company they have acquired does well so they can sell it later at a higher price and multiple.
Why would a company sell to private equity if it wasn't already a wreck to begin with?? If your company is doing good, your not going to sell to private equity. So you can't blames the firms, if anything they give a chance for a wrecked company to turn around.
I worked at Michaels during their buyout from Apollo. To say the culture changed would be an understatement. When I first worked there we had 8 registers in the store, plenty of staff, and district managers were rarely on our ass about minutiae because they'd get taken care of before they needed to be a problem. Afterwards, we had two cash registers, only one cashier at a time, and 4 self checkouts. There was a credit card system all of a sudden that seemed deeply unpopular with customers, hardly any staff in the stores, cut hours left and right, and every manager up and down the chain seemed to be pissy at absolutely everything every single day. It became a miserable place to work, I was extremely suicidal by the end of my time there and leaving was the best thing I've ever done. Private equity is a mistake. It's a crime.
Similar story with pOpshelf; only it started out that way and continues to worsen. It sucks when you're a "low-level" employee, yet you can tell what horrible mistakes corporate is making when they can't. I hope you're so much better now!
I grew up watching my dad work. He brought me from tending wells all the way to the C level meetings. He did well, lead massive deals in shale, but refused private equity. He saw early private equity destroys companies early in his career, easy money but gave up control. Private equity looked to hit home runs, not do the fundamentals correct. They wanted explosive growth with unsustainable models. He always stressed doing the right thing, don't try to hit home runs, pick small consistent wins. Play by the rules (legality), know your strengths and stick to them. Private equity is growth at all costs.
@@jamesbenz3228 that's a decent analogy at least the way most PE firms work. Using the bodies resources to grow in a way that is unsustainable for the whole organism in the long term. The cancer doesn't care if the organism dies in this it's like a cancer however it's also like a virus in that it is transferrable to different bodies so it can do the whole thing over again!
@@jamesbenz3228 came here to say the same thing. Any entity that seeks to grow at all costs functions the same way cancer does. Non-cancerous cells work in unison to keep the entire being stable and functioning. Cancer will multiply with abandon and in outgrowing its blood supply, kill large portions of itself, and ultimately, the individual within which it resides because all it seeks is to divide and replicate with no other considerations. That's private equity, vulture capital, venture capital, etc.
@@kevinp.h157I think the joke/reference is that companies (recently, Boeing) has a history of killing people who whistleblow/uncover unethical/illegal behavior and making it look like suicide. So, when someone is aging something that goes against a large and powerful corporation they might say “I am doing well and I am happy and not suicidal” so if they turn up the next day dead by apparent suicide, people will know it was really murder.
My wife is currently going through the joys of working for a company currently owned by a private equity. Looks like we're approaching the resale/go public stage.
I work for a service company that is owned by a private equity firm as well and we are at the same stage. We spent 3 years buying up smaller competitors and now we are told not to spend a dime and get ready for the sale to go public. I have heard nothing but horror stories about it so not looking forward to it. Wish all the luck to your wife.
here in Spain they are making big moves. The government bailed banks with our money, sold hundreds of thousands of houses to companies like blackrock for a massive discount , Blackrock got subsidies from the government to buy the inventory. Then Blackrock started selling the houses back to us for a huge premium. Ah, and the government is subsidizing the banks to loan us the money to buy the houses. These subsidies dont lower the interest rates, they just increase the banks´ earnings. Many people complained because they tried to buy these houses in the first place to live in, not to speculate. They got ignored and they are buying these same houses from Blackrock at a huge premium
Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners. Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners.
its price fixing plain and simple , local lobbying of politicians , funding local people to pretend to be for the peopel while crafting BS legislation that takes our power away !
Wendover's breakdown is kind of one-sided. Our economy wouldn't work nearly as well as it does if zombie corporations weren't allowed to die. Refer to Japan's lost decades to understand what that looks like in action. Private equity is part of that life-and-death cycle of companies. Either they nurse a business back to health, or they strip it of resources that get returned to the ecosystem. If you have all your people and capital tied up in non-profitable endeavors, your country ends up like Argentina or Venezuela. Yes, change hurts. Finding a new job or grocery store is scary. However, change is a necessary but difficult part of a functioning economy.
The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.
My charity for affordable housing in Vancouver was taken over by a new CEO who owns a private equity firm. He lays off staff, increases his own salary and the management team, decreases salary of 80 percent of existing staff, takes money (donations) that are supposed to go for a good cause into his own pockets and so on. Stop donating to charities unless you are sure the money actually goes to the places they are supposed to go, not CEO and private equity firms!!!
Report that to the government and your boss will get in trouble and also could possibly lose your non-profit status. But to be honest, as long as some of the donations are going to programs and the mission, the boss can take a higher share of it. It just can’t be obscene. Non-profit CEOs making half a mill though isn’t out of the ordinary.
House flipping, but the owner makes money while they own the house, and they make money selling all of the valuable stuff in the house, and then they saddle that house with the debt from a portfolio of other houses, and then they write it off as a loss on their taxes when the house becomes condemned, and then they build something more profitable on the property before they make more than their initial investment
it's not but when there are so few people in the industry they will always be made out to look badly by the general public sort of how whenever the middle, lower, and impoverished fall on hard times the first blame is "Wall St." even though anyone with a phone can be on wall st. nowadays
@@FELiPES101 I hope that boot tastes as good as you make it sound. The middle, lower and impoverished have little to no impact on how the economy functions on a macro scale yet are impacted the most when the economy fails. Rich people can always weather out economic downturns and buy more assets to hoard for pennies on the dollar while the lower class is scraping to find pennies to live.
Excellent video! Reminds me of a family story… My old man worked as an HVAC Controls (BAS) technician for a corporation. His company that employed him was called “ESC Automation”. It got bought out by a private equity firm in the mid 2000s. As soon as the takeover was complete, half of his colleagues were laid off and the remaining employees got their wages slashed in half. So more people ended up quitting and before you knew, my old man was doing all the work and overtime work for cents on the dollar just to keep regular customers happy. After a few years of milking the corporation dry, the private equity firm sold everything to an investor who allowed things to be turned around in the company for the better. My old man was lucky and did not lose everything, but man, most folks out there are given a rotten deal with corporations these days.
@@HuyHTX I get what you're trying to go at, but its gotten to the point where its getting impossible to just "hop around". Which is why many people (including myself) don't want to work at a corporate job anymore.
Private equity just has just taken over the clinical lab at the hospital where I work. Someone must have made a bunch of money because it's led to increased turn around time for results, decreased communication, lost specimens and even a C. Diff outbreak on the inpatient ward🤦♀️
There's another reason that private equity bought companies end up going bankrupt a lot: PE firms make money by taking big risks with companies that have a lot of debt. They can use the borrowed money to take big risks, and if they work out, they get to keep the returns, but if they don't, they declare bankruptcy and the creditors are the ones who get screwed. These are usually companies that were super safe before PE and could easily get low interest rate loans.
If it is like that, why are the banks giving them a loan? The answer is easy: The banks make a lot of money as well. So the majority of loans are paid back.
@@ChaosEIC PE firms have found a way to privatize gains and socialize losses by selling the land that businesses sit on and then charging them crazy high rent on it. Banks loan them money because it's a guaranteed win for the PE firm. The business retains liability for operational costs and the PE firm gets asset rights. It's a great con.
Not with huge debt are they getting a low interest loan. PE could declare bankruptcy but they ain’t trying end their business. Only a small and shady firm would do that and like make a new business. But no one would invest with them.
Ryan Grimm did a nice (if not more brutal) breakdown of how private equity operates, and the fact it has not ended with bankers being hunted on the streets and endless RICO prosecutions still astounds me.
Actually I think its unethical because usually how they "save" companies is cutting the lowest, most vulnerable employees without warning while giving the people who actually failed the company golden parachutes
their favorite companies are ones built by great men 75 years ago and are being ruined by their grandchild who's now CEO, and would do anything to make themselves look like they're the one saving the business from financial ruin by selling to private equity firms
@@tom23245 This assumes the right that the people at the top who make all the bad decisions are entitled to several million dollars that could be used to pay severance and pensions instead
@tom23245 if by 'job that loses the company money', you mean the people that you see in your day to day interactions, yes. A significant amount of companies have realized that the most cost-effective way to hire labor is to hire as little as possible and expect those employees to do what would have been the responsibilities of 2-3 people.
The company I work for got bought out by Blackstone, there's been renovations done over a couple of years, now huge rounds of layoffs. Rumours saying they want to cut the staff by 50% to reduce operating costs. Prices keep increasing, hours cut back, layoffs, all this to turn a profit while they run it into the ground.
@@mzaiteyou realize that pension funds that hold retirement money is invested in private equity Plenty of intuitions like colleges endowments, retirement funds, etc rely on the ability to generate at least 8% a year to continue operations
@@revl6151 What if we just kept the retirement homes running anyways. Even better perhaps. Private equity produces no material goods, all they do is YOLO and dip. So if they produce no material goods what happens when they disappear materially? Nothing! You just have to reorganize the numbers we made up so people don’t become homeless.
This is happening in hospital systems nationwide. My hospital was bought out by a larger regional hospital network a few years ago which was then bought out by an even larger regional hospital network last year, and the employees have seen the negative effects trickle down. Ultimately, it's bad for patient care.
@Q_QQ_Q Yupp. It's why I cringe when I hear about developing countries adopting Western/American business/economic models, and I'm just left screaming NO! NO, IT'S A TRAP! The US's greatest skill is marketing and PR. They know how to sell the world an image of success that they pretend is built on meritocracy, but it is instead built off greed and privilege.
I work as a veterinarian in the USA. Mars owns a large cap of the industry in the veterinary field. They own VCA, Blue Pearl and Banfield. Those are veterinary clinics and hospitals. They also bought Antech. That is a veterinary reference laboratory (biopsy, cytology, bloodwork, radiology services). Now they bought Heska, an in-house laboratory machine distributor which allow us to do in house bloodwork in 1 hr. Every year there is a 3-4% price increase to services and products. All because PE owns a vertical portion of the industry. While they run the hospitals leaner and leaner.
I do Ground Penetrating Radar and Private Utility locating. Its a new industry and its expanding in its use case every year. It takes a LONG time to train someone up to do the work we do, which has been a major struggle for the small company I work for. You NEED competent operators because we are essentially locating utilities and if we fuck up they will break the utilities when they dig. In my city there is really only us and a massive nationwide GPR company that was bought out by private equity in 2017. Prior to that they had a few guys we all knew by name and they were well known and experienced. Since then they have struggled to retain employees and we constantly run into jobs where they fucked up and we acquire a new client. They also changed their GPR manufacturer and word is the new ones are NOT very good lol. Thankfully my boss declined a buyout because thats what they did in a ton of markets.
Something that is kinda referenced but has been a major problem lately is how they are acquiring the companies. They heavily leverage the acquired company with debt which can normally be fine, but with interest rates being so high right now it is hurting a lot of these privately owned companies. Some companies might not be able to keep up with the cash burn from interest and cause them to go bankrupt. This model of leveraging up is another reason why PE firms are crushing the US economy/society.
The saddest part about this situation is that the SEC won’t even make private equity firms report earnings. They literally lose money and don’t have to tell their investors or the public. It’s disgusting and the worst part is that most pension/retirement funds have about 20% of their money invested with PE firms - Almost every American working for a large company is funding this mess without knowing it.
I mean investors get quarterly earnings reports. They wouldn’t invest if they didn’t get them. The issue would be if they were fraudulent like the many Ponzi schemes one like Bernie Madoff.
It's not a mystery why the "benign structure" yields destructive results lmao. Private equity firms extract value from businesses whilst contributing nothing not already contained within it.
The thing you need to mention about the Yahoo deal is the fact that the micro soft offer included 30 billion worth of alibaba stock. The Verizon buy out didn't include the stock thats why their price seemed so much lower
@@dmurvihill The problem there is that then you have to figure out what to do with all that Chinese stock. The Chinese stock market is not as robust as the US stock market, and the restrictions the CCP places on foreign firms are highly restrictive and often not worth the hassle. This was in 2008, 6 years before Alibaba would IPO in the US in 2014. That 30 billion in Alibaba stock would be worth something in 2014, but until then its value would be completely hypothetical, assuming the CCP wouldn't nix the deal outright or force Yahoo to sell its stock to chinese companies for pennies on the dollar.
@dmurvihill You misunderstand, Yahoo is the one that owned the Alibaba stock. And the deal with Verizon didn't include buying the stock. It remained with yahoo and the company was renamed Altaba.
my family went to marsh a lot, especially since they had a free daycare while you shopped, so thanks for the mini episode on marsh and explaining how it went under
PE is now out there buying up trailer parks: buy out older owners who are ready to sell, do minimal improvements, jack up the lot rents and tell those who can't afford the increase that they are "free" to move (they own the home, but not the land it sits on).
Which is basically eviction into homelessness since where are they meant to move their trailer park to? Also, its not like the land owners particularly care to pay for the removal of the trailer, so in practice they also seize that asset too (since many ppl lack the cash to get their trailer parks relocated in the first place). Its a very common practice in trailer parks near big cities, since the lack of affordable housing means they can kick off the locals, build new houses, jack up the rents, and yet be considered "affordable housing" anyway due to how unafordable big cities have become.
"When the person making the decision is the same person unlocking the door each morning...." Is such an underrated feature of any business. Great video.
But it’s not a loophole it is working the exact way it’s supposed to. They aren’t getting income their company that they own is going up in value and there is risk in trying to create a company that isn’t there in deciding to get a salary job at a restaurant or something and so they get taxed less. Should small business owners be required to pay a 37% fee on all growth they have every year and get nothing when they shrink as a company? No? So why would this be different?
@@adamheuer8502 That's a false dichotomy. Just because flatly deleting carried interest is a bad idea doesn't mean that it's currently giving good outcomes, or even justifiable outcomes. And you're kinda presenting the small business owner case like it's typical. The modern economy is utterly dominated by giant firms, and the ways they exploit tax law and financial regulations is essentially in another universe to any small business. Trying to build a case for the fairness of carried interest tax exemptions on the back of small business owners is simply nonsensical when you want to look at giant firms. They are economically, socially, institutionally, and ethically in totally different worlds. Corporations are not people, do not have human rights, nor are owed the right to exist, they have no natural right to life the way people do. Taxation is justified by its necessity for a functional society, not by whether it's "fair" to abstract entities, and should be constructed to maximise utility to society. The way the rights of individuals becomes involved in this is complex and contentious, but corporations aren't people and so it's moot for them. When it comes to corporate taxation, the only question that matters is "what degree and structure of taxation leads to the best outcomes for society long term", harvesting their profits like trees in a long-term silviculture project.
@@adamheuer8502 no they should not, let’s start the stupid tax at 15 million. That’s more than enough for anybody to live their wildest dreams and stop 1000 people from sucking the rest of the wealth up.
It’s a mantra now that it’s unfair. It seems to me if you hold a company for years and sold it then it should be LT capital gain, not ordinary income. What am I missing?
Private Equity is what you get when you optimize capitalism so much that it stops creating value in aggregate and starts simply moving value to people up the chain. In effect, it's a consequence of higher than ever income inequality, where normal people can't uphold their ways of life in the face of corporations.
No. Private Equity is just one small piece of the economy. Something people seem to forget is that, well, people can make choices. Corporations are not forced into selling to private equity. People aren't forced to take bad mortgages. When this stuff backfires, it should clearly send signals not to do this. All people and corporations have to do is to stop doing the d*mb move (which many already do. You just aren't focusing on them).
@@io9021 If they're thinking that, then the business must be in such a sh*tty situation that it's most definitely an excellent decision. Sorry to tell you, but preserving jobs to an insane extent is how you create a worse economy that harms people in the long term.
When I think of Private Equity, I think of Sears, in which the most profitable parts were sold off for a short-term increase in profit and a long-term death for Sears. The others parts were sold to Eddie Lampert, CEO of Sears, under the umbrella of shell companies. Basically, he scammed Sears to make money in every way he could at their expense... and it would appear, got away with it, too.
Before the dying of shopping malls Sears was by far the most embarrassing and Ghetto retailer to go into during the early 2000's - 2010's compared to the other giants. Lights flickering, half empty shelves, no customers, all of their clothes were just.. eh.. and when you found an employee, they looked like their joy had been stolen from them. Not an isolated incident either. It was a really weird vibe. Their saving grace became their tool, automotive or appliance sections when they would run holiday specials, that was about it.
@@williamdaniels9728 No, their saving grace was Land's End clothing and Craftsman tools, both owned by Sears and both very profitable despite how terribly the retail stores were doing. And under Eddie Lampert, those profitable parts were sold off for a quick buck.
@@williamdaniels9728 I worked for Sears from 90-93. It was still doing pretty well back then. Went into a Sears in around 07 and it was everything you described. Now bad government policies are transforming every store into this in liberal cities. Every industry is under attack from horrendous policies from both sides of the aisle. This is an engineered takeover of everything. I never thought that implementing fascist and socialist policies at the same time was even possible yet here we are.
Didn't the CEO make loans to Sears, secured by assets more valuable than the loans? So when Sears couldn't pay the loans, the CEO made $$$ by getting the more valuable assets. And Sears then declined further.
Thts not private equity acquisition, thrs simply a company declining because of bad decisions and having to sell off operations to downsize. The most profitable parts weren't sold off either
A very well known brand of power tools was bought by an Asian private equity firm in the mid 2000s. Quality instantly plummeted even as prices soared, riding on the name recognition they had build over decades.
I was thinking of Milwaukee and to a lesser extent Ryobi and iirc AEG as well... It's a common story with tool brands sadly. I have hope for Milwaukee though, they've stuck around the pro world for a good long while now so maybe it was just a temporary dip rather than a permanent collapse. Doesn't help any of the SBD group companies or others though :(
@@yoyosingh1088 Walmart used to do that, I'm not sure if they still do. When they were, every employee was walking around with a 50k policy on them; payable directly to the company upon their death.
YOU can’t do that. Multi billion dollar equity firms can do as they please, the SEC meant to investigate this is a joke and so are the tiny fines given to these companies.
This is what happened to Common Bond, a bakery and coffee shop chain with ~6 locations here in Houston Texas. They recently fired a beloved manager of 10 years at the Medical Center location because she refused to have her hours raised from 50 hrs/week to 55 hrs/week with no pay increase. Meanwhile, without raising employee compensation, prices on all goods have gone up 20-50% over the past two years. And now the private equity firm that bought this small chain several years ago is wondering why sales have slowed.
Hey Sam, There’s a lot of very good points in this video, but I think you missed a key aspect of the impact of private equity. One key characteristic of private equity is that the asset management company benefits from very large economies of scale as it grows. It takes roughly the same amount of people to manage a portfolio of 10 investments, whether each of those is $10m or $100m. That means that as PE managers grow, they make more margin, which can then be distributed to the owners (the partners) as dividends. It’s much easier for PE managers to make more money by raising more funds while employing roughly the same number of people, than to make investments that perform really well. In addition, as you mentioned in the video, the management fee of 2% is a much more stable income than the carried interest (the performance fee on 20% above the hurdle). This is why you see PE managers raising always more money: they are de-risking the cash flow for the owners (the partners). The “issue” for the partners of the PE firm is that this is such a cash machine, that no one within the firm has enough cash to buy their stake in the PE firm when time comes for them to retire. So what happens? They IPO the company. This is what happened with Bridgepoint in 2020, and what CVC is in the process of doing. If you look at the investor presentations of Bridgepoint, you’ll see that 1) they make way more money off of the management fee than the performance fee 2) the focus is on raising funds - not the performance. They only need to have a good enough a performance that investors keep giving them new money. Finally, what’s the consequence of all this? Well you’ve got more and more PE firms with more and more money to invest, who are competing for the same finite universe of companies which don’t require too much work - they make money off of deploying the capital, not off of making high returns. So they just keep buying and selling the same companies to the same other PE funds. IPOs and sales to corporates are relatively rare - meaning that the valuation is probably distorted. When’s it going to fall?
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On top of all that, there is the private equity push in to residential property, with companies like Blackstone buying up billions in property and raising rents. Of course they'll say it's more complicated than that, but as this video describes, private equity fees benefit the partners while consumers and workers suffer the knock-on effects of the money grabs.
So should we pass a law to require only homeowners who Live in that house can buy the house? Milton freedman would say a free market works best. Sooner or later law of gravity licks in. The real value of homes will reappear, which is according to what the average person can pay.
PE firms are just the worst. My wife worked operations with a small practice that sold a controlling stake to a PE firm. The instant that they saw a (potentially temporary, completely out of anyone's control) setback in monthly earnings (basically an insurance reimbursement projection), they wanted my wife to lay off loads of staff. The fact that this was happening in December, the weeks leading into Christmas, was of little concern to the PE firm. They wanted their heads on a spike, and fuck anyone who got in the way of that. My wife was able to get things to happen after the holidays, but she just couldn't take it any longer. Left the company shortly thereafter and is (comparatively) blissfully working for a non-PE operated company now.
@@Mcfunface I'm normally a leftist with liberal social views, but its getting extremely hard to deny the evidence that's coming from the right. Wherever you look these days, there they are.
I know a friend who worked for a very nice company and worked closely with the boss who was proud and passionate about his company and whom my friend described as one of the best bosses they worked for. One day, someone gave the boss the idea to let a private equity company buy out his company and make his company become bigger and better. The boss went for it and within a few years, things went to shit. Many members of staff were replaced by hard sharky business types, work culture became unfriendly, product quality went down, the boss got replaced by someone the PE company approved of. While the boss tried not to show it, my friend knew he was devastated by what became of his company.
I worked at a wonderful private school that got bought up by private equity. At first it all seemed fine. Pandemic came and they slashed all part-time teachers leaving them without healthcare, and shoveled the extra hours onto everyone else for no extra pay. Stripped our bespoke software out for their "standard" which made back office tasks take twice as long in the name of data management. Within 2 years over 70% of the staff I knew had left, myself included. The executives paid themselves millions in bonuses while they sold off other parts of the education portfolio while they let teachers rot.
This is what Richard Gere in Pretty Woman did for a living. Also Martin Sheen and Charlie Sheen in the movie Wall Street. edit: Michael Douglas was the private equity guy . Thanks all for the corrections.
private equity bought my company. Fucked everyone's day up for about a year, saddled us with debt and then sold us off to someone else. 1/10 no one enjoys this
@@rafradeki No the company just has a debt to someone else. Or a company may have no debt, gets bought, inherits the buyout debt, can not pay it, goes out of business and this makes the buyer money.
I would've liked to see an analysis of how much the public and other industries are subsidizing private equity. Stuff like pensions falling on the state government and banks eating the cost of default, above the implicit cost baked into the interest rate.
as an analyst in training I already didnt want to work in finance or private equity - having a positive impact on people is more important than having a positive impact on numbers
This. I would love to see a video about credit unions and any pitfalls since this is a similar model. I wonder what can be learned to adopt a fuckup-proof employee owned company.
It's consumed the UK as well There is a well known supermarket chain in UK called Morrisons. It was started several decades ago and was still owned by the guy who started it. It was a great store and tried to be a bit more traditional and low cost. It owned all of its real estate etc When the owner died it was snapped up by private equity and now it's sold off it's real estate and leased the land back. It's prices are going up I never go to their stores now
Problems mentionned : Private equities buy businesses and the General Partner makes money off of the revenues, 2% of all revenues and, after a certain threshold, 7% of the revenue above threshold. This means private equities will look for short term gains that would go over the threshold to make the GP incredibly richer than otherwise. They're also taxed almost twice as little as general income by the IRS. So in practice : Sun company buys Marsh, sells all their real estate to get money off of the sales directly into the Private Equity, all the while collecting 2%. Then they filed for bankruptcy to be done with it once it wasn't profitable any longer and all the employees lost their jobs, all the consumers lost their healthy and affordable grocery store. Looking for efficiency, they'll also destroy healthcare, increase prices etc
The investors who put the money into the equity firm lost their money. They did not make a profit, the employees of the equity firm did. Based on that alone, the equity firm lost investors and capital. There was a negative outcome for them, purposely left out to support a particular narrative.
@@themachine9366yeah, I feel almost as bad for them as the skeletal crews that remain in companies bought by PE firms who have to do the work of all the workers who are always fired by these firms.
This is happening in the UK right now with US PE buying out vets. Prices have shot up across the board as well; what are you going to do? let your beloved pet die? I'm also worrried what the Embracer group have done to Asmodee by shifting all their debt onto them then cutting them lose after a saudi buyer backed out.
Hedge funds don't buy companies, it's private equity firms that do that, and when they do they use majority (>50%) debt via a strategy called leveraged buyout or LBO for short. This is the strategy that the public gets enraged about when it kills firms.
I found it a bit disingenuous for Wendover to claim that companies acquired as part of a leveraged buyout are 10x more likely to file for bankruptcy in the next few years as if to say it's the buyout and subsequent management of the private equity firm that caused the bankruptcy. In reality, the companies acquired by private equity are more often than not already on the way to bankruptcy.
Leveraged buyouts should be illegal, bar none. Unlikely to happen anytime soon, but these PE firms have made it even harder for normal Americans to see investment returns. Aside from basically being a flipping scam, the few legitimate PE investment scenarios are done without the opportunity for the public to invest, leading to fewer options over time for ordinary funds and investors.
A woman took her three-year-old son to the dentist for a checkup, and the dentist, without even taking x-rays, said he needed seven root canals. Unfortunately, she trusted the expert. Of course it was an office in a dental chain backed by private equity, so it had to meet its revenue targets. There have been reports from former employees in different offices in this dental chain that talk about drilling healthy teeth, unneeded procedures, morning huddles of how they (the office) were going to meet their revenue targets for that day. Treating to insurance. Just one example of the horrific consequences resulting from the perverse incentives of private equity. But if you have a job with retirement plans or pensions, it's hard to know where any of that goes, and some of it for sure going to private equity. So it's like we eat ourselves. I think Benjamin Lay had a lot figured out.
Well said. As part of a team that makes businesses grow and look after their staff and customers I'm sick of these number manipulators who can't manage anything.
They also work hand in hand with funds shorting the stocks as well. For example Sears. For what Eddie Lampert did to pensioners he deserves the pit of hell.
The "point" of the business, any business, is to make record profits. When you understand that, you understand just how permanently ruined our economy is.
The bus routes in my home city are contracted out to various different operating companies. One of those companies is owned by a private equity firm and even though the whole network is plagued with staffing problems and cancellations, the routes run by that company are noticeably worse than the ones run by other companies
PE Megafunds like Blackstone, KKR, Apollo, etc are also known for their generally awful working culture (apollo in particular). Even with standard industry hours exceeding 80+ a week on average, there are many accounts of young people dying from overwork just because they're able to make 500k a year after 4 years of harvard and 2 years at goldman sachs.
Blackrock isn't a private equity firm. Jesus christ, you all see these companies as the same things. Hedge funds, private equity firms, and the dozens of types of banks are all different.
And you know what kills me about that? Its the ones with consciences that are dying of stress and suicide. The heartless monsters, the ones who have no reservations about letting your grandparents die of neglect in understaffed nursing homes, or of a healthcare mistake because the nurse has been doing 12-hour shifts with twice the patient load they're supposed to have. Those absolute sociopaths, they live and thrive, and live criminally long lives and careers.
If they do that to the workers of the companies they buy, why wouldn't they do it to their own workers? They're as important as the pc's keyboards to the execs.
It's happening to the lab my dad works for. The owner sold to one of these companies, and now they are closing down all the branch labs that allowed the company to originally grow because they can just send the samples two states over to the headquarters for analysis. It was the ability for analysis to be done locally, which allowed the company to originally expand so far. Also, a little fun fact the lab was going to offer water testing for the people of the East Palestine disaster, but the company that bought the lab said that it would be a conflict of interest... guess who had a large share in Norfolk Southern...
I work for a large airline purchased a few years back by one of the largest private equity firms in the country, and between that and Covid we're significantly worse off than we were five years ago. To give an example: our widebody program is fairly new (building on a fleet of over 100 narrowbody jets), and as we regressed after Covid they suddenly cancelled the remainder of the order, including abandoning several brand new, finished, perfectly deliverable aircraft. Now, our widebody fleet is wildly successful and a number of new routes are performing well above expectations... to the point where we can't expand any more, as the few aircraft we do have are already being stretched far too thin. Not to mention the corporate culture we were renowned for has been absolutely gutted, and guest experience has taken a massive hit too.
We should start a NON-PE movement. Can't avoid it fully, but can reduce giving our business to PE backed firms. Live in NON-PE apartments, take our pets to NON-PE backed vets ..etc.
@@FuncleChuck They mean the 401K managing companies, not the companies you have the 401K invest in; i.e., by USING a 401K (which is usually chosen by the company you work for, not the individual worker), you're benefiting Private Equity- regardless of the companies you use the 401K to invest in.
I worked for a labor law poster company, earlier this year the CEO sold the company to Outsolve LLC(turns out they were a private equity firm), we met with them and they lied to us about not shutting us down and firing all of us, and we fell for their lies because they seemed to be "good" people, and in less than a year they sold all of our equipment to another poster company in California and gave all us severance packages and shut down the company, we had in been in business since 89 and they stripped us down to nothing while lying through their teeth and saying we'll still have jobs. the company I worked for was The Federal Wage and Labor Law Institute based in Houston TX.
Great video. One huge consequence of PE that you didn't mention was the cutting of R&D when PE takes ownership. This is usually identified as an easy cost to cut, because the impact to the company won't be immediate and likely won't be felt until after the PE firm has sold off the remnants of the company. They have no financial interest in that potential long-term revenue. This is obviously bad for any individuals impacted by layoffs (I have several friends who have suffered this as a result of PE buyouts). But the macroscopic impact to the US economy is also huge. Due to the high cost of living in the US, manufacturing in the US will also cost more than global options. So US companies must stay on the forefront of R&D and innovation in order to compete, and the US economy is dependent on the growth/health of these companies. The impact of PE slashing R&D/innovation likely won't be felt for a generation, since it will be a slow fizzle rather than an economic implosion. But the impact will be real, and likely permanent, for the US economy.
Sale lease-back is an interesting concept. The college I just finished my accounting program at is actually involved in one! One of their campuses sold a bunch of its land to a grocery chain to build a new store, but then realized they gave up too much parking lot space and leased it back. Thankfully early in the project so parking space could be planned accordingly.
The tech company I work for was recently bought by PE. They've already started layoffs and trying to increase our workloads. Pretty much all us engineers are looking for new employment. There is a company-wide zero fvcks given attitude now because we all know they bought the company just to break it apart and sell the IP. 99% of the time, private equity is pure evil.
Another extremely frustrating/depressing aspect is that these firms and their affiliates are also leaders in spreading pro 'trickle down'-style propaganda throughout media and political messages...in many cases causing the victims of these equity firms to blame immigrants, minorities, corporate taxes, and progressive ideologies for their loss of jobs, stagnating wages, and reduced consumer protections.
People think snake oil salesman and scammers are a thing of the past. They arent, they just went into finance and wrote the laws to protect themselves.
This is the golden era of scammers. And while many fell in the old times, many more saw through it. Nowadays we're less and less prepared to spot the bs.
Thank you, Sam, for triggering me…I had JUST gotten over losing my local Marsh and now I’m back to square one 😭😂 Lord I preferred those stores over Kroger!
This is EXACTLY what happened to Shopko out of Wisconsin. They owned the land under all their stores. Private equity bought them, gutted them and left them to go bankrupt.
The current factory i work at in the netherlands was owned by apollo. (its now westlake epoxy, used to be called hexion) Basicly how the work is that they only look at short term, like maintance that would make its money back in 5-10 they skip, they reduce inspection, and they try to save money whatever it cost.
My local radio show/podcast, The Von Haessler Doctrine, just featured part of this on his show for Weds, May 8. I was like, "hey!! I know that TH-camr!" Apparently, this video resonates with a lot of people. Great video, Sam!
Appreciate your videos! I’m 54 and younger generations should know there’s no shortcut to acquiring wealth, but there are ways to go about it. Fellow millionaires don’t tell the poor/middle class they need the knowledge of finance coaches to help build their wealth. If anyone here needs a good coach, here’s it..
Inflation hits people a lot harder more than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of It's not surprising that the negative market sentiment is so high now We really need help to survive in this Economy.
It's really hard times, I had lots up and down working different jobs. Glad my investments started paying off so I can quit them, my decision to put in some money valued in stocks/ crypto has really saved me, all thanks to Celina Raghee
Celina Raghee news of her expertise has gone viral this my third time of coming across of her testimony, i also want to give her a try, how can I reach her??
I'm not against Private Equity in concept, but it seems backwards to me that there are ways for them to run a business into the ground and still walk away with a profit.
Opinions diverge. Some claim overvaluation due to rapid gains, while others cite strong economic fundamentals justifying high valuations. Raises concern for my $600K equities going 8% up and 20% down. Should I hold on or sell off my positions and hold cash?
I do agree, Investing has gotten difficult especially after pandemic, hence why I decided to use the expertise of an advisor, my spouse kicked against the idea initially, but oh well guess who's best buddies with our advisor now hehehe.
There are a lot of independent advisors you might look into. But i work with “Sonya Lee Mitchell” and she is excellent. You could proceed with her if she satisfies your discretion. I endorse her
Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
Great video as ever Sam! The person at 19:39 is Dave Prentis, former General Secretary of the British trade union, UNISON - the last sort of person who would be working in private equity!
mrs Bellamy freya was my hope during the 'bear summer' last year. I did so many mistakes but also learned so much from it, and of course from Bellamy freya
Marsh may not still be around, but its echos are. Old Marsh buildings are now department stores and you can still find marsh shopping karts at small time businesses. Im guessing they bought the marsh karts for cheap.
And that's why they send you this shit through emails, using several layers of intermediaries that have all been whipped into not questioning the person above them.
YES ! You major TH-cam channels are making the stand. I seriously believe that if it weren’t for a handful of you guys, the world would be still so ignorant today. Your truly doing gods work.
Just seems like the basics of private equity is to exacerbate the downfall of a company. They let a company go broke yet the investors are the ones that make out. Why is this not in the mainstream news?
I work for an engineering company that was bought out by a private equity firm a couple of years ago. Since their purchase, we have had several rounds of layoffs, budget cuts, and members on the board suggesting we commit fraud by charging clients for work we haven't done to meet our numbers. Going from a company that was focused on engineering excellence to a stripped-down, shell of a company where shareholder profits is the primary driver has been very disheartening.
Sounds like you need to leave that job and find a better company.
I work for an engineering firm who is a prime target for pe. I constantly tell the powers that be that I'd I get a whiff of a buyout my resume would be on the street same day.
Not relevant, but did you know Leon Black is Jewish
Monarch's hiring?
@@DisposableSupervillainHenchman until a equity firm does that all over again. And again. Guess who lose in this?
It's impact on healthcare has been terrible. Many smaller rural hospitals have closed down to predatory maneuvers by large finance companies.
Yep the big cities usually left leaning people who scream about the poor love to take money from the poorest and then virtue signal while they get mass immigration to come replace you at half the price gotta love commies.
Dr. Glaucomflecken has been doing a good job at raising awareness of this problem
Yeah but that's fine because the owners of PE don't live in rural areas.
-Modern economics
@@aaronandannelogan Dr G is amazing.
That’s an unfortunate reality but it’s also the natural consequence of hospitals that aren’t profitable
The biggest problem with leveraged buyouts is that the private equity firm doesn't lose anything if they wreck the company. They get their fees and commissions after gutting the company and bear no responsibility. On top of it, they can write off any loss or pay 15% on the gains. The solution is to make laws that don't allow this, but good luck with that.
Yeah.. but there is al2ays trying
Law makers benefit by not making laws that go against their investments. It doesn't matter where any politician leans, this is an obvious problem.
The fees and commissions are just to keep the lights on and pay the employers of the Private Equity company. When the company goes bankrupt the PE firm has to pay their investors first. Portfolio companies repeatedly going bankrupt causes PE firms to lose investors and lose money. Their goal isn’t to milk the company dry and then bankrupt up. They benefit when the company they have acquired does well so they can sell it later at a higher price and multiple.
Why would a company sell to private equity if it wasn't already a wreck to begin with?? If your company is doing good, your not going to sell to private equity. So you can't blames the firms, if anything they give a chance for a wrecked company to turn around.
@@TheBaldr not true most of the buyouts are because they want to sell the company and the founder want to retire
I worked at Michaels during their buyout from Apollo. To say the culture changed would be an understatement. When I first worked there we had 8 registers in the store, plenty of staff, and district managers were rarely on our ass about minutiae because they'd get taken care of before they needed to be a problem. Afterwards, we had two cash registers, only one cashier at a time, and 4 self checkouts. There was a credit card system all of a sudden that seemed deeply unpopular with customers, hardly any staff in the stores, cut hours left and right, and every manager up and down the chain seemed to be pissy at absolutely everything every single day. It became a miserable place to work, I was extremely suicidal by the end of my time there and leaving was the best thing I've ever done.
Private equity is a mistake. It's a crime.
Similar story with pOpshelf; only it started out that way and continues to worsen. It sucks when you're a "low-level" employee, yet you can tell what horrible mistakes corporate is making when they can't.
I hope you're so much better now!
It's not a crime
@@nyangau8740it is morally inexcusable. It is a cancer killing or country
@@nyangau8740 Should be.
I'm guessing that something similar has been happening to Joann's.
I grew up watching my dad work. He brought me from tending wells all the way to the C level meetings. He did well, lead massive deals in shale, but refused private equity. He saw early private equity destroys companies early in his career, easy money but gave up control. Private equity looked to hit home runs, not do the fundamentals correct. They wanted explosive growth with unsustainable models. He always stressed doing the right thing, don't try to hit home runs, pick small consistent wins. Play by the rules (legality), know your strengths and stick to them. Private equity is growth at all costs.
So it's cancer
@@jamesbenz3228 that's a decent analogy at least the way most PE firms work. Using the bodies resources to grow in a way that is unsustainable for the whole organism in the long term. The cancer doesn't care if the organism dies in this it's like a cancer however it's also like a virus in that it is transferrable to different bodies so it can do the whole thing over again!
A good man❤
@@jamesbenz3228What’s cancer. Private equity firms?
@@jamesbenz3228 came here to say the same thing. Any entity that seeks to grow at all costs functions the same way cancer does. Non-cancerous cells work in unison to keep the entire being stable and functioning. Cancer will multiply with abandon and in outgrowing its blood supply, kill large portions of itself, and ultimately, the individual within which it resides because all it seeks is to divide and replicate with no other considerations. That's private equity, vulture capital, venture capital, etc.
Remember, lads.
Sam Denby and his channels are doing great.
Wendover and Nebula are doing well.
Sam Denby is not suicidal or sickly.
@rachejohnson5427 savage. lol
Who said he was?
@@kevinp.h157I think the joke/reference is that companies (recently, Boeing) has a history of killing people who whistleblow/uncover unethical/illegal behavior and making it look like suicide. So, when someone is aging something that goes against a large and powerful corporation they might say “I am doing well and I am happy and not suicidal” so if they turn up the next day dead by apparent suicide, people will know it was really murder.
he's not a whistleblower or sharing otherwise sensitive information so he'll be fine
... probably
@@hiddendrifts yes, it’s a joke/reference, not literal.
Private equity firms: the villains in pretty much EVERY company man video
Whenever he mentions Leveraged Buyouts, I knew the company he's talking is already a walking corpse.
Its almost time for another video this Thursday
PE firms are to Company Man what Michael Eisner is to Defunctland
That's because private equity doesn't actually benefit society
Like how SPAC mergers are the villains on Wall Street Millennial's channel.
My wife is currently going through the joys of working for a company currently owned by a private equity. Looks like we're approaching the resale/go public stage.
I work for a service company that is owned by a private equity firm as well and we are at the same stage. We spent 3 years buying up smaller competitors and now we are told not to spend a dime and get ready for the sale to go public. I have heard nothing but horror stories about it so not looking forward to it. Wish all the luck to your wife.
here in Spain they are making big moves. The government bailed banks with our money, sold hundreds of thousands of houses to companies like blackrock for a massive discount , Blackrock got subsidies from the government to buy the inventory. Then Blackrock started selling the houses back to us for a huge premium.
Ah, and the government is subsidizing the banks to loan us the money to buy the houses. These subsidies dont lower the interest rates, they just increase the banks´ earnings.
Many people complained because they tried to buy these houses in the first place to live in, not to speculate. They got ignored and they are buying these same houses from Blackrock at a huge premium
I congrat her for surviving the squeezing lemon phase. Praying for her to find other company fast before the next recession.
Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners.
Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners.
Isn’t that the summary of what capitalism is all about? Such a joy! 🙃
@@Parakeet-pk6dl Not really... unless you are referring to the oversimplified Marxist summary of capitalism.
its price fixing plain and simple , local lobbying of politicians , funding local people to pretend to be for the peopel while crafting BS legislation that takes our power away !
Wendover's breakdown is kind of one-sided. Our economy wouldn't work nearly as well as it does if zombie corporations weren't allowed to die. Refer to Japan's lost decades to understand what that looks like in action. Private equity is part of that life-and-death cycle of companies. Either they nurse a business back to health, or they strip it of resources that get returned to the ecosystem. If you have all your people and capital tied up in non-profitable endeavors, your country ends up like Argentina or Venezuela. Yes, change hurts. Finding a new job or grocery store is scary. However, change is a necessary but difficult part of a functioning economy.
The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.
My charity for affordable housing in Vancouver was taken over by a new CEO who owns a private equity firm. He lays off staff, increases his own salary and the management team, decreases salary of 80 percent of existing staff, takes money (donations) that are supposed to go for a good cause into his own pockets and so on. Stop donating to charities unless you are sure the money actually goes to the places they are supposed to go, not CEO and private equity firms!!!
This seems hella illegal!
What was the name of your charity out of curiosity?
Name of company/charity...or is this just more bullshit to gain attention? Grow some balls child
Report that to the government and your boss will get in trouble and also could possibly lose your non-profit status. But to be honest, as long as some of the donations are going to programs and the mission, the boss can take a higher share of it. It just can’t be obscene. Non-profit CEOs making half a mill though isn’t out of the ordinary.
@@briansounalath true, it is crazy how much these CEOs make.
Private equity is basically just house-flipping, but for corporations.
House flipping, but the owner makes money while they own the house, and they make money selling all of the valuable stuff in the house, and then they saddle that house with the debt from a portfolio of other houses, and then they write it off as a loss on their taxes when the house becomes condemned, and then they build something more profitable on the property before they make more than their initial investment
it's not but when there are so few people in the industry they will always be made out to look badly by the general public sort of how whenever the middle, lower, and impoverished fall on hard times the first blame is "Wall St." even though anyone with a phone can be on wall st. nowadays
@@FELiPES101 I hope that boot tastes as good as you make it sound. The middle, lower and impoverished have little to no impact on how the economy functions on a macro scale yet are impacted the most when the economy fails. Rich people can always weather out economic downturns and buy more assets to hoard for pennies on the dollar while the lower class is scraping to find pennies to live.
And lives
Foreigners are distorting the markey as well
Should tax foreigners on property and stocks. 1-2% a year should do well and fix the budget a lot
Excellent video! Reminds me of a family story…
My old man worked as an HVAC Controls (BAS) technician for a corporation. His company that employed him was called “ESC Automation”.
It got bought out by a private equity firm in the mid 2000s. As soon as the takeover was complete, half of his colleagues were laid off and the remaining employees got their wages slashed in half. So more people ended up quitting and before you knew, my old man was doing all the work and overtime work for cents on the dollar just to keep regular customers happy.
After a few years of milking the corporation dry, the private equity firm sold everything to an investor who allowed things to be turned around in the company for the better. My old man was lucky and did not lose everything, but man, most folks out there are given a rotten deal with corporations these days.
That's why you shouldn't be loyal to the company. Always looking.
@@HuyHTX I get what you're trying to go at, but its gotten to the point where its getting impossible to just "hop around".
Which is why many people (including myself) don't want to work at a corporate job anymore.
Thank you so much to the team.
Private equity just has just taken over the clinical lab at the hospital where I work. Someone must have made a bunch of money because it's led to increased turn around time for results, decreased communication, lost specimens and even a C. Diff outbreak on the inpatient ward🤦♀️
Jesus hearing all the stories from nurses about private equity is insane
There's another reason that private equity bought companies end up going bankrupt a lot: PE firms make money by taking big risks with companies that have a lot of debt. They can use the borrowed money to take big risks, and if they work out, they get to keep the returns, but if they don't, they declare bankruptcy and the creditors are the ones who get screwed. These are usually companies that were super safe before PE and could easily get low interest rate loans.
If it is like that, why are the banks giving them a loan?
The answer is easy: The banks make a lot of money as well. So the majority of loans are paid back.
@@ChaosEIC PE firms have found a way to privatize gains and socialize losses by selling the land that businesses sit on and then charging them crazy high rent on it. Banks loan them money because it's a guaranteed win for the PE firm. The business retains liability for operational costs and the PE firm gets asset rights. It's a great con.
Not with huge debt are they getting a low interest loan. PE could declare bankruptcy but they ain’t trying end their business. Only a small and shady firm would do that and like make a new business. But no one would invest with them.
@@briansounalathso larger more stable companies know exactly how much they can take out of a company and community before they kill it?
Ryan Grimm did a nice (if not more brutal) breakdown of how private equity operates, and the fact it has not ended with bankers being hunted on the streets and endless RICO prosecutions still astounds me.
^doesn't know what a shepherd is
What channel was the video on? I wanna watch it now...
Ryan Grim is a partisan nut job that happened to do a report on PE.
@rachejohnson5427Soft
@@caramoore5293 same I can't find it
Actually I think its unethical because usually how they "save" companies is cutting the lowest, most vulnerable employees without warning while giving the people who actually failed the company golden parachutes
their favorite companies are ones built by great men 75 years ago and are being ruined by their grandchild who's now CEO, and would do anything to make themselves look like they're the one saving the business from financial ruin by selling to private equity firms
This assumes that employees have a right to work a job that is losing the company money.
@@tom23245 This assumes the right that the people at the top who make all the bad decisions are entitled to several million dollars that could be used to pay severance and pensions instead
Better lose some then go bust and now they are all out of a job.
@tom23245 if by 'job that loses the company money', you mean the people that you see in your day to day interactions, yes. A significant amount of companies have realized that the most cost-effective way to hire labor is to hire as little as possible and expect those employees to do what would have been the responsibilities of 2-3 people.
As a recently laid-off Yahoo employee, thank you for bringing this up Sam and team.
The company I work for got bought out by Blackstone, there's been renovations done over a couple of years, now huge rounds of layoffs. Rumours saying they want to cut the staff by 50% to reduce operating costs.
Prices keep increasing, hours cut back, layoffs, all this to turn a profit while they run it into the ground.
The antidote is to steer into the crash. Stop helping them make money and run the company dry before they can cash out.
@@mzaiteyou realize that pension funds that hold retirement money is invested in private equity
Plenty of intuitions like colleges endowments, retirement funds, etc rely on the ability to generate at least 8% a year to continue operations
@@revl6151 Pen-Sions? Re-tyre-mint? What odd old language from the before-before times.
@@revl6151 What if we just kept the retirement homes running anyways. Even better perhaps. Private equity produces no material goods, all they do is YOLO and dip. So if they produce no material goods what happens when they disappear materially? Nothing! You just have to reorganize the numbers we made up so people don’t become homeless.
@@revl6151maybe a few have to crash before people realise that their pensions are being bet at the casino.
This is happening in hospital systems nationwide. My hospital was bought out by a larger regional hospital network a few years ago which was then bought out by an even larger regional hospital network last year, and the employees have seen the negative effects trickle down. Ultimately, it's bad for patient care.
This is happening everywhere to everything. It's why literally EVERYTHING sucks now.
This is happening outside america as well. Same business model has gone global
@Q_QQ_Q Yupp. It's why I cringe when I hear about developing countries adopting Western/American business/economic models, and I'm just left screaming NO! NO, IT'S A TRAP!
The US's greatest skill is marketing and PR. They know how to sell the world an image of success that they pretend is built on meritocracy, but it is instead built off greed and privilege.
I work as a veterinarian in the USA.
Mars owns a large cap of the industry in the veterinary field.
They own VCA, Blue Pearl and Banfield. Those are veterinary clinics and hospitals. They also bought Antech. That is a veterinary reference laboratory (biopsy, cytology, bloodwork, radiology services). Now they bought Heska, an in-house laboratory machine distributor which allow us to do in house bloodwork in 1 hr.
Every year there is a 3-4% price increase to services and products. All because PE owns a vertical portion of the industry.
While they run the hospitals leaner and leaner.
Worked for a startup that was bought out by Mars 2 weeks after I joined. It all makes sense.
Inflation is about 3% a year regardless though
I love how everythinf you described is a good thing and you think it's bad lol talk about a whoosh moment
The only reason I heard of Marsh: In 1974, the very first laser-scanning UPC barcode system for a grocery store was a Marsh in Troy, Ohio.
I'm from Muncie and got way to hyped about him.mentioning it and then I just got sad😂
A pack of Wrigley's gum, right? Weird how that's a fact that we all just remember.
@@vigilantcosmicpenguin8721 Actually, scanned a multi-pack of gum. A package with enough room to print the size of barcode the tech can read.
Wonder if there was a connection to NCR in Dayton
I do Ground Penetrating Radar and Private Utility locating. Its a new industry and its expanding in its use case every year. It takes a LONG time to train someone up to do the work we do, which has been a major struggle for the small company I work for. You NEED competent operators because we are essentially locating utilities and if we fuck up they will break the utilities when they dig. In my city there is really only us and a massive nationwide GPR company that was bought out by private equity in 2017. Prior to that they had a few guys we all knew by name and they were well known and experienced. Since then they have struggled to retain employees and we constantly run into jobs where they fucked up and we acquire a new client. They also changed their GPR manufacturer and word is the new ones are NOT very good lol. Thankfully my boss declined a buyout because thats what they did in a ton of markets.
Sounds like a FTC complaint needs to be made
Odd, usually private equity buyouts resolves issues mentioned above. Must have just been poorly managed
Does the equipment have hackable 'backdoors?'
Something that is kinda referenced but has been a major problem lately is how they are acquiring the companies. They heavily leverage the acquired company with debt which can normally be fine, but with interest rates being so high right now it is hurting a lot of these privately owned companies. Some companies might not be able to keep up with the cash burn from interest and cause them to go bankrupt. This model of leveraging up is another reason why PE firms are crushing the US economy/society.
The saddest part about this situation is that the SEC won’t even make private equity firms report earnings. They literally lose money and don’t have to tell their investors or the public. It’s disgusting and the worst part is that most pension/retirement funds have about 20% of their money invested with PE firms - Almost every American working for a large company is funding this mess without knowing it.
I mean investors get quarterly earnings reports. They wouldn’t invest if they didn’t get them. The issue would be if they were fraudulent like the many Ponzi schemes one like Bernie Madoff.
It's not a mystery why the "benign structure" yields destructive results lmao. Private equity firms extract value from businesses whilst contributing nothing not already contained within it.
Benign Structure sounds like another name for a tumor.
Yeah, this channel makes a lot of good points but just can't break away from being a bit of a simp for the system. "Good Tsar, bad boyars."
@@relliotkthey call out tons of bad stuff and even end the video on the bad side of it..
@@relliotk Did you even watch the video? The entire video is pretty much shitting on most of PE.
@@kolaignad6495"Most of PE" - you're proving their point.
The thing you need to mention about the Yahoo deal is the fact that the micro soft offer included 30 billion worth of alibaba stock. The Verizon buy out didn't include the stock thats why their price seemed so much lower
It didn't seem lower, it was lower. Yahoo lost out on 30 billion worth of Alibaba stock.
@@dmurvihill The problem there is that then you have to figure out what to do with all that Chinese stock. The Chinese stock market is not as robust as the US stock market, and the restrictions the CCP places on foreign firms are highly restrictive and often not worth the hassle. This was in 2008, 6 years before Alibaba would IPO in the US in 2014. That 30 billion in Alibaba stock would be worth something in 2014, but until then its value would be completely hypothetical, assuming the CCP wouldn't nix the deal outright or force Yahoo to sell its stock to chinese companies for pennies on the dollar.
@dmurvihill You misunderstand, Yahoo is the one that owned the Alibaba stock. And the deal with Verizon didn't include buying the stock. It remained with yahoo and the company was renamed Altaba.
my family went to marsh a lot, especially since they had a free daycare while you shopped, so thanks for the mini episode on marsh and explaining how it went under
PE is now out there buying up trailer parks: buy out older owners who are ready to sell, do minimal improvements, jack up the lot rents and tell those who can't afford the increase that they are "free" to move (they own the home, but not the land it sits on).
Which is basically eviction into homelessness since where are they meant to move their trailer park to? Also, its not like the land owners particularly care to pay for the removal of the trailer, so in practice they also seize that asset too (since many ppl lack the cash to get their trailer parks relocated in the first place). Its a very common practice in trailer parks near big cities, since the lack of affordable housing means they can kick off the locals, build new houses, jack up the rents, and yet be considered "affordable housing" anyway due to how unafordable big cities have become.
"When the person making the decision is the same person unlocking the door each morning...." Is such an underrated feature of any business. Great video.
The carried interest loophole is one of the most comically unfair tax rules in the US. It needs to go away ASAP!
But it’s not a loophole it is working the exact way it’s supposed to. They aren’t getting income their company that they own is going up in value and there is risk in trying to create a company that isn’t there in deciding to get a salary job at a restaurant or something and so they get taxed less. Should small business owners be required to pay a 37% fee on all growth they have every year and get nothing when they shrink as a company? No? So why would this be different?
@@adamheuer8502 That's a false dichotomy. Just because flatly deleting carried interest is a bad idea doesn't mean that it's currently giving good outcomes, or even justifiable outcomes.
And you're kinda presenting the small business owner case like it's typical. The modern economy is utterly dominated by giant firms, and the ways they exploit tax law and financial regulations is essentially in another universe to any small business. Trying to build a case for the fairness of carried interest tax exemptions on the back of small business owners is simply nonsensical when you want to look at giant firms. They are economically, socially, institutionally, and ethically in totally different worlds.
Corporations are not people, do not have human rights, nor are owed the right to exist, they have no natural right to life the way people do. Taxation is justified by its necessity for a functional society, not by whether it's "fair" to abstract entities, and should be constructed to maximise utility to society. The way the rights of individuals becomes involved in this is complex and contentious, but corporations aren't people and so it's moot for them. When it comes to corporate taxation, the only question that matters is "what degree and structure of taxation leads to the best outcomes for society long term", harvesting their profits like trees in a long-term silviculture project.
@@adamheuer8502 no they should not, let’s start the stupid tax at 15 million. That’s more than enough for anybody to live their wildest dreams and stop 1000 people from sucking the rest of the wealth up.
It won't go away until lobbying is reformed or banned.
It’s a mantra now that it’s unfair. It seems to me if you hold a company for years and sold it then it should be LT capital gain, not ordinary income. What am I missing?
Private Equity is what you get when you optimize capitalism so much that it stops creating value in aggregate and starts simply moving value to people up the chain. In effect, it's a consequence of higher than ever income inequality, where normal people can't uphold their ways of life in the face of corporations.
Cronyism
No. Private Equity is just one small piece of the economy. Something people seem to forget is that, well, people can make choices. Corporations are not forced into selling to private equity. People aren't forced to take bad mortgages. When this stuff backfires, it should clearly send signals not to do this. All people and corporations have to do is to stop doing the d*mb move (which many already do. You just aren't focusing on them).
Private equity exists to cash out wealth built by generations of Americans. We will never get that know how back.
Like MLM for the absurdly wealthy. Except nobody has to hock Tupperware to the PTA moms.
@@io9021 If they're thinking that, then the business must be in such a sh*tty situation that it's most definitely an excellent decision. Sorry to tell you, but preserving jobs to an insane extent is how you create a worse economy that harms people in the long term.
When I think of Private Equity, I think of Sears, in which the most profitable parts were sold off for a short-term increase in profit and a long-term death for Sears. The others parts were sold to Eddie Lampert, CEO of Sears, under the umbrella of shell companies. Basically, he scammed Sears to make money in every way he could at their expense... and it would appear, got away with it, too.
Before the dying of shopping malls Sears was by far the most embarrassing and Ghetto retailer to go into during the early 2000's - 2010's compared to the other giants. Lights flickering, half empty shelves, no customers, all of their clothes were just.. eh.. and when you found an employee, they looked like their joy had been stolen from them. Not an isolated incident either. It was a really weird vibe. Their saving grace became their tool, automotive or appliance sections when they would run holiday specials, that was about it.
@@williamdaniels9728 No, their saving grace was Land's End clothing and Craftsman tools, both owned by Sears and both very profitable despite how terribly the retail stores were doing. And under Eddie Lampert, those profitable parts were sold off for a quick buck.
@@williamdaniels9728 I worked for Sears from 90-93. It was still doing pretty well back then. Went into a Sears in around 07 and it was everything you described. Now bad government policies are transforming every store into this in liberal cities. Every industry is under attack from horrendous policies from both sides of the aisle. This is an engineered takeover of everything. I never thought that implementing fascist and socialist policies at the same time was even possible yet here we are.
Didn't the CEO make loans to Sears, secured by assets more valuable than the loans? So when Sears couldn't pay the loans, the CEO made $$$ by getting the more valuable assets. And Sears then declined further.
Thts not private equity acquisition, thrs simply a company declining because of bad decisions and having to sell off operations to downsize. The most profitable parts weren't sold off either
I like how they kept the sponsor ad in the end and did not disturb the flow of content seekers. Good job, Thank you for this learning.
Thanks, a much needed video of yours!
A very well known brand of power tools was bought by an Asian private equity firm in the mid 2000s. Quality instantly plummeted even as prices soared, riding on the name recognition they had build over decades.
so many can be the right answer but when dewalt did it hurt my soul
@@jeffamato7627 yeah DeWalt was one for sure
Craftsman?
Skil as well
I was thinking of Milwaukee and to a lesser extent Ryobi and iirc AEG as well... It's a common story with tool brands sadly. I have hope for Milwaukee though, they've stuck around the pro world for a good long while now so maybe it was just a temporary dip rather than a permanent collapse. Doesn't help any of the SBD group companies or others though :(
Has anybody heard of Apollo Global Management being sued for taking out life insurance policies on patients in care establishments they bought?
You can do that?
Wait, what?!!!1!! 😱
@@yoyosingh1088 Walmart used to do that, I'm not sure if they still do. When they were, every employee was walking around with a 50k policy on them; payable directly to the company upon their death.
@@yoyosingh1088they are a corporation, they can do whatever they want .
YOU can’t do that. Multi billion dollar equity firms can do as they please, the SEC meant to investigate this is a joke and so are the tiny fines given to these companies.
This is what happened to Common Bond, a bakery and coffee shop chain with ~6 locations here in Houston Texas. They recently fired a beloved manager of 10 years at the Medical Center location because she refused to have her hours raised from 50 hrs/week to 55 hrs/week with no pay increase. Meanwhile, without raising employee compensation, prices on all goods have gone up 20-50% over the past two years. And now the private equity firm that bought this small chain several years ago is wondering why sales have slowed.
Hey Sam,
There’s a lot of very good points in this video, but I think you missed a key aspect of the impact of private equity.
One key characteristic of private equity is that the asset management company benefits from very large economies of scale as it grows. It takes roughly the same amount of people to manage a portfolio of 10 investments, whether each of those is $10m or $100m. That means that as PE managers grow, they make more margin, which can then be distributed to the owners (the partners) as dividends.
It’s much easier for PE managers to make more money by raising more funds while employing roughly the same number of people, than to make investments that perform really well. In addition, as you mentioned in the video, the management fee of 2% is a much more stable income than the carried interest (the performance fee on 20% above the hurdle).
This is why you see PE managers raising always more money: they are de-risking the cash flow for the owners (the partners).
The “issue” for the partners of the PE firm is that this is such a cash machine, that no one within the firm has enough cash to buy their stake in the PE firm when time comes for them to retire. So what happens? They IPO the company.
This is what happened with Bridgepoint in 2020, and what CVC is in the process of doing.
If you look at the investor presentations of Bridgepoint, you’ll see that 1) they make way more money off of the management fee than the performance fee 2) the focus is on raising funds - not the performance. They only need to have a good enough a performance that investors keep giving them new money.
Finally, what’s the consequence of all this? Well you’ve got more and more PE firms with more and more money to invest, who are competing for the same finite universe of companies which don’t require too much work - they make money off of deploying the capital, not off of making high returns. So they just keep buying and selling the same companies to the same other PE funds. IPOs and sales to corporates are relatively rare - meaning that the valuation is probably distorted.
When’s it going to fall?
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My partner’s and i have been considering going the same route, could you share more info please on the advisor that guides you.
Wow, her track record looks really good from what I found online. I'll take a chance and see how it goes. Thanks for the info
On top of all that, there is the private equity push in to residential property, with companies like Blackstone buying up billions in property and raising rents. Of course they'll say it's more complicated than that, but as this video describes, private equity fees benefit the partners while consumers and workers suffer the knock-on effects of the money grabs.
And then they lobby both parties and unions to push for policies that increase regulations to make it harder for someone to compete against them.
So should we pass a law to require only homeowners who
Live in that house can buy the house?
Milton freedman would say a free market works best. Sooner or later law of gravity licks in. The real value of homes will reappear, which is according to what the average person can pay.
PE firms are just the worst. My wife worked operations with a small practice that sold a controlling stake to a PE firm.
The instant that they saw a (potentially temporary, completely out of anyone's control) setback in monthly earnings (basically an insurance reimbursement projection), they wanted my wife to lay off loads of staff. The fact that this was happening in December, the weeks leading into Christmas, was of little concern to the PE firm. They wanted their heads on a spike, and fuck anyone who got in the way of that.
My wife was able to get things to happen after the holidays, but she just couldn't take it any longer. Left the company shortly thereafter and is (comparatively) blissfully working for a non-PE operated company now.
Of course the PE firm doesn't care about Christmas. They celebrate Hanukah instead...
@@Mcfunface Nevermind. You're the worst.
@@Mcfunfacethe Juice-ish ppl 😂
@@Mcfunface I'm normally a leftist with liberal social views, but its getting extremely hard to deny the evidence that's coming from the right. Wherever you look these days, there they are.
It's not just in the USA. I'm working for a German company that just recently was bought by an US PE company.
(run)
Hope you have other job prospects.
Im so sorry for your job
as an american, run.
You'll be leaning on the worker protections in Germany, a lot; it's a lot more expensive to mass layoffs over there.
I know a friend who worked for a very nice company and worked closely with the boss who was proud and passionate about his company and whom my friend described as one of the best bosses they worked for. One day, someone gave the boss the idea to let a private equity company buy out his company and make his company become bigger and better. The boss went for it and within a few years, things went to shit. Many members of staff were replaced by hard sharky business types, work culture became unfriendly, product quality went down, the boss got replaced by someone the PE company approved of. While the boss tried not to show it, my friend knew he was devastated by what became of his company.
Sorry for that guy, but he took the dumbest move possible.
I worked at a wonderful private school that got bought up by private equity. At first it all seemed fine. Pandemic came and they slashed all part-time teachers leaving them without healthcare, and shoveled the extra hours onto everyone else for no extra pay. Stripped our bespoke software out for their "standard" which made back office tasks take twice as long in the name of data management. Within 2 years over 70% of the staff I knew had left, myself included. The executives paid themselves millions in bonuses while they sold off other parts of the education portfolio while they let teachers rot.
I work for a company who provides services for private equity funds
Instantly clicked it as soon as I saw notification
What am I supposed to do with that information?
@@TheSeppentoni you can scroll up or down
They have "to the moon" mentality.
They make millions, while I make a dime, that's why I watch Wendover on company time.
@@OnkarPankanti_jr that is awesome!
This is what Richard Gere in Pretty Woman did for a living. Also Martin Sheen and Charlie Sheen in the movie Wall Street. edit: Michael Douglas was the private equity guy . Thanks all for the corrections.
It's also what they did to that night club in Good Fellas
George Costanza wasn't happy...
Martin Sheen played a aircraft maintenance worker and union representative for a junior airline in the movie "Wall Street."
Umm... I think that you meant Michael Douglas as Gordon Gekko. Martin Sheen was one of the "good guys" in that movie.
Yup and Wall Street is a classic, Tom Hanks did probably as well
private equity bought my company. Fucked everyone's day up for about a year, saddled us with debt and then sold us off to someone else. 1/10 no one enjoys this
They bought your company, so they actually removed a debt from you?
@rafradeki they purchased the company I work for with borrowed money. Which is now the companies debt. 50 million to be exact
@@rafradeki No the company just has a debt to someone else. Or a company may have no debt, gets bought, inherits the buyout debt, can not pay it, goes out of business and this makes the buyer money.
So glad you talked about Marsh. Being from rural Indiana, Marsh was the obviously best grocery store to shop at while growing up.
I would've liked to see an analysis of how much the public and other industries are subsidizing private equity. Stuff like pensions falling on the state government and banks eating the cost of default, above the implicit cost baked into the interest rate.
as an analyst in training I already didnt want to work in finance or private equity - having a positive impact on people is more important than having a positive impact on numbers
Same. I left the field back in 2022
God bless your souls.
what do you want to do then? doing data analytics as well
Employee owned companies are the way. Make a law outlawing sale of company to anyone but the employees.
Not going to happen. Nothing happens these days if the rich and their politicia lackeys can't profit from it.
This. I would love to see a video about credit unions and any pitfalls since this is a similar model. I wonder what can be learned to adopt a fuckup-proof employee owned company.
It's consumed the UK as well
There is a well known supermarket chain in UK called Morrisons. It was started several decades ago and was still owned by the guy who started it. It was a great store and tried to be a bit more traditional and low cost. It owned all of its real estate etc
When the owner died it was snapped up by private equity and now it's sold off it's real estate and leased the land back. It's prices are going up
I never go to their stores now
Problems mentionned :
Private equities buy businesses and the General Partner makes money off of the revenues, 2% of all revenues and, after a certain threshold, 7% of the revenue above threshold. This means private equities will look for short term gains that would go over the threshold to make the GP incredibly richer than otherwise. They're also taxed almost twice as little as general income by the IRS.
So in practice : Sun company buys Marsh, sells all their real estate to get money off of the sales directly into the Private Equity, all the while collecting 2%. Then they filed for bankruptcy to be done with it once it wasn't profitable any longer and all the employees lost their jobs, all the consumers lost their healthy and affordable grocery store.
Looking for efficiency, they'll also destroy healthcare, increase prices etc
The investors who put the money into the equity firm lost their money. They did not make a profit, the employees of the equity firm did. Based on that alone, the equity firm lost investors and capital. There was a negative outcome for them, purposely left out to support a particular narrative.
@@themachine9366yeah, I feel almost as bad for them as the skeletal crews that remain in companies bought by PE firms who have to do the work of all the workers who are always fired by these firms.
Literally turning businesses into pyramid schemes.
@@themachine9366 "Won't anyone think of the poor billionaires?!" - you
This is happening in the UK right now with US PE buying out vets. Prices have shot up across the board as well; what are you going to do? let your beloved pet die? I'm also worrried what the Embracer group have done to Asmodee by shifting all their debt onto them then cutting them lose after a saudi buyer backed out.
The best indicator of a brand dying is when a Hedge fund wants to buy it.
Hedge funds don't buy companies, it's private equity firms that do that, and when they do they use majority (>50%) debt via a strategy called leveraged buyout or LBO for short. This is the strategy that the public gets enraged about when it kills firms.
Those aren't the same things...
I use yahoo finance a lot!
Its not the same thing.
I found it a bit disingenuous for Wendover to claim that companies acquired as part of a leveraged buyout are 10x more likely to file for bankruptcy in the next few years as if to say it's the buyout and subsequent management of the private equity firm that caused the bankruptcy. In reality, the companies acquired by private equity are more often than not already on the way to bankruptcy.
Leveraged buyouts should be illegal, bar none. Unlikely to happen anytime soon, but these PE firms have made it even harder for normal Americans to see investment returns. Aside from basically being a flipping scam, the few legitimate PE investment scenarios are done without the opportunity for the public to invest, leading to fewer options over time for ordinary funds and investors.
That's anti semitic!
@@Mcfunface You're not helping anyone.
A woman took her three-year-old son to the dentist for a checkup, and the dentist, without even taking x-rays, said he needed seven root canals. Unfortunately, she trusted the expert. Of course it was an office in a dental chain backed by private equity, so it had to meet its revenue targets. There have been reports from former employees in different offices in this dental chain that talk about drilling healthy teeth, unneeded procedures, morning huddles of how they (the office) were going to meet their revenue targets for that day. Treating to insurance. Just one example of the horrific consequences resulting from the perverse incentives of private equity.
But if you have a job with retirement plans or pensions, it's hard to know where any of that goes, and some of it for sure going to private equity. So it's like we eat ourselves. I think Benjamin Lay had a lot figured out.
Well said. As part of a team that makes businesses grow and look after their staff and customers I'm sick of these number manipulators who can't manage anything.
Private Equity: Buying a farm with high-quality dairy cows and selling them all to the slaughterhouse
They also work hand in hand with funds shorting the stocks as well. For example Sears. For what Eddie Lampert did to pensioners he deserves the pit of hell.
But in our capitalistic paradise, he'll live like a king while the people he wronged will suffer.
The general partners will say they are making record profits, but also while just ruining the whole point of the business
The "point" of the business, any business, is to make record profits. When you understand that, you understand just how permanently ruined our economy is.
@@mzaitethis is basically what's happening in the gaming industry. All these layoffs and closures to eek out every last cent.
@@wilbo_baggins I mean it's happening everywhere. We live in a post consumer economy.
Indiana mentioned! Once again, for the usual, depressing reasons.
I love Indiana... Born and raised and I've never lived anywhere else. Hopefully people stay far away
@@kylendmiller anyone that complains about housing gets recommended to move to Indiana. Good luck!
Funny how private equity makes money getting rid of "unnecessary" staff, while installing themselves as the new unnecessary staff.
The bus routes in my home city are contracted out to various different operating companies. One of those companies is owned by a private equity firm and even though the whole network is plagued with staffing problems and cancellations, the routes run by that company are noticeably worse than the ones run by other companies
I’m part of a PE group that will be buying Wendover productions. We will fire Sam and crank out AI produced content.
😆 😆 AI is the future
-PE manager
“Here are the top 5 companies that made significant impact on American business”
PE Megafunds like Blackstone, KKR, Apollo, etc are also known for their generally awful working culture (apollo in particular). Even with standard industry hours exceeding 80+ a week on average, there are many accounts of young people dying from overwork just because they're able to make 500k a year after 4 years of harvard and 2 years at goldman sachs.
Blackrock isn't a private equity firm. Jesus christ, you all see these companies as the same things. Hedge funds, private equity firms, and the dozens of types of banks are all different.
And you know what kills me about that?
Its the ones with consciences that are dying of stress and suicide.
The heartless monsters, the ones who have no reservations about letting your grandparents die of neglect in understaffed nursing homes, or of a healthcare mistake because the nurse has been doing 12-hour shifts with twice the patient load they're supposed to have. Those absolute sociopaths, they live and thrive, and live criminally long lives and careers.
If they do that to the workers of the companies they buy, why wouldn't they do it to their own workers? They're as important as the pc's keyboards to the execs.
The hospital failure announced today is a example of this happening!
How they manage to tank something that literally sells a product you can't not buy would be impressive, if it wasn't so damn terrifying.
It's happening to the lab my dad works for. The owner sold to one of these companies, and now they are closing down all the branch labs that allowed the company to originally grow because they can just send the samples two states over to the headquarters for analysis. It was the ability for analysis to be done locally, which allowed the company to originally expand so far. Also, a little fun fact the lab was going to offer water testing for the people of the East Palestine disaster, but the company that bought the lab said that it would be a conflict of interest... guess who had a large share in Norfolk Southern...
I work for a large airline purchased a few years back by one of the largest private equity firms in the country, and between that and Covid we're significantly worse off than we were five years ago. To give an example: our widebody program is fairly new (building on a fleet of over 100 narrowbody jets), and as we regressed after Covid they suddenly cancelled the remainder of the order, including abandoning several brand new, finished, perfectly deliverable aircraft. Now, our widebody fleet is wildly successful and a number of new routes are performing well above expectations... to the point where we can't expand any more, as the few aircraft we do have are already being stretched far too thin. Not to mention the corporate culture we were renowned for has been absolutely gutted, and guest experience has taken a massive hit too.
We should start a NON-PE movement. Can't avoid it fully, but can reduce giving our business to PE backed firms. Live in NON-PE apartments, take our pets to NON-PE backed vets ..etc.
Be sure to avoid 401k's, the two biggest you know who's control them. Hence, using your own money to price you out of housing.
@@MrWhite2222my friend, you can choose what you invest into in a 401(k). It’s not a random thing.
@@FuncleChuck They mean the 401K managing companies, not the companies you have the 401K invest in; i.e., by USING a 401K (which is usually chosen by the company you work for, not the individual worker), you're benefiting Private Equity- regardless of the companies you use the 401K to invest in.
@@FuncleChuckIt's cute you think that
Vanguard is not a PE firm.
Private equity is a financial cancer.
Capitalism is the cancer. PE is just the symptom.
Things I didn't expect to see today, Marsh being featured in a Wendover Video.
I worked for a labor law poster company, earlier this year the CEO sold the company to Outsolve LLC(turns out they were a private equity firm), we met with them and they lied to us about not shutting us down and firing all of us, and we fell for their lies because they seemed to be "good" people, and in less than a year they sold all of our equipment to another poster company in California and gave all us severance packages and shut down the company, we had in been in business since 89 and they stripped us down to nothing while lying through their teeth and saying we'll still have jobs. the company I worked for was The Federal Wage and Labor Law Institute based in Houston TX.
Great video. One huge consequence of PE that you didn't mention was the cutting of R&D when PE takes ownership. This is usually identified as an easy cost to cut, because the impact to the company won't be immediate and likely won't be felt until after the PE firm has sold off the remnants of the company. They have no financial interest in that potential long-term revenue. This is obviously bad for any individuals impacted by layoffs (I have several friends who have suffered this as a result of PE buyouts).
But the macroscopic impact to the US economy is also huge. Due to the high cost of living in the US, manufacturing in the US will also cost more than global options. So US companies must stay on the forefront of R&D and innovation in order to compete, and the US economy is dependent on the growth/health of these companies. The impact of PE slashing R&D/innovation likely won't be felt for a generation, since it will be a slow fizzle rather than an economic implosion. But the impact will be real, and likely permanent, for the US economy.
That retirement home mortality statistic should be the end of the discussion. Period. What are we even doing acting like that's debatable?
Sale lease-back is an interesting concept. The college I just finished my accounting program at is actually involved in one! One of their campuses sold a bunch of its land to a grocery chain to build a new store, but then realized they gave up too much parking lot space and leased it back. Thankfully early in the project so parking space could be planned accordingly.
The tech company I work for was recently bought by PE. They've already started layoffs and trying to increase our workloads. Pretty much all us engineers are looking for new employment. There is a company-wide zero fvcks given attitude now because we all know they bought the company just to break it apart and sell the IP. 99% of the time, private equity is pure evil.
Another extremely frustrating/depressing aspect is that these firms and their affiliates are also leaders in spreading pro 'trickle down'-style propaganda throughout media and political messages...in many cases causing the victims of these equity firms to blame immigrants, minorities, corporate taxes, and progressive ideologies for their loss of jobs, stagnating wages, and reduced consumer protections.
People think snake oil salesman and scammers are a thing of the past.
They arent, they just went into finance and wrote the laws to protect themselves.
This is the golden era of scammers. And while many fell in the old times, many more saw through it. Nowadays we're less and less prepared to spot the bs.
Oh, nice to know. Arriva Denmark will either be squeezed for no good reason, or die, leading to the state railway taking over
Fuck
On the plus side. The Mediterranean will get another couple of yachts out of your increased costs for worse service.
Oh no i literaly rely on arriva for survival
@@hrafnkelloskarsson6303 as an owner of arriva, or as a passenger, or as an employee?
Thank you, Sam, for triggering me…I had JUST gotten over losing my local Marsh and now I’m back to square one 😭😂 Lord I preferred those stores over Kroger!
This is EXACTLY what happened to Shopko out of Wisconsin. They owned the land under all their stores. Private equity bought them, gutted them and left them to go bankrupt.
Hmm, it's almost like Shopko was highly mismanaged and inefficient and the only way to recover any value was to sell off assets.
The current factory i work at in the netherlands was owned by apollo. (its now westlake epoxy, used to be called hexion)
Basicly how the work is that they only look at short term, like maintance that would make its money back in 5-10 they skip, they reduce inspection, and they try to save money whatever it cost.
My local radio show/podcast, The Von Haessler Doctrine, just featured part of this on his show for Weds, May 8. I was like, "hey!! I know that TH-camr!" Apparently, this video resonates with a lot of people. Great video, Sam!
Essentially, PE buys something, sucks the wealth out of it, and tries to sell it to some sucker when theres almost nothing left of it.
Still gets paid even if they don't manage to sell.
Appreciate your videos! I’m 54 and younger generations should know there’s no shortcut to acquiring wealth, but there are ways to go about it. Fellow millionaires don’t tell the poor/middle class they need the knowledge of finance coaches to help build their wealth. If anyone here needs a good coach, here’s it..
Elizabeth Greenhunts
Get to her with her name..
Good to here. Big Thanks
So sad that this is what you’re doing with your life. Trying to scam people on TH-cam.
You had me in the first half, you stupid bot.
Inflation hits people a lot harder more than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of It's not surprising that the negative market sentiment is so high now We really need help to survive in this Economy.
To my understanding this just proves how much we need an edge as investors because playing the market like everyone else just isn't good enough.
It's really hard times, I had lots up and down working different jobs. Glad my investments started paying off so I can quit them, my decision to put in some money valued in stocks/ crypto has really saved me, all thanks to Celina Raghee
Celina Raghee news of her expertise has gone viral this my third time of coming across of her testimony, i also want to give her a try, how can I reach her??
SHE'S MOSTLY ON TELEGRAMS APPS WITH THE BELOW NAME
SHE'S MOSTLY ON TELEGRAMS APPS WITH THE BELOW NAME
11:05 I'm from Muncie Indiana and got way to hyped when you started talking about Marsh. They used to be the only store we would go to.
This why we love, trust, and respect Wendover Productions. Thank you.
I'm not against Private Equity in concept, but it seems backwards to me that there are ways for them to run a business into the ground and still walk away with a profit.
It is backwards. But it also is real. So yea. Complete nightmare.
Opinions diverge. Some claim overvaluation due to rapid gains, while others cite strong economic fundamentals justifying high valuations. Raises concern for my $600K equities going 8% up and 20% down. Should I hold on or sell off my positions and hold cash?
It may be a good idea to speak with a financial advisor who can help you develop a portfolio based on your individual goals and risk tolerance.
I do agree, Investing has gotten difficult especially after pandemic, hence why I decided to use the expertise of an advisor, my spouse kicked against the idea initially, but oh well guess who's best buddies with our advisor now hehehe.
Glad to have stumbled on this comment, I will like to give this a try. Please who is your advisor and how do I get in touch?
There are a lot of independent advisors you might look into. But i work with “Sonya Lee Mitchell” and she is excellent. You could proceed with her if she satisfies your discretion. I endorse her
Thanks for sharing, I just looked her up on the web and I would say she really has an impressive background in investing. I will write her an e-mail shortly.
All my homies hate private equity
Essentially the cause of the death of corporate pensions
Great video as ever Sam! The person at 19:39 is Dave Prentis, former General Secretary of the British trade union, UNISON - the last sort of person who would be working in private equity!
Hit $200k today, Thanks for the knowledge and nugget you have thrown my way over the last month , started with $14,000 in last month 2024.
You're correct!! I make a lot of money without relying on the government. Investing in stocks and digital currencies is beneficial at this moment.
mrs Bellamy freya was my hope during the 'bear summer' last year. I did so many mistakes but also learned so much from it, and of course from Bellamy freya
She must be really dedicated and well trusted for people to talk much good about
The fact that I got to learn and earn from her program is everything to me think about it, it's a win-win for both ways.
Wow. I'm a bit perplexed seeing Bellamy freya name been mentioned here also. Didn't know she has been good to so many people.
Rip marsh! I grew up next to one. Was always our grocery store growing up. Suburban Indiana late 90’s / early 2000’s
Marsh may not still be around, but its echos are. Old Marsh buildings are now department stores and you can still find marsh shopping karts at small time businesses. Im guessing they bought the marsh karts for cheap.
Person: caring about giving to a cause purpose.
Pencil pusher: you can itemize every minute of your day for HIGHER PROFITS
Person: what am I doing?
And that's why they send you this shit through emails, using several layers of intermediaries that have all been whipped into not questioning the person above them.
YES !
You major TH-cam channels are making the stand. I seriously believe that if it weren’t for a handful of you guys, the world would be still so ignorant today. Your truly doing gods work.
Please go back to playing Roblox.
Just seems like the basics of private equity is to exacerbate the downfall of a company. They let a company go broke yet the investors are the ones that make out. Why is this not in the mainstream news?