Comment by mcmoor
3 days ago
By this point, I suspect that PE is simply a sophisticated liquidation service. Where an owner doesn't want to deal with a company anymore and want to cash out, but can't just easily sell everything. By this perspective, any fault on a company's discontinuation lies solely with whoever sold it to a PE as it's him who actually wants to kill it.
I consider PE to be equivalent to a crypto rugpull.
There's PE the theory and PE the practice.
The theory is that the buyers improve operational efficiency, restructure the business, dispose of underperforming assets, etc and "transform" the business. As another commenter reminded me, there are a handful of examples of this, most notably HIlton. And any of these successes will throw around "operational efficiency" a lot. Maybe Blackstone really did massively improve Hilton's operations. If so, I still consider it an outlier.
PE in practice seems much closer to the 1980s corporate raiders. It's done by people who have zero understanding of the business and zero interest in it. They've essentially decided to do a rugpull and ripoff the new owners so the "financial engineering" is how to structure the exploding debt in such a way that the new buyers don't realize it before it's too late.
That seems to be the case with many high-profile cases such as Toys'R'Us and Red Lobster.
I personally think this model of loading up a company with debt to pay off the LBO should be illegal.