Comment by notatoad
2 years ago
because the people who have spend years of their life trying to build something, whether that's a brand, an experience, a product, whatever, have an emotional attachment to it and don't want to see it destroyed. so when they're struggling, the look for a lifeline. PE provides that lifeline as a cash infusion in exchange for ownership.
PE "vulture capitalism" is profitable because it takes advantage of vulnerable people who want to see their dream continue. and yes, the execs at $1.5bn companies can still be vulnerable people who want to accomplish something in the world.
the argument that PE firms are skilled managers only holds water if they actually turn the companies around and make them succeed. but more often than not they don't, they're burning things down to milk as much profit as they can before the end.
This may be true but it doesn't have to be so cynical.
Most people don't have experience on how to squeeze the last drop of value from a struggling company. And many don't know how to quantify the value either. So if the average corporate executive tried doing this, they might not recoup the full value than if they just sold to the "experts".