Comment by jmclnx
2 months ago
Good example of what Private Equity did and doing to many industries. I also notice once a PE Firm takes over a Company, kiss quality good bye.
They mentioned Eye Wear is next, I think the author can guess where that is going. No reason to doubt the same will happen to that industry too.
I think he means "eyeware is next" in the sense that it's the industry he'll be covering next. Pretty much every brand and every layer of the eyewear industry has been owned by Luxxotica for a long time.
It seems like not my preferred Serengeti or my recent work gift of Maui Jim.
To save folks the search, these both sell ~$300 sunglasses.
They show action shots of people wearing them kayaking or at the beach but I'd be so worried about dropping them in the river or scratching the lenses with sand that I'd never take them those places. $300 is more than I paid for my kayak, LOL. Probably more expensive than entire sets of clothes I might wear while doing those activities, or at least right around the same price.
seems like a good business model to watch where PE is moving in. Start investing in quality designs while PE drives quality down, then sweep in and be the "quality amongst trash" brand.
I feel the same, but I do wonder sometimes if that’s true. Are there PE firms out there quietly operating great businesses that they’ve acquired? If not, why not? Surely in the long run that’s a better ROI, and private capital should be able to take a longer view, right?
For every one public headline failure there are hundreds of profitable executions that never get mentioned.
I think the general rule is more like they expect only 1 in 4 to work out, but that 1 works out good enough for the rest.
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> profitable executions
I can't tell if that's good or bad /s
> Surely in the long run…
And that's the rub. PE is all about short term ROI at any price. Their business model doesn't take product superiority or brand loyalty into account. If a widget can be made cheaper, you do it, damn the collateral damage.
OK, but that doesn't answer why? Why is PE about short term ROI at any price? Is it really true that the maximum long-term ROI is by doing it this way? I'm skeptical, and people's intuitions based on their observations isn't very useful.
Maybe this is like the toupee fallacy, and we only pay attention to the ones with this kind of strip mining approach, and we don't see the majority where they run the businesses to maximize ROI in the long run?
In reality that absolutely is part of the equation though.
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What do we think of Apollo Global Management?
The longer term of continuing to buy businesses, load them with debt, strip them of value, and move on to the next, promises much better ROI than focussing on a single business.