How Private Equity Consumed America

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Writing by Sam Denby and Tristan Purdy
Editing by Alexander Williard
Animation led by Max Moser
Sound by Graham Haerther
Thumbnail by Simon Buckmaster

[THEEPICPUPPY]

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.

[scpatlnow]

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.

[NothingXemnas]

Remember, lads.
Sam Denby and his channels are doing great.
Wendover and Nebula are doing well.
Sam Denby is not suicidal or sickly.

[cmdr]

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.

[worcestershirey]

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.

[iamstrong]

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.

[prettypic]

Private equity firms: the villains in pretty much EVERY company man video

[njlifeandhealth]

It's impact on healthcare has been terrible. Many smaller rural hospitals have closed down to predatory maneuvers by large finance companies.

[Henchman]

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.

[DriveLapseCA]

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!!!

[Pestsoutwest]

Private equity is basically just house-flipping, but for corporations.

[samwill]

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

[quintessenceSL]

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.

[Madamchief]

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🤦‍♀️

[alexsmith-oblu]

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.

[andrews]

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.

[haydnreycraft]

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.

[fnxplatad]

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.

[lewishein]

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.

[Mike-zflo]

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.