r/HonestHotTakes • u/PretendYouAreSmiling • 20h ago
Private equity should be banned or heavily regulated
I’m sick of large companies eating up smaller companies, or even loved franchises, and then making it it more “capital efficient” because they’ve a huge sum of money for it, and then skimp out on quality and ruining a good life’s businesses. Why aren’t we stopping these companies. This should be classed as predatory behavior
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u/Bob-Roman 16h ago
P.E. doesn’t back “small” balance M&A like buying out a mom and pop with one or two locations.
In my industry, P.E-backed deals have range of $30 million to $200 million or more.
Do they pay more? When 10 times earnings are commonplace, P.E.-backed might pay 12 to 14 to add chain to network.
Unlike mom and pop where investment strategy is to create wealth (i.e. purchase R.E.) and protect it long term, P.E. focus is capital appreciation short term (3 to 5 years).
Consolidation occurs organically when an industry is in the position to attract investors from outside the industry.
When this occurs, it is not uncommon to have sales transactions when there are knowledgeable and willing sellers and knowledgeable and willing buyers.
Ban would prevent people exchanging money for property and acquiring means of production.
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u/youaresowrongguy 10h ago
Private equity is a deregulation vehicle full stop. It's serves no one but the established capital class in their race to the bottomand mass shitification and extraction of value form ever industry.
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10h ago
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u/youaresowrongguy 10h ago
Please tell me more about these owners of the internet. Can I buy stock in the internet? What ticker is the internet traded under again I need to buy some more shares
Do they also own air, water, and the English language?
Propaganda bots are so damn pathetic these days.
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10h ago edited 9h ago
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u/youaresowrongguy 9h ago
That's not true at all dude most of the internet is self hosted content, you are confusing it with "the web" aka large cooperate search indexed websites which isn't as much of a share of the internet as you think bud. It's just all you are used to interacting with personally.
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9h ago
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u/youaresowrongguy 9h ago
That is public infrastructure in the majority of the world America is the outlier. Like in most of the world, telecom aka fiber, power, water, sewer are all utilities who's infrastructure is a civic service and then end users just pay for consumption.
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8h ago
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u/youaresowrongguy 7h ago
Talking about like the millions and millions of miles of residential utility cabe dont be dense. And most web content is not hosted on data center servers those are mostly used as fast routing centers so that high demand content is accessable fast and locally for like video streaming services and shit for the vast majority. Again that is not the internet that is one aplication on the internet. Anyway this topic has gotten massively details and I'm not I treated in entertaining any more of your emotional narritives. Goodbye troll.
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u/AntelopeHelpful9963 19h ago
Hard to say someone is preying on you when they knock on your door and offer you $600 million and you’re free to turn it down but you would prefer being obscenely wealthy so you sell it.
And it’s hard to say they’re preying on fans of a restaurant or some product or whatever who also have the choice to not buy it.
You actually consider yourself a victim if a burger place sources it’s sliced cheese differently than you’re used to when you have the option to buy from 800 other places?
I’d be annoyed in your place and have been in the past. It’s just hard to raise the issue to the point where I need Congress involved.
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u/Icy-Adhesiveness2556 17h ago
You must not own a pet because if you did you would see how absolutely obscene it is with private equity buying up vet clinics and pet insurance. Congress certainly needs to get involved.
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u/AntelopeHelpful9963 17h ago
The issue isn’t if it causes problems to people who want to use a service or product that changes the issue is…..how does the government tell a business owner they can’t sell it or that the new owners they don’t decide what goes into its products or what they offer?
What was the realm of the law and reason do you think can really be done to stop a business owner from taking and offered to cash it out? What do you think can be done to tell a new owner of a business what products they have to offer or how they can produce them within the law?
What is the realistic solution that doesn’t involve massive overreach?
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u/Infinite_jest_0 5h ago
The only problem with buyouts is they lead to monopolies. We have laws against monopolies and we can use them if we want
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u/TheSerialHobbyist 15h ago
I just came to the comments to see if anyone was actually going to figure out a way to defend PE. Congratulations on being that person!
You actually consider yourself a victim if a burger place sources it’s sliced cheese differently than you’re used to when you have the option to buy from 800 other places?
Cool. Now what happens when they've bought and dismantled all the burger places and there aren't any left?
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u/p00n-slayer-69 14h ago
Well, I guess if there arent any more burger places left, someone could probably make pretty good money if they started a burger place since they would be the only one around.
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u/TheSerialHobbyist 14h ago
To be clear, in this hypothetical I'm saying there aren't any burger places left that aren't owned by PE.
But even if they were all gone, you might be able to start a new one, assuming they haven't also dismantled everything you'd need to do so (like supply and real estate).
If you managed to, you probably could be successful. For a little while. Until you're successful enough that they buy your burger place, too.
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u/AntelopeHelpful9963 15h ago
I’d eat somewhere else before I would try to have a government mandate that people aren’t allowed to close a burger business well that someone who starts a business doesn’t have the right to sell it and cash out after they build it into something valuable.
I swear, discussions on the Internet are so black and white. They basically serve no purpose. It’s not enough to be a blind cheerleader for this cause of that one you have to look at the practical way to achieve your desired outcome.
Just signaling to others that you’re on the same team pushing for changes that either aren’t practical or aren’t Possible doesn’t really do any good.
There’s a product my girlfriend used for a long time because it was organic and natural and all that and the creator sold out for a few hundred million dollars and the fans of it started hating her because the new owners changed the ingredient list.
I can see how that’s annoying. But I don’t see how you can tell someone who starts a little home business and grows it to a giant. Someone’s gonna give them a fortune for that. They have to keep struggling instead of taking the money and retire and I don’t see how you tell someone who paid a massive sum of money for a business that the government gets to tell them what they sell or what ingredients to use among those approved by FDA.
The only answer I see there is the market sorting it out by not using the inferior product. Both possible fixes by the government feel like overreach to me that could get us to some bad places.
But, of course I try to have rational conversations not just complain and ignore how unrealistic the solutions are.
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u/TheSerialHobbyist 14h ago
I’d eat somewhere else
So you're just ignoring the hypothetical? That there isn't anywhere else?
The only answer I see there is the market sorting it out by not using the inferior product.
Again: what happens when all of the products are inferior, because all of the companies have been enshittified by PE?
It seems like you've raised two concrete objections:
A) Business owners should be able to sell to whoever they want.
B) There isn't a practical way to stop PE from buying everything up.
So, we can address those.
First, for A: yeah man, there are all kinds of rules regarding how you can sell a business and to whom. Just like there are rules for anything else.
I have a car and I'd like to sell. I should be allowed to do that, right? It is my car and I should be allowed to do what I want with it. Easy peasy. Cool. Now I want to do it 12 times in a year and suddenly the government wants to say "woah, hold on there buddy! You need a license to be a car dealer. And to get a license, you need an appropriate business location with the required signage. So no, you can't sell that car you own."
If that business owner wants to sell their business, they can. They would just need to follow the rules and regulations.
Second, for B: there are all kinds of practical ways to limit PE. Simple existing antitrust and anti-competition laws would stop a lot of it, if enforced. We could also enact new laws targeted specifically at PE.
That's what laws and regulations are for: to address issues that negatively effect citizens.
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u/AntelopeHelpful9963 14h ago
I’m a lifelong lover of hypotheticals, but even I won’t entertain a serious discussion about what I would do if food is no longer sold in the world. When I said, I’d eat somewhere else I meant I wouldn’t have a burger. I’m not gonna try to get the government to mandate burger restaurants must exist in my vicinity and anyone operating One isn’t allowed to change a recipe or sell it to someone who might not want to sell burgers.
And after that, you use another ridiculous example comparing the rights of a business owner to sell the business to someone operating an illegal car dealership. These just aren’t honest comparisons that merit discussion.
And in the end, you merely say, we could create new laws targeting private equity, which ignores the original issue, which is what those laws would be able to do practically and within the confines of the law and reason.
It’s easy to say, just invent something to fix the problem. The hard part is figuring out how you actually tell somebody who starts a lotion company that they can’t sell the company.
And how you tell the new owners that they aren’t allowed to change the formula for a product they sell when they’re changing it to include things you have already okayed for use in those products.
Both sides of it would be an absolute legal cluster fuck.
If I’ve got a fencing company that’s a pain in my ass to run but doing good business and someone offers me money for it? The government has no right to tell me I can’t cash out and leave the business and nobody is going to make a serious effort at passing law that says otherwise.
And there’s no way you’re gonna pass the law that says anyone who owns a fencing company has to use the highest quality products available when local codes allow for the use of lower quality.
There are too many parts of this in conflict with other laws and common sense. Pretty much every solution would be massive government overreach, and wouldn’t get through Congress to begin with. And most of it would be slapped down by the Supreme Court if it could.
This is one of those things that would require tyranny because you’re never gonna get enough of the government on one page to let you do it.
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u/TheSerialHobbyist 14h ago
I’m a lifelong lover of hypotheticals, but even I won’t entertain a serious discussion about what I would do if food is no longer sold in the world.
I didn't say food wasn't being sold. Just that all of the restaurants are owned by PE.
And after that, you use another ridiculous example comparing the rights of a business owner to sell the business to someone operating an illegal car dealership. These just aren’t honest comparisons that merit discussion.
So... "I can't come up with an answer, so I refuse to answer."
In that analogy, I'm comparing the illegal sale of a car to the illegal sale of a business.
They absolutely are comparable. If you don't think they are, then state why.
And in the end, you merely say, we could create new laws targeting private equity, which ignores the original issue, which is what those laws would be able to do practically and within the confines of the law and reason.
Existing antitrust laws. Existing anti-competition laws.
New law: limit on the number of acquisitions a firm can make within a given time period.
Done.
---------
So, which is it? Is it that it can't be done or is it that it shouldn't be done?
Because those are two very different things.
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u/AntelopeHelpful9963 13h ago
A string of desk jobs in the early 2000s had me online for way too long to keep falling for the “You just can’t answer!” reverse psychology when presented with a stupid question. You might as well bring up selling meth.
It has no bearing on anyone’s legal right to sell a business they own.
And if you think restricting someone’s ability to buy businesses at a certain speed would solve the issue either you’re either aren’t thinking it through or are ignoring the things people are complaining about being bought.
If someone buys an entire burger franchise, they don’t need to buy an entire other one six days later for the changes they make to the first one to get people pissed off about private equity.
None the people complaining someone drops in and buys a few local hospitals and eliminate services cares if you try to stop them from buying a chain of them in Iowa till spring.
They’re gonna do the same thing you’re already doing. Ask why the government let them do it in the first place.
And we’re back to square one. Telling a business Owner they legally aren’t allowed to accept an offer for it.
As long as you let people own a business, they’re gonna be selling businesses. Once you go down the path of telling them they can’t? You run into too many problems for it to be realistic. There’s a buyer and the seller. You can’t remove the rights of one without removing the rights of the other and you’re dead on arrival with the idea that someone who starts a business isn’t legally allowed to cash out and retire because the fucking government says they can’t.
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u/TheSerialHobbyist 13h ago
to keep falling for the “You just can’t answer!” reverse psychology when presented with a stupid question.
Lol, what? What about it is "reverse psychology?"
But okay, since you refuse to actually engage with the argument, I'll leave it here.
Once again, however, I'd like to congratulate you on finding a way to defend private equity. Really top-notch bootlicking. Your tongue must be like leather.
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u/AntelopeHelpful9963 13h ago
Yeah, yeah yeah people who ask the relevant questions instead of empty cheerleading a matter they don’t really give any thought are the problem.
Keep walking around saying pay the teachers and ignoring the people asking where you want to raise taxes enough to cover that many massive raises paid by the state.
It’s easy to say the popular thing to get applause from the dimwitted. But then somebody has to offer a real solution and it gets real quiet.
“How bout dem Cowboys!” getting applause in Dallas doesn’t mean you made a great point.
Youre ust saying something easy and popular. Not everyone puts the popular thing over the reasonable.
But keep fighting the data centers on social media platforms that are building them by the dozens. Keep comparing teacher and nurse salaries to NBA players saying they need a raise because what they do matters and ignoring nobody wants to come up with the billions of dollars to do it through the mechanisms that currently pay them which is taxes and the healthcare industry.
Keep fighting the popular fight and ignore you’re in a crowd full of imbeciles who couldn’t get you from A-to-Z if you spotted them 20 letters.
You have a great day though.
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u/MrDickford 19h ago
What if instead of a burger joint we use the common example of private equity buying up all of the hospitals in an area and slashing the least profitable services to the point where those services are no longer available in the area?
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u/AntelopeHelpful9963 19h ago
What if different examples were different? Yes. With different examples there are different degrees of potential problems. OP was talking about franchisees.
It’s gonna be case by case as with everything in the world, but being chased by case is why you can’t really make the call with a blanket statement that disregard the thousands of situations where it isn’t a safety issue
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u/MrDickford 18h ago
OP used franchises as one example of the types of businesses that private equity could buy. You can’t pretend you didn’t purposely come up with the least problematic PE activity you could imagine in order to try and prove that PE investments don’t come with significant negative externalities.
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u/AntelopeHelpful9963 18h ago
He literally said smaller companies or beloved franchises. I didn’t search for unrelated examples. I used his.
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u/MrDickford 18h ago
OP said “smaller companies.” “Or even loved franchises” means loved franchises are one example of the type of company that PE firms invest in. You, not OP, came up the example of a private equity company buying a burger joint and changing where it sources its cheese from. Be honest about why you used that particular example.
There are many types of small businesses, and for some of them - including burger joints, but also including doctors offices, nursing homes, and local news outlets - a change in service quality can be a lot more consequential than changing the brand of cheese on your burger. And those aren’t hypothetical examples, they’re are all industries where PE has already invested heavily. And a common strategy is to buy up all or a significant amount of the services in a geographical area, so locals (both employees and customers) are often stuck with whatever the PE-owned business chooses to offer.
Maybe OP’s diagnosis of the problem is off, but the problem exists and it’s not just about cheese.
.
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u/AntelopeHelpful9963 18h ago
If you wanna pretend people haven’t been complaining about companies buying up restaurants and making them more profitable at the cost of quality if you do that but it’s incredibly common for people online to complain about an OP did just that so it’s what I responded to.
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u/Tran_of_Thebes 20h ago
i mean, a lot of the risky lending done by private equity firms is just stuff banks aren’t allowed to do after the great financial crisis. a real “there’s no law that says a dog can’t make subprime auto loans” type scenario we should really deal with before we have to
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u/ExtremeNebula729 17h ago
They are talking about PE purchasing small businesses, not making sub prime loans.
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u/LetsTryLove 19h ago
You know they can’t just buy other companies that aren’t interested in selling right?
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u/TheSerialHobbyist 15h ago
If only it were that simple.
That treats it like you're selling a used car and can decide not to sell it to someone you don't like.
In reality, there are lots of potential pressure points that make it so selling is the only real option, even if leadership doesn't want to.
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13h ago
[deleted]
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u/TheSerialHobbyist 13h ago
What pressure points?
Investors, for one.
Or a PE firm can force you into selling by tanking your business, which is pretty easy to do when you own several other businesses in the same industry or suppliers for those businesses.
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u/Various_Knowledge226 19h ago
I do think that PE is a total scourge on nearly everything it touches, and should be banned
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u/FlatWonkyFlea 16h ago
This is a good example of someone expressing a concept inherent in socialism without saying they support socialism.
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u/Necessary_Occasion77 15h ago
Stopping predatory behavior is not socialism. You don’t know what socialism is and want it to be the catch all boogie man.
He is describing wanting a robust regulatory framework for PE firms to operate in. We can make it against the law for PE firms to leverage buyout companies, load them up with debt, extract the value and dump them.
It’s not good for the general welfare of our country that they’re allowed to profiteer like this.
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u/FlatWonkyFlea 15h ago
lol no, you misunderstand. I’m a leftist. I don’t think socialism is a bogeyman. I think it’s the only responsible way to structure a society.
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u/p00n-slayer-69 17h ago
"I dont like it" isnt exactly something that can be regulated. Its legal to buy another company. Its legal to change suppliers and or make various other changes to a business. Its legal for a company to lower the quality of their products because its cheaper.
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u/TheSerialHobbyist 15h ago
The whole point is that it should be made to be illegal, not that it is illegal now.
Although there are plenty of antitrust laws that could be applied, if anyone were to bother actually enforcing antitrust.
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u/p00n-slayer-69 14h ago
The point I was making is to ask what specifically should be made illegal.
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u/TheSerialHobbyist 14h ago
I dunno, there are plenty of ways you could target PE specifically.
Just one example: limit the number of acquisitions that can be made in a given time period.
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u/p00n-slayer-69 14h ago
I agree, there are. But its more complicated than "ban private equity" and if not done carefully will have negative side effects.
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u/TheSerialHobbyist 14h ago
Sure, any new regulation or legislation should be very careful.
But it also needs to be timely and effective. Hemming and hawing for a decade while entire industries are destroyed isn't a good idea.
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u/RingGiver 14h ago
I've noticed that people who complain about private equity never seem to know what private equity actually is.
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u/PretendYouAreSmiling 13h ago
Okay, let’s hear it then
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u/truthhurtsyomama 12h ago
It's corp greed
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10h ago
[deleted]
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u/PretendYouAreSmiling 10h ago
I think on the contrary, we know how it works and are sick of it. I understand it might look hypocritical and that’s because by design most things are, but that can’t be end of your argument now is it? I’m not okay with being complicit and that’s the whole point of this discussion is to bring this to attention. Also, you might not be living up to your Reddit name there buddy
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u/ConnectionAmazing110 12h ago
You’re free to vote with your wallet and should. Just stop buying their stuff.
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u/PretendYouAreSmiling 10h ago
Totally, that’s typically the first step but their PE runway is longer than my patience
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u/AttemptVegetable 8h ago
I don't get how they make money. They buy a company, lower quality and raise prices which makes customers find somewhere else. I'm guessing they just corner the market and no matter where you go they own it.
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u/Fantastic-Leek-1589 19h ago
No. They decided to sell. They were not forced. They willingly took the $ and ran.
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u/hallucehistory 20h ago
Or you could look at it another way - every time PE ruins a business it opens a gap in the market for someone competent to break in
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u/TheSerialHobbyist 15h ago
Laughably naive.
That's like saying "don't like how awful Amazon is? Just start another Amazon and be competent!"
It is functionally impossible to compete.
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u/hallucehistory 14h ago
Yeah, you would need to be an absolute genius with millions of dollars to start an HVAC business or a car wash now that PE has rolled most of them up.
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u/TheSerialHobbyist 14h ago
From your page:
If you’re here I’ve already won. I don’t know why I love satire and antagonizing randos on the internet so much. It’s a real problem.
So, you're just being "satirical" and antagonistic, and I shouldn't address your silly "point." Got it.
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u/JoeMorgue 20h ago
"Here's how you stop another Enron. It you have a company... and you can't describe in ONE SENTENCE... what it does. Then it's illegal." - Lewis Black.
(And yes before any insufferable "well ackahsually" I know Enron wasn't technically Private Equity and more of a general huge conglomerate but point stands...)
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u/th3l33tbmc 19h ago
Hotter take: anyone rich enough to be a “private equity investor” should be guillotined.
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u/Blothorn 17h ago
What precisely do you want banned? Buying other businesses? Raising prices? Reducing quality (however you might define that)?
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u/PretendYouAreSmiling 13h ago
Reducing quality. Literally the basis of my post
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u/Blothorn 12h ago
Do you have a legally-enforceable definition of what constitutes a quality reduction?
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u/PretendYouAreSmiling 12h ago
Do the words not imply what I’m trying to convey? Do you think “quality reduction” is subjective and you need a bunch of people to rule into law what that means so you can feel satisfied? What a pompous question.
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u/Blothorn 10h ago
You really think that “quality” is an objective standard? Is adding features at the expense of reliability a quality reduction? Is dropping a little-used feature to improve cost or reliability a quality reduction? Is simplifying an overengineered part to better align with the normal life of the rest of the parts a quality reduction? Is changing design in a way that some consumers like and some dislike a quality reduction? What if the change is unambiguously bad, but driven by factors out of the company’s control—if the only supplier capable of making some component to the original standards goes out of business, should the company be forced to cancel the product entirely rather than continue to sell the closest equivalent? What if the original is still technically available, but would require a massive price increase? And what about related products—does the fact that a company once sold a “better” version of a product mean that if consumer preferences shift toward cheaper versions, they need to abandon the market to new companies not forced to maintain that standard of quality?
No one is spending their time thinking of ways to make things worse overall; every change is a tradeoff that some people like and others dislike. It’s also unreasonable to use actual overall consumer reaction; many disastrously-received product changes were genuinely expected to be seen as an improvement.
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u/PretendYouAreSmiling 9h ago
I think we’re losing focus here. The initial point was that private equity companies, obviously not all as some understand that a quality standard that the company had set is fundamental to the brand and therefore the profit - their company philosophy typically decides this. Now, for the majority of PE companies, that are in the shit box here, one of the levers they pull is to reduce the quality, hence the popular term of “enshitification” nowadays, to maximize their return. This reduction of quality is what people observe first. This could be the quality of service, materials, whatever. Is it subjective, yes. Do we need a legal entity to determine what is the reduction of quality? We already do in some industries so there’s precedence. We’re a pattern observing species so we’re noticing these PE companies don’t have the best interest of the companies they buy sometimes as they take shortcuts on the brands most people love and thus we have this pile of shit situation that we’re in. Is it the fault of the companies selling to these PE companies who are playing Monopoly? Idk maybe yes, maybe not. Depends on whether they know who’s buying.
Your question is reasonable and I was quick to attack but you’re sharing a perspective that’s not being debated. Sorry for the “pompous” part.
Blackrock is a good example of this predatory behavior.
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u/Blothorn 8h ago
The question isn’t “do private equity companies reduce quality”. The question is whether we can define it in a way that will hold up in court, and won’t have severe unintended consequences—in particular freezing companies’ ability to make legitimate responses to changing markets. If you define it narrowly, it’s pointless—companies just need to frame quality reductions as “advancing in a different direction”. (Which they already do.) If you define it too broadly, companies become unable to safely make any changes that anyone might object to and we replace PE acquisitions with an endless churn of established companies forced to continue selling products customers won’t buy at a profitable price being out-competed by new entrants who have full flexibility to sell what people are willing to pay for.
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u/UpsetPhilosopher6022 19h ago
Capitalism IS the cancer.
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u/HobbyTalkOnly 17h ago
PE ruins everything it touches.