6 Things Private Equity will do After They Buy Your Business

There are 6 things a private equity firm will do after they purchase your company and you need to be ready. Jim Schleckser from the Inc CEO Project shares them

[briangasser]

I like his blunt talk. Condenses a 20 minute discussion to a few minutes.

[vince]

Private equity firms are basically House flippers. They buy a company that is sometime in rough shape. they do some cheap renos. and then sale it to some sucker who will find out 6 months later that everything is completely rotten.

[Johnsmith]

I was the CFO of a company that got bought out by PE. 💯 of those things happened. And it’s not just debt. It’s super high interest debt which made my life a nightmare.

[joegallagher]

They don’t keep the old owners around to ‘learn the business’. They keep them around to keep the customers happy until the customers are comfortable with the new owners. Then they broom the old owners under any pretext that might arise. But that works fine for both parties.

[kennethvenezia]

100% accurate, but you cut to the chase and just say, they're gonna squeeze every penny out of your business and then crush it into bankruptcy. The end

[peterbryant]

Private equity I believe is the posh name for what we called in the 1960's asset strippers. They have only one interest how much cash can they make and how quickly the business may or may not survive but they are raiders not builders.

[hillsonn]

I hate everything about what this man represents, but I appreciate him explaining his evil so succinctly.

[EricDaMAJ]

In short, private equity will destroy your company for short term profits. Which is perfectly OK if you're tired of your company and just want a big fat pay day yourself.

[adam]

Direct and to the point. Also true. If you're a business owner and you're thinking about inviting PE in the door, then assume that you're going to lose control of your business and up gone. That may be what you want, but go in with your eyes open.

[JK-ksxq]

To sum it all up...The movie "Wall St.": "why are you wrecking the company?" reply: " because it's 'wreckable'". Apollo took over my golf club. It must have been "wreckable" because they are wrecking it. From the lowest server to the top management, whenever a member has a question or complaint, their canned answer is, "We are a for profit business". In other words, "beat it kid, you bother me".

[kenarthur]

A company I worked for was bought by a Private Equity company. Morale fell off a cliff, good people left, and all focus was on money, nothing else. 🤮

[andremaines]

Kind of reminds me of that scene in the sopranos where a businessman ran up a gambling debt with Tony and then they basically took over his business and slowly bled it to death running up credit and taking inventory from the store

[ac]

Understanding “The Sacred Cows” is key. Private Equity will slaughter them for hamburger. When the sacred cow is a private jet for the CEO and his do-nothing nephew, that’s great and one of the most efficient parts of PE. But blade that slaughters the cows is double-edged. Sometimes those cows are important not just to the business, but the community at large.

For example, many emergency rooms and even whole hospitals have been purchased from hospitals by PE firms. The “Sacred Cows” in healthcare, especially an ER, are motivated and competent employees and lifesaving care. Malpractice aside, a poorly-skilled ER doc or nurse is not necessarily more profitable than a talented one, and may be more expensive. Making people healthier or avoiding unnecessary care isn’t necessarily good for short-term profit. On the other hand, a captive consumer base and a high degree of informal trust combined with low profitability makes places like ERs very juicy targets for PE.

[simongross]

This is all true. I've been through it. You left out one thing. The purchase price they pay will somehow become partly contingent on company performance in the first year. In other words, they will make the business fund its own buyout, or they get it at a very reduced price. The old owners will remain with the company only so long as its clear which way that'll go.

[iAPX]

To the point.
For the employees this also means a lot of pressure, firing some to send a message and diminish the payroll, including key employees: you'd better have a plan B.

[SeaDadLife]

Thank you! I worked at a public company and, yep, what happened is pretty much what you describe. IME there is one more: be prepared to move.

[gkoproske]

Talk about this and talk about that, but the bottom line over the mid term is that the employees are going to get screwed.

[TheCritic-MMA]

Relating to balance sheet, they'll also sweat the employees/manage by spreadsheet. Sort-by salary and start getting rid of the highest regardless of most impacts to the business.

[fseznomoor]

What makes the days fun or miserable for the organization of the acquired business is the competency of the board and/or advisors - pure roll of the dice.

[jakurdadov]

Private Equity should be illegal, along with everthing else that gives capital too much levverage over labor.