If only people read history books. They will know that financial instruments/ systems are easily some of the most powerful weapons in a society. That's why we have always had strict rules.
@@wayando Which books would that be? I'm working in the investment industry and I too hate a lot of things. Wanted to learn about the global financial system and the instruments more to understand the why's of the whole thing
The worst thing is that private equity own children's care homes in the UK. They have local authorities over a barrel as local authorities have a legal duty to house and care for children who cannot be left with their families. PE is literally draining money out of local authority budgets while providing the worst, neglectful, minimal "service" in these care homes. Why is this not more widely publicised?
My wife worked for one of those “child”care /nurseries. She quit after she saw the children were somewhere as 3rd 4th place as importance. Money and paperwork were more imported as childcare
@@cubbyhoo they decided to respond to the budget cuts by an extremely short-sighted policy of selling off assets rather than to cut current spending. That is very much a decision.
Private equity doesn't bring money into the economy - it acquires viable companies and then loads them with unsustainable debt, asset strips and runs away with the proceeds - usually avoiding any tax through complex ownership trails offshore. It's disgusting that UK government has allowed this to happen on such a massive scale for so long.
Not true at all. This is completely false. PE firms, at least competent ones, buy businesses on the brink or ones that need new markets. The money made by the PE firm is coming from profitability and value of the business. If the business is able to profit largely and pay off the debt quickly, then the PE firm exits with a higher profit of their own via carry. Totally wrong.
I imagine the “truth” is somewhere between both views stated here. Years ago it wasn’t called PE… it was called something like corporate raiding…or something else. The objective is to saddle the company with a lot of debt / sell assets and walk away with lots of $$. Companies like ToysRus… ended up bankrupt. Maybe in some cases PE saves a company but there are plenty of cases where the opposite is true. Guitar Center got raided by some PE firm… the company is still afloat but just look at the computers they use: it’s like something from 1990 PC dos.
Private equity has bought the dental lab where I work in Dorset. (We make dentures and crowns that your dentist fits). Within a year of them taking over, they increased prices three times, made 20% of my colleagues redundant, and we have not received a pay increase in the last 24 months!!! (We were a team that focused on quality for our clients... not any more...)
If they set up competition the PE firm will probably slash prices for 6 months with flash deals, choke the competition in its crib while they run at a loss, then raise prices again. This is how Starbucks did it
Yep, cut staff, lower standards to increase ££, sell property then lease it back to the company, raid pension funds, and on and on. They drain a company as much as they can and then sell it to another company who further drains it. And the employees are the ones who are working their butts off to keep the place afloat to eventually be laid off anyway.
Literally everyone loses but the private equity companies and members. Also, it's funny how even in the US they are trying to change this because of how anti-competitive it can get.
Who do you think funds the private equity companies with the equity? For the most part, counter to belief, it's not high net worth individuals but rather Pensions, Insurance companies and Sovereign Wealth Funds. Which we all benefit from...
@@Tailloredare we? Our social security is predicted to run out, pensions are slowly disappearing from corporate life, and insurance is becoming more and more expensive. Sure feels like we were sold a lie to enrich the management class at this point.
Tailored. Private equity funds are primarily funded by the people who can contribute millions to the funds. This is not for the bottom 99% of the people. In the US private equity is buying doctor offices and new single family homes to name two industries. Also value for customers means the folks who have money in the funds.
Go and have a look at the private equity firms list of people that provide cash to their funds, its on most big US alternatives you know. You will see that it’s not the 1% that provide all the cash. It’s your life insurance provider, the big state fund (Calpers etc.), endowments (Harvard, yale), pension funds (of big companies that people work at). So it’s not just for the 1%. The point around buying doctor office and new single family just assumes private equity buys and guts the business. That historically was the case but not anymore. Look at what KKR does with their share incentivisation for employees
Just end the central banking system that allows this type of nonsense, along with many other attrocities like the real estate bubble in 2008. Without central banks, banks cannot create money out of thin air anymore, and borrowing becomes much harder, causing prices to drop and people stop paying billions in interest to banks just to survive. Bring back the gold standard. It's that simple.
@@UncleSam-j6s But it doesn’t make sense. When you place debt into the acquired company, the evaluation of it should immediately drop like a rock, and thus making such a loan invalid under reasonable bank regulations. Something smells more than mere bad loaning practice, but systemic corruption.
@@chunglin_tang if you load yourself up with dept ie. buy a house, does the value of your economic output go to zero? No it doesn’t. Neither does the company’s with the dept on the books. These are private companies so the valuations only matter to the buyer and the bank. They can negotiate whatever kind of loan they choose to.
because everybody involved wins - businessman makes money - bank makes money and if not government will bail out the bank - tax payer loses. So everybody wins except the tax payer so why wouldn't they do it? Government will not let the big bank fail and will always take tax payer money to bail them out ,so there is literally no risk for them
That is because banks and their lending is as follows When you need money or lending they won’t give it to you When you are rich and don’t need “moar” money banks are fawning and tripping over themselves wanting to loan you capital at amazing conditions for the borrower
So buy a company at 100% value, borrow against it's "projected value" pay huge wages to single individuals, bankrupt, get a payout, walk away with the bank having the risk, but keeping the assets, i.e. the brand name, individual sectors, and physical assets, and the bank passes on their debt to their customers via inflating borrowing interests retroactively. The government then protects the bank with payouts to protect the customers. Fantastic. Money for nothing.
A lot of PE funds that buy things like supermarkets are funded partly by pensions funds also, so you’re even more correct in your assessment of who wins and who loses
@@user-mp9fv5bf5d if you ban interest people will stop depositing money which banks need in order to have reserves to be able to offer loans. Without loans people and businesses can't afford to compete as they need to raise capital that people aren't depositing. If they don't also charge interest on loans then they can't pay their employees because they wouldn't be making profit, and people/depositors hate paying charges at a bank to use their own money, especially when they are "low income". It's more complicated than all of this, but making wise choices as a bank customer is about the best you can do. The bad thing is that they all basically behave the same because they need to compete with each other for deposits, so they are encouraged (by greed) to just get the customers in. Banking, money, interest aren't inherently bad, but people with limited morals and unscrupulous attitudes are, and banks do behave bigger than they are and intimidate people, but customers need to know that they are always in a position to negotiate what they want with a bank, and business is business. Banks are not your friends, they are business partners/competitors, never make the mistake of believing they will behave to your best interest when the going gets tough.
Look at Debenhams in the UK, destroyed by PE. Its demise leaves huge holes in the high street to this day. Thames Water is another that is in a parlous state with £16 billion debt imposed by an Aussie PE company who have since sold it on.
This is how Manchester United football club ended up with leaking roofs massively flooding the stadium when it rains and with equipments that have never been upgraded for two decades. The Glazers borrowed the money to buy the club and put the loan on the club! Between servicing the loan and the Glazers taking some of the revenue the club generates, nothing is left to make renovations to clubs facilities ending up with waterfalls off the leaking roofs and the club premises not even getting cleaned regularly
@@BobbieBalldoWringe out as much profit as possible by raising prices, squeezing suppliers, cutting wages, scrimping on R&D, capex and maintenance, and finally asking for government handouts and subsidies.
this seems like something that should be illegal. You should not be able to buy a business and then load it up with debt so the company has to carry the burden and the risk while you drive off into the sunset with all your money.
how was he able to load it up with debt? who gave him the loan? So the issue are the banks. The reason why it happens is that government do not let banks fail, so there is no risk on the bank side, they will take money from tax payer if something happens which cover the banks losses. 100 years ago when banking was actually risky and there was no bail outs from government this business would never be able to get that loan because the bank wouldn't take that risk. So yeah, blame the government for that one.
No. this is capitalism with an incompetent/impotent state as is common in most anglo states. adding useless suffixes to "capitalism" simply to cope with the failures of marxist theory is just pathetic.
@@YoY664 Not really, the is a specific financial scheme which happens to work under capitalism. You are just trying to force a Marxist theory relation. When the financial mechanism really can be studied in a vacuum on it's own. Even if Marxism never existed, it would still be very odd.
@@YoY664 Boss, is it that Marxism did fail, but whatever vices come with the so called capitalism isn’t capitalism's fault; is that what you want to say?🤣🤣🤣
But they haven't 'spent' £200Bn buying these companies. They've borrowed £200Bn to buy these companies and when it goes pop we have to pick up the pieces. It isn't investment when we're ultimately on the hook for it with bailouts and austerity when the house of cards falls down
The problem is leveraged buyouts. That came with higher interest payments saddled on the troubled businesses. Regulations need to stop this practice. PE can buy all they want but with their own debt
I live in a town that has remained almost unaffected by big businesses in terms of how much space they have consumed. There is a single Sainsburys and Aldi and thats mostly it, the rest is locally owned businesses. No McDonalds, no Burger King, etc. The local council is very anti - big business and very pro local businesses. Its a town in east Kent, which makes it even more surprising.
Private equity only exploits all the inefficiencies the government puts into the market with regulations and subsidies.Private equity exploits downstream effects of government intervention.
PE bought a large business I worked for in the 80's; they sacked everyone and closed down everything bar the manufacturing facilities; the business was restructured so that everyone was a contractor, no employees and asset stripped the business; they then sold off the new 'improved' business at a huge profit, having put hundreds of people out of work, while the new workers were all on insecure contracts.
@@czerwo5805 "oh nooooo, businesses are becoming more efficient" And greater "efficiency" means destroying the web of life faster while making a few people super rich.
Private Equity drew a lot of Care Home operators bankrupt in England just 10-12 years ago. Amazing that people will bite the same bait. Another credit crunch is just round the corner I dread to imagine.
They did this for Nursing homes In US and then reduced the quality leading to more deaths. There is a class action law suit going on against one such PE firm Porto Picoolo group. Absolutely evil
Private equity and supermarkets go back longer than Morrisons. Back in the late 1980s, Gateway was the third largest supermarket chain in the UK in terms of sales and actually largest in terms of square footage. Then in 1989 it was bought out by a private equity group known as Isosceles plc. It was loaded up with debt - around US$2.1 billion (probably the equivalent of US$5.5 billion today). Of course, it struggled to repay that debt. They later merged with Kwik Save and were eventually sold to the Co-op in 2008 for £1.5 billion
To think that India... people used to respect India. But sorry.. no more. Not at all. My family used to own a take away when I was a small child. And we helped each other out. An dnow, what.. are this set of brothers, going to actually respect us ? Sorry..."but you are a different set of chinese families".... Well... what goes round comes around. I hope people will also buy out and force out India's farms. Which is what Bill Gate tried to do... Let the UK buys out the gold then from India. Be done with. The end. We don't want fin tech money any more.
@@fly463 Mohsin Issa and his brother are owners of the private equity firm Asda which along PLDR bought Morrisons. They’re Indian. But, I don’t know what the person you’re responding to is jabbering about.
Sometimes PE can really turn a business around but 9 times out of 10 they just take a business pump it full of debt fuelled growth and flip it before the business model becomes unstable.
Uk took on the American private equity model. Big mistake,people are not having a decent quality of life. Everything from car and home insurance, medical, even pet care, the prices have gone through the roof. Take pet care, vet prices have trebled, you can't get proper drugs to treat your pet, and we are becoming like the US. Animal shelters are rammed, yet the rcvs do nothing. Animals are suffering and the knock on effect is, w here do we put all those animal remains? Whether you are a pet lover or not, it affects us all. it's set to be a huge problem but everyone is ignoring it. That's just one facet of becoming little america.
00:05 Private equity investors dominate British high street businesses. 01:05 Private equity relies heavily on leveraged buyouts 01:54 Private equity firms use leveraged buyouts to acquire companies with debt. 02:38 Private Equity firms took advantage of post-Brexit opportunities in the UK 03:34 American Private Equity companies invested heavily in undervalued British assets post Brexit. 04:40 Private equity acquisition led to increased debt and financial challenges for Morrisons. 05:33 Private equity acquisitions impacting businesses and employees in the UK. 06:34 Concerns over private equity ownership in Britain
I’ve worked in a business that’s had 3 different private equity investor/owners for nearly 20 years. I started the business with others 25 years ago and our first taste of PE investment was in Year 5. Fast forward to today and my own personal experience is that I found 1 of the 3 PE firms over the 20 years to be a “rotten apple” and the other two have been great to work with and really helped to grow the business with plenty of backing to support our development plans. There are two sides to the PE story in my view…
Exactly. Not everyone is skimming and it is in all interest to have businesses that can generate, not lose, income but also serve entrepreneurs and customers alike.
It's capitalism when huge profits are made and everybody cheers BUT it's socialism when everything fails and the government has to step in and bail out investors especially banks....
@@mateusz3162 You don't know what socialism is, do you? I bet you think you have the weekend, and most worker's rights because of Capitalism and you think unions are useless probably. And that we're all less poor because of capitalism and not primarily because of the advancement of technology.
@@abdvs325 Man I am from Poland and old enough to remember my family staying in the queue for few hours just to do basic shopping. And there was fight to have just a right to have unions cause our one and only socialist ruling party was officially saying that they are not needed cause we have socialism already
@@mateusz3162 The soviet union wasn't socialist. Socialism is fundamentally about equality. Having someone who is essentially a king controlling the whole society is about as hierarchical as you can get and hence the antithesis of equality.
I am a non-resident foreigner. But I have read a lot of financial statements and analyses of companies that were bought in leveraged buyouts then spun off into publicly traded companies. The proximate cause of the problem is not the ownership. The proximate cause of the problem is the debt. So I have to ask: Who is approving these loans and purchasing these bonds and why do they think the loans and bonds will be repaid? If the loans and bonds all get repaid, then there won't be a problem. If they don't get repaid, then that is an error on the part of the creditors, and the obvious thing to do would be to tighten regulations on the banks and disclosure requirements on the bonds.
15yrs ago I was explaining to some boomers what private equity actually meant and results of this practice. None of them could understand that someone would want to f-k a company, risking bankrupting it. Draining it of resources and then sold on. And these were people who ran businesses, albeit small ones.
First I thought Bloomberg might actually have done a critical piece on the excesses of too little regulated capitalism but in reality it appears the main message are in the last two sentences and to Labour specifically: apperently there's not enough foreign investment (despite the City of London hoovering up billions each year from overseas dependencies/tax havens) and Labour has to tread the line (backing up what Starmer said recently that Labour will basically stick with Tory tax policies and keep underfunding essential services)
Can someone explain why this is legal, and what are the downsides are to banning leveraged buyouts? Seems like a disasterous cocktail for companies, and jobs in the UK.
@info781 True, but they are also responsible for many of the issues in this country. And the top 1% benefit the most from the damage caused by private equity. And the are also part of the reason why the disparity in the wealth gap increased like it has. And there is more to this story.
@@info781and are $35 trillion and rising in debt. Is the US a PE firm? So I'm taking what you laughably said with a pinch of salt. Get back to me when the US gets its integrity back by clearing the biggest debt in world history.
The private equity ecosystem is driven by government intervention, regulation and subsidies. Eliminate those and you will have less private equity and more competitive, productive and efficient businesses.
@@mimi21746 They'll do a story in Britain because nobody in the US will pay attention, but meanwhile US private equity firms and others can continue to pillage unscathed here.
@@stingyblue8189 Private Equity has already been dragged into various Congressional Hearings. Any legislative measures, however, will likely have to wait until after the 2024 elections, though, given how ineffective the Republican Party increasingly is.
In an alternative reality, things like leveraged buyouts will be illegal and these investors would be jailed for causing unparalleled misery and inequality.
Usually Private Equity firms are on the lookout for businesses with low levels of debt and valuable physical assets that they can end up owning/controlling via an LBO (Leveraged Buyout) by promising the top management and ownership a lucrative amount to convince them to sell, then taking on a lot of debt to fund the purchase of their business (some of those proceeds go to payoff the current management), and finally stripping the business of its key assets and transferring the debt to the business.
The reality is in PE the actual operations of an acquired business are an afterthought. The goons who get the loans to purchase the business get their returns after stripping assets like the real estate of the businesses. After that they got their cut, and are just increasing prices and giving lower quality services without a care in the world.
Exactly what happened to the tech startup I worked at. Got bought by a publicly traded tech company, all the shareholders and board member get lucrative payouts and wage increases, then 50% of the company gets sacked, we raise our prices 30%, and the quality of the product has dropped significantly
In the meantime the US has hit it's highest ever level of debt. The richest people in the world are benefiting from all of this, it is pretty scary really.
Thames Water was a leveraged buyout as well. A strategically important service provider was allowed to engage in such high risk transaction...we can see how well turned that one out as well.
Leveraged Buyouts must be made illegal. PE can buy as many companies they want at whatever price they desire, but do it with your money and your debt. Funfact: Almost 95% of Companies bought with leveraged fail within 10 years of the buyout. Another Funfact: 99.9% of Companies purchased with Leveraged Buyouts were already successful and established businesses.
Not a problem, government does not need to regulate. Retail chains grow, they die, they merge , they split. Sears gets replaced by Amazon and Wal-Mart, not a big deal, we don't need laws to save Sears and K-Mart.
@@info781 : Retail stores come and go just like fads as the market changes most certainly. But what these private equity firms do to businesses and their employees is just plain evil. Read up on how the private equity takeover and merging of Cabelas and Basspro decimated the economy of an entire town when they shut down a corporate HQ so they could have even greater profits. It’s quite sick.
@@info781 : What you describe is the basic rise and decline cycle of any business or industry as fads come and go, technology changes, and other economic factors affect a business’s ability to thrive or fail. But what private equity firms do to a business is far more sinister and negative for labor and the general economic landscape. You should read up about how the forced merger between Cabellas and Bass Pro Ajops by a private equity firm for THEIR benefit and profits ruined an entire town’s economy. That is the evil of private equity firms at work.
The people who make money from this are very powerful, this isn't your mortgage, they're borrowing billions and will scratch the backs of a political class and banking sector that would allow it.
I'm not a fintech expert but one can see that this system of buying a company with debt and then infringing that debt on the company while you get away with the profit seems surreal to me. Bottomline, the seller boss gets his money, the buyer mafia boss get his profit and the workers get to pay the debt or risk being laid off because the business goes bankrupt. Well done English politicians for permitting such a scam. That is what Noam Chomsky talks about when referring to predatory financial organisms.
First part is pretty misleading. Leverage used in leveraged buyouts is used to finance the acquisition of the company’s shares, not financing the operating costs of the business.
The shareholders receive lower dividends and FCFE due to debt service. You cannot separate the company from its shareholders. This is like asking “is it you or your bank account which pays for rent”
@@adamheuer8502not really. Company debt does not transer into shareholders debt unless you have certain company structures that would allow this by law.
Thats it boys. England is officially even on paper owned by foreign companies. A lot of these private equity groups have high shareholders from the UAE or Saudi family. Welcome to Pakistan 2.0
Generally speaking, any company is for sale if you offer enough money and the sale is legal. In this case, I refer you to Tom Nicholas' video Why Cities Go Bust about how British cities are coping with massive political and therefore economic headwinds.
Yes this is exactly how it was purchased. The premier league has however passed a new law where only 65% of the value of the club can be purchased using debt.
5:59 - "When these (private equity buyout) deals go wrong, it can have real world impact. The purpose of these deals is extracting value from the purchased companies and delivering that to shareholders. This necessarily means ripping off the workers who generated that value: jobs are lost, those that remain are underpaid, and pensions disappear. Corners are cut so that the products and services rendered after the acquisition fall in quality. So it certainly does not deliver value to customers or other stakeholders in the community. It's just money extracted and deposited in off-shore bank accounts. WHEN they go wrong? If they ever go "right," it's accidental because stakeholders are not a priority. How is this legal?
Wait, if you sell a company for £800,000 entailing £400,000 of debt, then you're actually selling it for £1.2 million, because your bank balance goes up £1.2 million (£800,000 more money & £400,000 less debt) and the buyer's bank balance goes down £1.2 milllion (£800,000 less money & £400,000 more liability).
But how can PEs borrow money to acquire a company and then this debt falls on the acquired company and not on them? I don't understand how's that even possible. Or even if then they raise new debt with the company, that money can't (or shouldnt) go to the PEs
The problem is Privates Equity firms are heavily linked to pension funds and is becoming too big to fail. They come in dump a load of debt on the company and the reduce the number of employees. They are parisites
PE was made to turn around unsuccessful companies by buying them. However Leveraged Buyouts allow PE firms to buy successful companies, hollow them out, burden it with debt and take huge amounts of profit out of it
It’s all about prices to customers, not value. So long as the voters don’t get hit with higher prices, PE firms will get away with all their non value adding trickery.
Appreciate the use of graphs and actual numbers, I feel like a lot of finance journalism doesn't respect the competence of the readership / viewership.
Private equity is what destroyed EMI. Which was once one of the largest record companies in the world. It is doing the same to countless other heritage British companies.
The discussion around ''How Private Equity Ate Britain'' highlights significant economic and social concerns tied to private equity firms' dominance in the UK. These firms, especially after Brexit, have aggressively acquired undervalued companies, particularly in the retail sector, through leveraged buyouts. While this influx of investment can rejuvenate struggling businesses, the accompanying high debt loads and rising interest rates often push these companies into precarious financial positions, as seen with firms like Morrisons. This has ripple effects on pricing, job security for millions, and economic stability. The role of private equity underscores a broader tension between attracting much-needed foreign capital post-Brexit and managing the risks posed by unsustainable debt levels. For the UK to balance economic revitalization with consumer and employee protection, policymakers face the challenge of creating effective regulations without discouraging critical investment inflows.
The supreme irony would be if the private equity debt was financed by british banks. British assets bought on the cheap by foreigners financed by british banks. And if the companies go bust its the british banks that will be paying the cost.
Sorry, but I fail to understand how the VC buyers can transfer that debt to the company and then if it goes bankrupt, that money is wiped. There is a severe lack of legislation if it's that easy to buy something with debt, but then pass on the debt to the company you bought, and avoid any responsibility of paying back the debt that YOU took, not the company.
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Impose high estate taxes.
Make it impossible to pass down a business to future generations.
No choice but to sell to private equity.
Just imagine how bad something has to be for Bloomberg to call it problematic
If only people read history books. They will know that financial instruments/ systems are easily some of the most powerful weapons in a society.
That's why we have always had strict rules.
@@wayando Concentration of access to capital: New York and London. It shouldn't be set up this way.
"Annihilation of mankind will be problematic."
@@wayando Which books would that be? I'm working in the investment industry and I too hate a lot of things. Wanted to learn about the global financial system and the instruments more to understand the why's of the whole thing
Exactly!
The worst thing is that private equity own children's care homes in the UK. They have local authorities over a barrel as local authorities have a legal duty to house and care for children who cannot be left with their families. PE is literally draining money out of local authority budgets while providing the worst, neglectful, minimal "service" in these care homes. Why is this not more widely publicised?
That is SO wrong. I hadn't made that connection to child and govt. services.
My wife worked for one of those “child”care /nurseries.
She quit after she saw the children were somewhere as 3rd 4th place as importance. Money and paperwork were more imported as childcare
Local authorities used to run these homes. They decided to sell them. If they are now held over a barrel, it is a result of their choice.
@@dominiccharles6072 ah yes "decided" I am sure it had nothing to do with the giant budget cuts of the last 14 years...
@@cubbyhoo they decided to respond to the budget cuts by an extremely short-sighted policy of selling off assets rather than to cut current spending. That is very much a decision.
Private equity doesn't bring money into the economy - it acquires viable companies and then loads them with unsustainable debt, asset strips and runs away with the proceeds - usually avoiding any tax through complex ownership trails offshore. It's disgusting that UK government has allowed this to happen on such a massive scale for so long.
And the ££ goes off shore, with little or no taxes paid. And then people wonder why their lives are only getting worse.
but the person who sold the company received money
They didn't "allow" it to happen, they encouraged it to happen.
The average person will now reap the rewards for their recklessness.
Not true at all. This is completely false. PE firms, at least competent ones, buy businesses on the brink or ones that need new markets. The money made by the PE firm is coming from profitability and value of the business. If the business is able to profit largely and pay off the debt quickly, then the PE firm exits with a higher profit of their own via carry. Totally wrong.
I imagine the “truth” is somewhere between both views stated here. Years ago it wasn’t called PE… it was called something like corporate raiding…or something else. The objective is to saddle the company with a lot of debt / sell assets and walk away with lots of $$. Companies like ToysRus… ended up bankrupt. Maybe in some cases PE saves a company but there are plenty of cases where the opposite is true. Guitar Center got raided by some PE firm… the company is still afloat but just look at the computers they use: it’s like something from 1990 PC dos.
Private equity has bought the dental lab where I work in Dorset. (We make dentures and crowns that your dentist fits). Within a year of them taking over, they increased prices three times, made 20% of my colleagues redundant, and we have not received a pay increase in the last 24 months!!! (We were a team that focused on quality for our clients... not any more...)
You should set up in competition!
@@celiacresswell6909 don’t think most people want to be in a business of running a business. That’s a pretty pointless comment.
You should all quit and make a new dentist studio right next to it with lower prices and still pay employees more.
If they set up competition the PE firm will probably slash prices for 6 months with flash deals, choke the competition in its crib while they run at a loss, then raise prices again. This is how Starbucks did it
Yep, cut staff, lower standards to increase ££, sell property then lease it back to the company, raid pension funds, and on and on. They drain a company as much as they can and then sell it to another company who further drains it. And the employees are the ones who are working their butts off to keep the place afloat to eventually be laid off anyway.
Literally everyone loses but the private equity companies and members. Also, it's funny how even in the US they are trying to change this because of how anti-competitive it can get.
Who do you think funds the private equity companies with the equity? For the most part, counter to belief, it's not high net worth individuals but rather Pensions, Insurance companies and Sovereign Wealth Funds. Which we all benefit from...
@@Tailloredare we? Our social security is predicted to run out, pensions are slowly disappearing from corporate life, and insurance is becoming more and more expensive. Sure feels like we were sold a lie to enrich the management class at this point.
Tailored. Private equity funds are primarily funded by the people who can contribute millions to the funds. This is not for the bottom 99% of the people. In the US private equity is buying doctor offices and new single family homes to name two industries. Also value for customers means the folks who have money in the funds.
Go and have a look at the private equity firms list of people that provide cash to their funds, its on most big US alternatives you know. You will see that it’s not the 1% that provide all the cash. It’s your life insurance provider, the big state fund (Calpers etc.), endowments (Harvard, yale), pension funds (of big companies that people work at).
So it’s not just for the 1%.
The point around buying doctor office and new single family just assumes private equity buys and guts the business. That historically was the case but not anymore. Look at what KKR does with their share incentivisation for employees
Just end the central banking system that allows this type of nonsense, along with many other attrocities like the real estate bubble in 2008. Without central banks, banks cannot create money out of thin air anymore, and borrowing becomes much harder, causing prices to drop and people stop paying billions in interest to banks just to survive. Bring back the gold standard. It's that simple.
Even Warren Buffett has stated that private equity is very bad for any country.
It’s sad. Private equity and Wall Street also ruined America because profit is more important than people and communities.
you like communities? what are you a communist??
@@mtljinwhat are you, a child?
If by private equity you mean "Tibesmen" than yes
@@mtljin 😂
Literally was just saying this to my daughter yesterday.
I still don’t understand why transferring the debt into the acquired company is legal at all
It’s between the bank and the buyer. None of your business
@@UncleSam-j6s But it doesn’t make sense. When you place debt into the acquired company, the evaluation of it should immediately drop like a rock, and thus making such a loan invalid under reasonable bank regulations. Something smells more than mere bad loaning practice, but systemic corruption.
@@chunglin_tang if you load yourself up with dept ie. buy a house, does the value of your economic output go to zero? No it doesn’t. Neither does the company’s with the dept on the books. These are private companies so the valuations only matter to the buyer and the bank. They can negotiate whatever kind of loan they choose to.
because everybody involved wins - businessman makes money - bank makes money and if not government will bail out the bank - tax payer loses. So everybody wins except the tax payer so why wouldn't they do it? Government will not let the big bank fail and will always take tax payer money to bail them out ,so there is literally no risk for them
@@sten260 perfect answer....i knew logically and financially it didn't make sense but someone has to pay for asinine decisions
They need to regulate where the debt comes from and how much. How come when I buy a house I am stress tested for up to 7-8% rates but firms aren't?
Corporate socialism
There are lots of tests they have to go through. No one's going to lend to an insolvent businessman
That is because banks and their lending is as follows
When you need money or lending they won’t give it to you
When you are rich and don’t need “moar” money banks are fawning and tripping over themselves wanting to loan you capital at amazing conditions for the borrower
don't like it, don't borrow then?
@@petrichor259 It's literally just capitalism. Nothing socialist about it.
So buy a company at 100% value, borrow against it's "projected value" pay huge wages to single individuals, bankrupt, get a payout, walk away with the bank having the risk, but keeping the assets, i.e. the brand name, individual sectors, and physical assets, and the bank passes on their debt to their customers via inflating borrowing interests retroactively. The government then protects the bank with payouts to protect the customers. Fantastic. Money for nothing.
A lot of PE funds that buy things like supermarkets are funded partly by pensions funds also, so you’re even more correct in your assessment of who wins and who loses
And what's the common factor with all these things? Interest. Ban interest and none of this would happen
@@user-mp9fv5bf5d if you ban interest people will stop depositing money which banks need in order to have reserves to be able to offer loans. Without loans people and businesses can't afford to compete as they need to raise capital that people aren't depositing. If they don't also charge interest on loans then they can't pay their employees because they wouldn't be making profit, and people/depositors hate paying charges at a bank to use their own money, especially when they are "low income". It's more complicated than all of this, but making wise choices as a bank customer is about the best you can do. The bad thing is that they all basically behave the same because they need to compete with each other for deposits, so they are encouraged (by greed) to just get the customers in. Banking, money, interest aren't inherently bad, but people with limited morals and unscrupulous attitudes are, and banks do behave bigger than they are and intimidate people, but customers need to know that they are always in a position to negotiate what they want with a bank, and business is business. Banks are not your friends, they are business partners/competitors, never make the mistake of believing they will behave to your best interest when the going gets tough.
Interest is the root of all evil. But the whole world relies on it and it’s near impossible to get rid. Worst thing ever created
Look at Debenhams in the UK, destroyed by PE. Its demise leaves huge holes in the high street to this day. Thames Water is another that is in a parlous state with £16 billion debt imposed by an Aussie PE company who have since sold it on.
This is how Manchester United football club ended up with leaking roofs massively flooding the stadium when it rains and with equipments that have never been upgraded for two decades. The Glazers borrowed the money to buy the club and put the loan on the club! Between servicing the loan and the Glazers taking some of the revenue the club generates, nothing is left to make renovations to clubs facilities ending up with waterfalls off the leaking roofs and the club premises not even getting cleaned regularly
Fun fact I went to college with his daughter and she was a whale of a gal
Also look at Manchester airport, the worst airport in the world? Used to be brilliant when I was younger and operated by the council
Old Toilet
They can’t put loan on club they can use club as collateral. If they walk away they won’t have club anymore.
@@BobbieBalldoWringe out as much profit as possible by raising prices, squeezing suppliers, cutting wages, scrimping on R&D, capex and maintenance, and finally asking for government handouts and subsidies.
this seems like something that should be illegal. You should not be able to buy a business and then load it up with debt so the company has to carry the burden and the risk while you drive off into the sunset with all your money.
EXACTLY, UTD is the prime example.
you buy it = you won it, simple if you ask me...
Hard to legislate for something like that. It needs to be a societal, business, political and cultural change.
that's how a mortgage works. Its not just you who is responsible for paying it off. there is a lein on the property too
how was he able to load it up with debt? who gave him the loan? So the issue are the banks. The reason why it happens is that government do not let banks fail, so there is no risk on the bank side, they will take money from tax payer if something happens which cover the banks losses. 100 years ago when banking was actually risky and there was no bail outs from government this business would never be able to get that loan because the bank wouldn't take that risk. So yeah, blame the government for that one.
Way past late stage capitalism. This is necrotic capitalism.
That's an accurate description of private equity.😊
No. this is capitalism with an incompetent/impotent state as is common in most anglo states. adding useless suffixes to "capitalism" simply to cope with the failures of marxist theory is just pathetic.
You are very correct.
@@YoY664 Not really, the is a specific financial scheme which happens to work under capitalism. You are just trying to force a Marxist theory relation. When the financial mechanism really can be studied in a vacuum on it's own. Even if Marxism never existed, it would still be very odd.
@@YoY664 Boss, is it that Marxism did fail, but whatever vices come with the so called capitalism isn’t capitalism's fault; is that what you want to say?🤣🤣🤣
But they haven't 'spent' £200Bn buying these companies. They've borrowed £200Bn to buy these companies and when it goes pop we have to pick up the pieces. It isn't investment when we're ultimately on the hook for it with bailouts and austerity when the house of cards falls down
Private equity is evil.
It's called Capitalism baby
@@endxofxeternity It's one of the most evil forms of capitalism, baby.
@@endxofxeternity More like a scam baby
@@alexpark472 Santa baby.
@@endxofxeternity It's actually cronyism.
The problem is leveraged buyouts. That came with higher interest payments saddled on the troubled businesses. Regulations need to stop this practice. PE can buy all they want but with their own debt
The irony of private "equity" being driven by debt. Maybe it should be called priavte debt.
I live in a town that has remained almost unaffected by big businesses in terms of how much space they have consumed. There is a single Sainsburys and Aldi and thats mostly it, the rest is locally owned businesses. No McDonalds, no Burger King, etc. The local council is very anti - big business and very pro local businesses. Its a town in east Kent, which makes it even more surprising.
Private Equity ruins everything.
what? you want govt. to run Ikea, walmart and amazon.
@@AnotherComment-rl6fv Literally none of those are PE owned.
Private equity only exploits all the inefficiencies the government puts into the market with regulations and subsidies.Private equity exploits downstream effects of government intervention.
folks just walk around ant town in the UK its being stripped of every penny of profit and we are left with absolute poverty.
PE bought a large business I worked for in the 80's; they sacked everyone and closed down everything bar the manufacturing facilities; the business was restructured so that everyone was a contractor, no employees and asset stripped the business; they then sold off the new 'improved' business at a huge profit, having put hundreds of people out of work, while the new workers were all on insecure contracts.
Amazingly depressing but a much needed insight
Private equity has to be the most evil thing I have learnt about in recent months
thanks to murica... thats what they know best, destruction
oh nooooo, businesses are becoming more efficient
Ain't that the truth. Took the words straight out of my mind.
greed with extra steps
@@czerwo5805 "oh nooooo, businesses are becoming more efficient" And greater "efficiency" means destroying the web of life faster while making a few people super rich.
Private Equity drew a lot of Care Home operators bankrupt in England just 10-12 years ago. Amazing that people will bite the same bait. Another credit crunch is just round the corner I dread to imagine.
They did this for Nursing homes In US and then reduced the quality leading to more deaths.
There is a class action law suit going on against one such PE firm Porto Picoolo group. Absolutely evil
And the tax payer will be held responsible for the debt, while single mothers & disabled people are blamed for causing it. 😮
But can't they just drop interest rates again 🤔
@@adiintel1 No, they have to prepare the markets, and reduce it gradually.
They never learn in Babylon UK once they sniff a scent of money 💰 they will sell their soul to the devil pawning their grandmother in exchange.
Private equity and supermarkets go back longer than Morrisons. Back in the late 1980s, Gateway was the third largest supermarket chain in the UK in terms of sales and actually largest in terms of square footage. Then in 1989 it was bought out by a private equity group known as Isosceles plc. It was loaded up with debt - around US$2.1 billion (probably the equivalent of US$5.5 billion today).
Of course, it struggled to repay that debt. They later merged with Kwik Save and were eventually sold to the Co-op in 2008 for £1.5 billion
To think that India... people used to respect India. But sorry.. no more. Not at all. My family used to own a take away when I was a small child. And we helped each other out. An dnow, what.. are this set of brothers, going to actually respect us ? Sorry..."but you are a different set of chinese families".... Well... what goes round comes around. I hope people will also buy out and force out India's farms. Which is what Bill Gate tried to do... Let the UK buys out the gold then from India. Be done with. The end. We don't want fin tech money any more.
@@MeiinUKwhat are you even talking about ?
Did Indian companies buy some grocery company or something ?
@@fly463 Mohsin Issa and his brother are owners of the private equity firm Asda which along PLDR bought Morrisons. They’re Indian. But, I don’t know what the person you’re responding to is jabbering about.
@@stingyblue8189 oh ok
@@stingyblue8189its not to do with nationality, its to do with money, you are failing to see the difference.
Sometimes PE can really turn a business around but 9 times out of 10 they just take a business pump it full of debt fuelled growth and flip it before the business model becomes unstable.
Your ratio is skewed, it is more like 1 Success for 50 Failures
Uk took on the American private equity model. Big mistake,people are not having a decent quality of life. Everything from car and home insurance, medical, even pet care, the prices have gone through the roof. Take pet care, vet prices have trebled, you can't get proper drugs to treat your pet, and we are becoming like the US. Animal shelters are rammed, yet the rcvs do nothing. Animals are suffering and the knock on effect is, w here do we put all those animal remains? Whether you are a pet lover or not, it affects us all. it's set to be a huge problem but everyone is ignoring it. That's just one facet of becoming little america.
The future looks so bleak in the UK
00:05 Private equity investors dominate British high street businesses.
01:05 Private equity relies heavily on leveraged buyouts
01:54 Private equity firms use leveraged buyouts to acquire companies with debt.
02:38 Private Equity firms took advantage of post-Brexit opportunities in the UK
03:34 American Private Equity companies invested heavily in undervalued British assets post Brexit.
04:40 Private equity acquisition led to increased debt and financial challenges for Morrisons.
05:33 Private equity acquisitions impacting businesses and employees in the UK.
06:34 Concerns over private equity ownership in Britain
I’ve worked in a business that’s had 3 different private equity investor/owners for nearly 20 years.
I started the business with others 25 years ago and our first taste of PE investment was in Year 5. Fast forward to today and my own personal experience is that I found 1 of the 3 PE firms over the 20 years to be a “rotten apple” and the other two have been great to work with and really helped to grow the business with plenty of backing to support our development plans.
There are two sides to the PE story in my view…
How is this the only sensible comment in a sea of idiocy and lack of education. Reading this comment section kills my faith in humanity
Exactly. Not everyone is skimming and it is in all interest to have businesses that can generate, not lose, income but also serve entrepreneurs and customers alike.
It depends what the business is. If it is a commercial concern where the owners genuinely improve the business ok, not if it is a public service.
Finally I have understood why corporates have so much debt
It's capitalism when huge profits are made and everybody cheers BUT it's socialism when everything fails and the government has to step in and bail out investors especially banks....
and also if it is real socialism everyone are much more poor
i never heard that before
@@mateusz3162 You don't know what socialism is, do you? I bet you think you have the weekend, and most worker's rights because of Capitalism and you think unions are useless probably. And that we're all less poor because of capitalism and not primarily because of the advancement of technology.
@@abdvs325 Man I am from Poland and old enough to remember my family staying in the queue for few hours just to do basic shopping. And there was fight to have just a right to have unions cause our one and only socialist ruling party was officially saying that they are not needed cause we have socialism already
@@mateusz3162 The soviet union wasn't socialist. Socialism is fundamentally about equality. Having someone who is essentially a king controlling the whole society is about as hierarchical as you can get and hence the antithesis of equality.
I am a non-resident foreigner. But I have read a lot of financial statements and analyses of companies that were bought in leveraged buyouts then spun off into publicly traded companies. The proximate cause of the problem is not the ownership. The proximate cause of the problem is the debt. So I have to ask: Who is approving these loans and purchasing these bonds and why do they think the loans and bonds will be repaid? If the loans and bonds all get repaid, then there won't be a problem. If they don't get repaid, then that is an error on the part of the creditors, and the obvious thing to do would be to tighten regulations on the banks and disclosure requirements on the bonds.
Stuff like this is how the economy gets trapped into a corner it cant escape. Very bubbly if you ask me.
It is not against the law to start a new grocery store chain, private equity overpaid, they are the losers.
It certainly went well for Thames Water.
Don't worry, I'm sure customers will be more than happy to pay for it.
15yrs ago I was explaining to some boomers what private equity actually meant and results of this practice. None of them could understand that someone would want to f-k a company, risking bankrupting it. Draining it of resources and then sold on. And these were people who ran businesses, albeit small ones.
Likewise. I have always been suspicious of mergers and aquisitions. It's just asset stripping of the acquired company.
Manchester United being a prime example
First I thought Bloomberg might actually have done a critical piece on the excesses of too little regulated capitalism but in reality it appears the main message are in the last two sentences and to Labour specifically: apperently there's not enough foreign investment (despite the City of London hoovering up billions each year from overseas dependencies/tax havens) and Labour has to tread the line (backing up what Starmer said recently that Labour will basically stick with Tory tax policies and keep underfunding essential services)
Can someone explain why this is legal, and what are the downsides are to banning leveraged buyouts? Seems like a disasterous cocktail for companies, and jobs in the UK.
Exactly, seems like plain old fraud
@JohnDoe-nl3nf
Fraud...that's been legalized...thru lobbying.
example: Manchester United
😢
How so?
Private Equity started this in the USA around 1978/79
And yet, USA has very low unemployment and the best economy in the world.
@info781 True, but they are also responsible for many of the issues in this country. And the top 1% benefit the most from the damage caused by private equity. And the are also part of the reason why the disparity in the wealth gap increased like it has. And there is more to this story.
@@info781and are $35 trillion and rising in debt. Is the US a PE firm? So I'm taking what you laughably said with a pinch of salt. Get back to me when the US gets its integrity back by clearing the biggest debt in world history.
The private equity ecosystem is driven by government intervention, regulation and subsidies. Eliminate those and you will have less private equity and more competitive, productive and efficient businesses.
The UK decided to go on finance gambling instead of hard work !… now it’s on it’s knees !… silly games lead to silly prizes!…
Interest (or usury as it was called) ruins everything. A small number of greedy, powerful people becomes the order of the day.
That small group of greedy ”aliens” who wear little hats and get upset when you call them out on there evil ways
Regulation of companies is almost non-existent in the UK. That’s why all these greedy wolves come here.
Stronk Pound is everything
(read: sarcasm)
I thought Bloomberg loved private equity? You cheerlead for it every day on your shows and networks.
Maybe we're slowly creeping towards reform. Be glad.
Actually this proves the quality of Bloomberg's Journalism, their journalists are allowed to do independent research
@@mimi21746 They'll do a story in Britain because nobody in the US will pay attention, but meanwhile US private equity firms and others can continue to pillage unscathed here.
@@stingyblue8189 Private Equity has already been dragged into various Congressional Hearings. Any legislative measures, however, will likely have to wait until after the 2024 elections, though, given how ineffective the Republican Party increasingly is.
In an alternative reality, things like leveraged buyouts will be illegal and these investors would be jailed for causing unparalleled misery and inequality.
Why? They won the game of capitalism fair and square.
Being mad and trying to change the rule because you lose is not the answer.
Usually Private Equity firms are on the lookout for businesses with low levels of debt and valuable physical assets that they can end up owning/controlling via an LBO (Leveraged Buyout) by promising the top management and ownership a lucrative amount to convince them to sell, then taking on a lot of debt to fund the purchase of their business (some of those proceeds go to payoff the current management), and finally stripping the business of its key assets and transferring the debt to the business.
The reality is in PE the actual operations of an acquired business are an afterthought. The goons who get the loans to purchase the business get their returns after stripping assets like the real estate of the businesses. After that they got their cut, and are just increasing prices and giving lower quality services without a care in the world.
Exactly what happened to the tech startup I worked at. Got bought by a publicly traded tech company, all the shareholders and board member get lucrative payouts and wage increases, then 50% of the company gets sacked, we raise our prices 30%, and the quality of the product has dropped significantly
In the meantime the US has hit it's highest ever level of debt. The richest people in the world are benefiting from all of this, it is pretty scary really.
Thames Water was a leveraged buyout as well. A strategically important service provider was allowed to engage in such high risk transaction...we can see how well turned that one out as well.
Private Equity has be the same no pity, hight interest rates they don't care about us all they care is their more and more.
Leveraged Buyouts must be made illegal.
PE can buy as many companies they want at whatever price they desire, but do it with your money and your debt.
Funfact: Almost 95% of Companies bought with leveraged fail within 10 years of the buyout.
Another Funfact: 99.9% of Companies purchased with Leveraged Buyouts were already successful and established businesses.
It feels like we have sold off so much of UK. Even our water and our trains and post.
Even the National Grid
Yeah, winning ww2 only to surrender to US capital 80 years later
how did we allow all this greed?
Nice video creators! I love when people explain big economy words understandably 👍
Still waiting for the media in the US to talk about this problem too.
Not a problem, government does not need to regulate. Retail chains grow, they die, they merge , they split. Sears gets replaced by Amazon and Wal-Mart, not a big deal, we don't need laws to save Sears and K-Mart.
@@info781 : Retail stores come and go just like fads as the market changes most certainly. But what these private equity firms do to businesses and their employees is just plain evil. Read up on how the private equity takeover and merging of Cabelas and Basspro decimated the economy of an entire town when they shut down a corporate HQ so they could have even greater profits. It’s quite sick.
But then we have dead high streets which is a problem that a growing number of people really dislike.
@@Jon-hh3gz So rents will drop, smaller businesses will come in that can now afford the rent.
@@info781 : What you describe is the basic rise and decline cycle of any business or industry as fads come and go, technology changes, and other economic factors affect a business’s ability to thrive or fail. But what private equity firms do to a business is far more sinister and negative for labor and the general economic landscape. You should read up about how the forced merger between Cabellas and Bass Pro Ajops by a private equity firm for THEIR benefit and profits ruined an entire town’s economy. That is the evil of private equity firms at work.
that kind of sounds like it should be illegal
The people who make money from this are very powerful, this isn't your mortgage, they're borrowing billions and will scratch the backs of a political class and banking sector that would allow it.
I'm not a fintech expert but one can see that this system of buying a company with debt and then infringing that debt on the company while you get away with the profit seems surreal to me.
Bottomline, the seller boss gets his money, the buyer mafia boss get his profit and the workers get to pay the debt or risk being laid off because the business goes bankrupt. Well done English politicians for permitting such a scam.
That is what Noam Chomsky talks about when referring to predatory financial organisms.
America is at the beginning stages of this kind of decline.
In the US, private equity just destroyed the much-beloved Red Lobster restaurant chain. Don't let it happen to UK or anywhere else.
UK is already ruined and in far worse stage
It happened to a lot of our department stores which was the catalyst for dead high streets. Go to any typical UK town and it's just deadbeat.
I worked for a company in the US that was part of a PE leverage buy out. It had a terrible effect on the workforce and company balance sheets.
They ate it, they pooped it out, they spat on it and then they flushed it down the toilet.
A country set up to serve the greedy rich suffers symptoms of greedy rich people
Nobody is serving anyone, the elite won the game of capitalism fair and square.
Great info powerful. Liked and subscribed. More insights of the UK please.
Morrisons problems began a decade before Brexit, huge Debt load after 2008 it was a basket case.
No wonder the price of everything is through the roof
First part is pretty misleading. Leverage used in leveraged buyouts is used to finance the acquisition of the company’s shares, not financing the operating costs of the business.
Yeah but my feelings don’t care about your “facts”
Lol. Are you in finance? Does the company or do the shareholders pay for the interest on the company's debt?
The shareholders receive lower dividends and FCFE due to debt service. You cannot separate the company from its shareholders.
This is like asking “is it you or your bank account which pays for rent”
@@allee1781 Umm yes they do. The shareholders are the people who own the company. They are on the hook for any debt it has
@@adamheuer8502not really. Company debt does not transer into shareholders debt unless you have certain company structures that would allow this by law.
Thats it boys. England is officially even on paper owned by foreign companies. A lot of these private equity groups have high shareholders from the UAE or Saudi family. Welcome to Pakistan 2.0
Those little independent shops don't exist any more. Every high street in Britain looks practically the same, with the same global chain stores.
Look at deindustrialised town higb streets in the provinces. Pound shops, bookmakers, charity shops. Dead.
Look at deindustrialised town higb streets in the provinces. Pound shops, bookmakers, charity shops. Dead.
how on earth is this legal? There has to be some safeguards against investors destroying British companies e.g. our water industry.
The best video explaining how private equity works
But why were these companies for sale in the first place?
This is the main question everyone's avoiding. They feel better jumping over that question to blame private equity.
Generally speaking, any company is for sale if you offer enough money and the sale is legal. In this case, I refer you to Tom Nicholas' video Why Cities Go Bust about how British cities are coping with massive political and therefore economic headwinds.
Is it not a similar idea to how Glazer purchased Manchester United?
Yes this is exactly how it was purchased. The premier league has however passed a new law where only 65% of the value of the club can be purchased using debt.
5:59 - "When these (private equity buyout) deals go wrong, it can have real world impact.
The purpose of these deals is extracting value from the purchased companies and delivering that to shareholders.
This necessarily means ripping off the workers who generated that value: jobs are lost, those that remain are underpaid, and pensions disappear.
Corners are cut so that the products and services rendered after the acquisition fall in quality. So it certainly does not deliver value to customers or other stakeholders in the community.
It's just money extracted and deposited in off-shore bank accounts.
WHEN they go wrong? If they ever go "right," it's accidental because stakeholders are not a priority.
How is this legal?
Wait, if you sell a company for £800,000 entailing £400,000 of debt, then you're actually selling it for £1.2 million, because your bank balance goes up £1.2 million (£800,000 more money & £400,000 less debt) and the buyer's bank balance goes down £1.2 milllion (£800,000 less money & £400,000 more liability).
But how can PEs borrow money to acquire a company and then this debt falls on the acquired company and not on them? I don't understand how's that even possible. Or even if then they raise new debt with the company, that money can't (or shouldnt) go to the PEs
What storefronts? They’re all empty!! 😅 😭
The problem is Privates Equity firms are heavily linked to pension funds and is becoming too big to fail. They come in dump a load of debt on the company and the reduce the number of employees. They are parisites
PE was made to turn around unsuccessful companies by buying them.
However Leveraged Buyouts allow PE firms to buy successful companies, hollow them out, burden it with debt and take huge amounts of profit out of it
Like Arcadia Group hollowed out by that slimy Billionaire living in his yacht off the Mediterranean sea 😅
0:32 Pretty hilarious how the narrator says "Pizza Express" then a Princess Beatrice of York lookalike comes up! 😂
How does the debit transition from PE's to company's happen?
And once the bubble pops, the burden will be on the consumers and not the corporate leadership. As always.
Private equity is not an issue, taking a ton of debt and off loading it on to the company is the problem.
Private equity and LBOs tend to be synonymous, but your point stands.
Why would banks give loans though? I’m guessing greed
its such a crazy thing, you can buy a company with debt and then the company you buy then owns the debt, and not you as an entity.
Private equity is a blight
It’s all about prices to customers, not value. So long as the voters don’t get hit with higher prices, PE firms will get away with all their non value adding trickery.
American equity firm will destroy anything that it touches.
Who allowed this to go on and why isn't it been looked at. Surly it is making the country poor.
Appreciate the use of graphs and actual numbers, I feel like a lot of finance journalism doesn't respect the competence of the readership / viewership.
Speak for yourself…..
Private equity is what destroyed EMI. Which was once one of the largest record companies in the world. It is doing the same to countless other heritage British companies.
This will all solve itself over the next few years whenever the UK has a down turn you’ll be able to buy back many of your stores on the cheap.
So basically private equity pushed every business in the UK into huge amounts of impossible debt…
Correct 👍
“our customers” … wonder who the actual customers are
Muslim immigrants from Pakistan
@@axel3689 vote Reform
Why does UK need foreign investment when you said at the beginning German and France have a lot less?
Because unfortunately we're dependent on it because it's been happening for so long
Certain private equities should be deemed ENEMY OF THE STATE and criminally prevented from ruining communities and the performance of the country. 😠
Crazy how a leverage buy out puts the responsibility of paying back on the company not on who made the buyout. What a joke.
Financial money-moving nonsense is the cause.
The discussion around ''How Private Equity Ate Britain'' highlights significant economic and social concerns tied to private equity firms' dominance in the UK. These firms, especially after Brexit, have aggressively acquired undervalued companies, particularly in the retail sector, through leveraged buyouts. While this influx of investment can rejuvenate struggling businesses, the accompanying high debt loads and rising interest rates often push these companies into precarious financial positions, as seen with firms like Morrisons. This has ripple effects on pricing, job security for millions, and economic stability.
The role of private equity underscores a broader tension between attracting much-needed foreign capital post-Brexit and managing the risks posed by unsustainable debt levels. For the UK to balance economic revitalization with consumer and employee protection, policymakers face the challenge of creating effective regulations without discouraging critical investment inflows.
The supreme irony would be if the private equity debt was financed by british banks. British assets bought on the cheap by foreigners financed by british banks. And if the companies go bust its the british banks that will be paying the cost.
Unfortunately that's true
Sorry, but I fail to understand how the VC buyers can transfer that debt to the company and then if it goes bankrupt, that money is wiped.
There is a severe lack of legislation if it's that easy to buy something with debt, but then pass on the debt to the company you bought, and avoid any responsibility of paying back the debt that YOU took, not the company.