YouSaid · the spoken record

Brendan Ballou

lines on the record: 46
first: 2024-06-13
most recent: 2024-06-13
sittings or episodes: 1
sources: podcast

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“I don't want to give up too easily on the idea of some of these bigger structural changes in that in one way of talking about it's an obscure legal common law doctrine. On the other, it's a basic idea of fairness that the people who make decisions should be responsible for those decisions. And if an institution like Congress historically has struggled on some of these policy issues, there are a lot of different avenues here. States could be acting here. If you're a state legislator, a great thing to say would be, okay, I'm going to introduce a bill that says if you're a company headquartered in our jurisdiction and a private equity firm buys you, lays off a bunch of people, the company goes bankrupt, the private equity firm should be liable to the losses of the workers. That is a pro-worker, pro-resident reform. It makes intuitive sense. So I think that there is a way to have these big structural reforms. It might just not happen through the parts of the government that people are using.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“It seems politically easier to get them. It seems politically easier to defend them in a court, right? And say, look, here's all the harm that was caused. Here's the rule. The rule will stop the harm. Here's the authority that's vested in whatever part of the United States code that governs this agent. Like we're soft to the races, right? And it's weird that it's like easier for the government to make some rule that's like all the doorbells should be blue than it is for the government to say we should have a bunch of competition and actually have a market that decides what color the doorbells should be. Why do you think that? Because that's the one where it's like when you go talk to the conservative Republican, they should see that protecting the market keeps the government regulation off of them.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Reading the book and I was struck at how many extremely sensible, well meaning cases you discuss. And then at the end, the caveat is, and then they lost the case. And that just seems like a recurrent theme throughout this book. Like people have a great legal theory. The case makes a lot of sense. The problem seems obvious, and then they lose on a technicality of standing or corporate structure or funding sources or whatever. In a recurring theme, we have on this show and across the verge is that the tech audience wants to think of the legal system as a computer like a deterministic system with inputs and outputs. You have a lot of these specific prescriptions here for agencies, right? The Department of Health should require minimum staffing in nursing homes. You say the FCC should regulate the cost of phone calls from prison. Those kinds of very specific regulations of specific businesses and specific industries, and here are the rules”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“So basic laws of antitrust apply to everybody, whether it's a gigantic multi-billion dollar acquisition or if it's a small purchase of an OBGYN or veterinary or dermatology clinic. These laws apply no matter what the size if the effect is to substantially lessen competition. Obviously you have sort of constraints of the Department of Justice and FTC, which is DOJ antitrust staffing levels is at what it was in the 1970s. DOJ and FTC are not the only enforcers here. States and especially private litigants can take action here. Not to get two in the weeds. I mean, one of the challenges that you've got with private litigants is they just don't see where the money is going to come from in taking on these cases. You know, it's like, okay,”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Have a lot of specific solutions at the end of the book. I want to talk about those. One of them is actually regulating rollups, regulating mergers, regulating combinations of firms. That does connect to, I think, the antitrust reform movement to say we should stop more of this. We should have more companies, not fewer. We should not allow companies to roll up every veterinarian in Chicago. Is that possible? Like, that seems at once the easiest thing to suggest to just the random person. And also for some reason, the hardest thing to achieve.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“The other interesting possibility is that venture capital firms become more like PE firms. It's like Andreessen Horowitz is just becoming such a massive entity that eventually they might be looking at more the leverage buyout model than the traditional bet and hope you win the lottery or something like that. There's so much money around tech right now that it's possible that the private equity business model essentially becomes inevitable to at least one of the players there.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Our world here on Dakota, right? We must get startup CEOs or mid sized company CEOs that are saying, look, there's a kill zone around these companies where if we make a product that competes with them, they'll just bundle it into the operating system in my company's doomed. And that seems like one set of competitive problems. But the other set of competitive problems is they'll just buy everything, right? And that stopping that does not seem to have worked very well for the DOJ or the FTC, at least until recently do you see an interplay there?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“I'm always adamant about pushing back slightly on the story and Toys R Us. Toys R Was profitable the last year before it declared bankruptcy. The challenge was that it had so much debt that it was servicing that rather than able to expand its operations. And it had advantages that Amazon didn't have in terms of physical stores and so forth. But that's a rant perhaps for a future podcast. In terms of if you're in the tech industry, why should you care about private equity? Because to the extent you're interacting with finance, it's probably through venture capital firms and not through established PE firms. Two things. One is private equity has expanded into the tech industry in a lot of different ways. The most prominent example, unfortunately, is probably the purchase of solar winds, which was the cause of what was called the greatest hack in United States government history. It appears that solar winds moved its engineering work at least partly to Belarus.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Sort of elephant in the room when you come on a podcast like Decoder is the tech industry, which has upended most of American life. It's mostly a bunch of companies that were started fairly recently. They have not been colonized by PE. But on a show like Decoder, you show up and say, look, Shopka was killed by private equity. I think most of those are saying, no, they were killed by Amazon, right? Toys R Us, they just like blew it. They just forgot to make a website that worked and figure out the logistics of delivery. And Amazon did a better job of that because the scrappy Challenger brand that disrupted that industry. What is the interplay there? Because I really do think most listeners of this show have come along for the ride. I think most listeners of this show are pretty interested in being competitors. And they're going to say, well, look, that's a problem for the dead companies. We're going to start new companies that do a better job and win.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“It's a super interesting question. And I mean, it's been really fun talking about this book with people because I was doing an interview with a fairly conservative Republican at the beginning of the week. I was doing an interview with some DSA adjacent folks in the middle of the week. And I said to them both, you know, wherever you are on the spectrum, the basic problem of the private equity business model should concern you because it is not capitalism, it is a perversion of capitalism or an aberration of capitalism. I think that there should be a bipartisan sort of cross ideological consensus on this, which is if you want a healthy economy that works for people and works for the long run, we need to change the incentives of private equity.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Broadly, there's this idea that okay, you've got full hyper capitalist laissez-faire, just go for it. The market will figure it out. And then you end up with a quasi-controlled market anyway because you just have a handful of giant firms dominating entire sectors of the economy. And they're just, instead of having state control of it, you just have like two guys, right? That seems like a problem that we can see expressed right now, right? This is in the private markets, you've got a handful of pee companies in the public markets, you've got a handful of index funds, and they might as well just be controlling the economy. That seems like a problem that should cut across party lines, right? We should have functional markets. Everyone agrees that competition is good for consumers and that having new firms enter like lowers prices and makes better stuff. Do you see the political will to actually go and change it? Or do you see, ah, this is basically...”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“It would be really helpful if there were ordinary people talking about here are the consequences of understaffing nursing facilities at private equity-owned nursing homes. Here's the consequence of private equity firms not having a fiduciary duty to their limited partners when pension funds make investments. Here's the challenge that we've got when prison phone services charge exorbitant rates at the direction of their private equity owners. I think it's a project of helping people understand how private equity works and then how it impacts their life. And if we can do that, there are a lot of different levers that we can move to have some change.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“You've got another claim in the book that says, Look, the problem here is that judges and members of Congress and regulators, they just don't see how it works. All these moves are hyper-technical, hyperfinancialized, and your average district court judge is just flabbergasted at what's going on and saying, look, it's capitalism at work. Is that changing? Is there a mechanism to change that? Is that they've just gamed it too hard and they've hired too many people under their boards of directors? How do you fix that kind of problem? We see it in tech all the time. Every tech lawsuit is sort of like a disaster of misunderstandings. But you're saying here it's happening on the business side as well.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Which was reading the court documents around this. It was like a fascinating sort of shadow play of describing this as a third party. And it was like, no, it's just a different fund of sun capitals. And it was not fraud or deception or anything like that. It was just clever lawyering, but it allowed them to push off the company's pension funds from their books and onto the quasi-government agency. And so it meant that Sun Capital and Friendlies would no longer be responsible for the pension debts, the PBGC would. That's one of the ways that they can use bankruptcy to their advantage. If you're both the owner and the largest creditor, you can kind of push aside the other unsecured creditors. And that gives you another advantage here. So all that's a long answer to your short question that I think private equity firms have proven extraordinarily adept at using the bankruptcy system as well to their advantage.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“The examples that I've been interested in have been when there have been purposeful bankruptcies by private equity firms. One story, I think you might have even touched on it very briefly, is friendlies, which is a dining chain in the northeast or was. Sun Capital, the private equity firm bought it and then did all the tactics that we were talking about earlier. They executed a sale leaseback. They did a dividend recapitalization, had layoffs, ultimately pushed the company into bankruptcy. They were the equity owner of friendlies, but they were also the largest creditor of friendlies. And in the bankruptcy process, normally the ownership sort of flips. And so as the largest owner and creditor, Sun Capital was able to sell friendlies from itself to itself.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“There's an interplay here with bankruptcy, which is a move that you say a lot of private equity companies use. It was part of their playbook. And it just strikes me that your creditors are usually pretty good at getting their money back. And so if you're going to go into a company, load it up with debt, load it up with fees on servicing that debt, do a lease back where now you're loading up with even more fees and credit obligations. And then you're going to tank the company and walk with having collected your bag. The creditors are going to say who was responsible for this disaster. We want our money back. Are they winning?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“And we're kind of geeking out like first year law students here, but it's really hard to hold the private equity firms responsible for their portfolio company's actions. The legal doctrines around veil piercing vary from state to state, but generally it is extraordinarily hard to do that, in large part thanks to good litigating from defense side law firms. I don't want to overstate the case. It's almost impossible for a private equity firm to be held legally responsible under common law, veil piercing arguments. And that might make sense for ordinary investors. Like if Brendan or Ni were invested in a given company, you know, through our Vanguard account, it wouldn't really make sense to sue us because we don't really control their operations. But if you control 51% of the stock, if you control 100% of the stock, then it seems plausible to me that you're probably should be responsible for the actions of the company that you own.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“This thing you're talking about where the private equity companies actually operate the companies they're invested in through their funds direct their operations they roll them up they have preferred supplier agreements it's just very obvious that you could go to a court and say look get through the corporate veil the law school term is pierce the corporate veil and get to the people making the decisions this whole show is about decisions like get to them we can see them they're right there and they bought this clothing retailer and they own that t-shirt maker and they're forcing this clothing retailer to switch from this vendor to the one they own and people hate it and now the company's like just go look at them and it doesn't seem like that is easy or even possible”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Think it's a combination of those things. I think a lot of former government officials went to PE and so they've got a friendly face when it comes to lobbying. But I also think it goes directly to what you just said, which is private equity is sort of everywhere and nowhere in a lot of ways. And one of the things that I think PE firms have been most successful at is making their issues seem boring. When you talk about the carried interest loophole, like your eyes start to blaze over. It sounds so dull, and yet it has such profound implications for the equity of our tax code.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“That because people can't see? I feel like the healthcare industry, for example, lobbies quite a bit in this country, the pharma industry lobbies quite a bit, but they're villains, right? People can see what they're doing. The P companies are kind of invisible, right? You can't quite see how those rules affect regular people. Is that why they've built such a political advantage here? Or is it they just revolving door every ex-government official onto the board of a PE company?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“These sorts of things have been on the books for a long time. I think private equity firms have been really smart about identifying the opportunities here and using them. And I think it's just important to note how effective private equity firms have been in protecting their legal advantages over the years. Private equity firms have donated something like $900 million since 1990 to federal candidates. They have a bench of employees that include former cabinet members, secretaries of state, treasury, defense, chairman of the FCC, SEC, and so forth. And so when it comes to protecting preferred legal advantages like the carried interest loophole and so forth, I think that they've just been really, really effective in a way that even other very powerful industries have not been.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“It seems like another piece of the puzzle here is just some of the tactics you've described, right? We're going to go buy Manorcare. We're going to sell all of the real estate and have the company lease it back. So we've made money in a sale. And now we might have sold it to ourselves. They're going to lease it back. That kind of strategy seems very obvious. It seems to create the same exact kind of chaos for every kind of company that undergoes those moves. is something like a leaseback arrangement so common and why doesn't it seem to be as regulated as it should be given its very obvious negative consequences”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Think the leadership of the Department of Justice and the Federal Trade Commission are very attuned to those arguments and thinking about how can the antitrust laws be used to help regular people. I'll also say, and I think that this is a really important point, the federal government is not the only enforcer of the antitrust laws. Every state attorney general has the authority to enforce the Clayton Act individual litigants have the power to do that too. So I think as public awareness is growing on these issues and people are understanding how these roll-ups are occurring, there are a lot of different levers people can push on to make action here.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“That sounds absolutely backwards to me, right? Like we're going to try to block the ATT Time Warner merger and we're going to do calculus in front of a judge to show that prices will go up or down 15 cents when it's obvious what the real problem is, but we can't say that. Like that was a very complicated big deal that was like a 50-50 shot. I'm going to buy all the veterinarians in Chicago plan to make that worth it is raise prices is absolutely straightforward. I can explain that to anyone and say, do you think you should allow this? And the answer regardless of political belief would be, that seems bad.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“When it's one big company planning to buy another big competitor, I wouldn't say it's an easy case, but it's a straightforward one because it's a national or international market and you look at, okay, how are the market shares of these companies going to change? And then you hire some economists and try to figure out, okay, is that enough to raise prices? Here, because the acquisitions are much more distributed across geographies and antitrust, you have to define a geographic and product market, it's actually a much larger case in some ways to go after these smaller acquisitions because you're not looking at a national market, but rather many local ones.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“This seems squarely outside that we need to reform antitrust problem. You're going to buy all of the veterinarians in a city and raise prices. You don't need to reinvent antitrust law. Robert Pork would say, you've bought up all of the veterinarians in the city and raised prices. You've literally harmed the consumer welfare. We should stop.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Which I've always found very surprising. You'd sort of think if you're in the business of making money, you'd go after the rich people. But it seems that the model is that often businesses that service working class people are attractive because poorer customers don't have alternatives. And so you can raise prices, you can cut quality care. You can do all these things essentially without consequence because your customers don't have an alternative.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“A lot of the acquisitions that we're just talking about are part of roll up strategies. So the idea here is we're going to buy all of the dermatology or many of the dermatology practices in a given geography. And potentially that has efficiencies. You have the same back office billion and so forth. But potentially it's an opportunity to exert market power. If you control a significant percentage of the dermatologists, you can raise prices. You can cut quality care because there's only so far people are going to be able to drive to get to the next location. So roll-up strategies are really common in the private equity sort of playbook. One of the surprising things that I saw in my research was private equity firms often target businesses that service working class people rather than rich people.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Why is this happening in these markets? They can't all exit the same way, right? They can't all just extract fees from the same client base in the same cities. And yet they're all rushing in to literally the same markets, like dermatologists and veterinarians and the other practices you mentioned are location based. There's only so many that you need in a city. And yet they all seem to be rushing into the same markets. Why is that?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Private equity can be tremendously successful, certainly for the private equity firm, oftentimes for the limited partners that invest with them. And generally for the executives of the companies that sell to the private equity firms, whether it's a big company like Toys R Us that sells to KKR or a small one like a veterinary clinic or a dermatology clinic whose doctor wants to retire, selling to a private equity firm can make a lot of sense because you'll get a large payout because you've got a lot of equity. The challenge that you've got typically is for the people that remain. In the medical space, for instance, private equity ownership has become so pervasive that I look at job listings now and they will literally say, we need dermatologists at such and such a practice. And they'll say in all caps, not private equity owned. So it's become enough in the industry that people see this as a business.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Welcome back. We've explained what private equity is, and now we're going to jump right in where we left off why so many of these deals even happen. These companies are bad at operating businesses and they tend to break things apart and extract the value and run away, leaving you in bankruptcies, why do people make these deals?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Got some examples of firms that invested for the long term and brought sector specific knowledge that I think ultimately did a lot of good for the companies they bought. But the basic issue is look at the biographies of the people that run private equity firms. They are not folks with experience in engineering, product development, sales or marketing, logistics or anything like that. They have experience in finance. And so the expertise that they bring to an acquisition is financially. When private equity firms buy companies because they have a financial background, generally the changes that they're trying to make are financial ones, whether it's loading a company up with debt, spinning parts of the company off, or quite often trying to combine companies in a roll-up.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“One of the first claims you make in the book that stood out to me is private equity companies when it comes down to it are pretty bad operators of businesses, which strikes me as one, a pretty huge claim. Also counterintuitive, right? This is a group of people that go, they buy companies, they do whatever they're going to do to try to make them better companies, sharper companies, you'd think they have at least some experience on a broad level of being able to look at a company's books and say, here's what works, here's what a fat is, we're cutting it, here's where your opportunity is, we're growing it. This is the pitch that every PE person I've ever talked to has ever made. We might not know anything about running nursing homes or steel mills, but the abstract business logic you need to make a company leaner or more efficient, we're great at that. And your argument is actually they're pretty bad at that.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“I should say there's a range of private equity firms. Some think short term, some think long term. Being in the private markets can give executives the space they need to breathe, relieving them of the pressure of quarterly and annual earnings reports. And that can be really important. The challenge that we've got is many, if not most private equity firms have not structured themselves that way.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Show is about decisions. I ask every executive how they make decisions. The theme they come back to all the time is you need to think long term. And then you should figure out what decisions are short term and make those as fast as you can. But you got to have your eye on the ball and you got to have a long-term vision for what you're trying to accomplish. That absolutely cuts against what you say private equity companies do, which is that they're hyper short term. And one of the arguments that I hear from PE companies is we're going to pull you out of the quarter by quarter pressure so you can reset the company with a long-term vision and then do a good job. When we've had companies that are successful in the PE deals come on the show, that's what they talk about. Why do you think a bunch of executives who sort of uniformly as the conventional wisdom know that you have to have a long-term vision? How do they end up in a private equity situation where they're making ultra short-term choices?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“You know, the timeframe that these firms are considering really, really changes whether they want to invest in research and development, whether they want to invest in employees, whether they want to invest in new output and so forth. So that's one problem that you've got. The other is the debt issue, which is private equity firms tend to buy businesses with debt that the company they buy is responsible for. So when KKR buys Toys R Us, or when Carlisle buys the nursing home chain Manner care, the debt is held by the company that they bought. And often the companies need to spend an enormous amount of money servicing that debt. Toys R Us was spending as much money just servicing its debt as it was making an income at the time that it went bankrupt. And then the third, you know, you're talking about the perspective of private equity firms that they sort of get companies to be leaner, meaner. Somebody said that they're like heat-seeking missiles for profit. The challenge that you've got is when things go wrong.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“As long as businesses need to build factories and hire new workers, somebody's got to be willing to risk the money to help them do that. And to the extent that private equity firms are helping to do that, that's great. The challenge that we've got is that, one, private equity firms tend to invest for the short term. I always joke if I was trying to maximize the investment on my house, I'd redo the kitchen and add a new inset bookcase. If I was trying to maximize the money over the next week, I would burn it down and try to collect the insurance money.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Talking about a 40 year argument we've been having about private equity. But the positive case is sometimes these companies are too bloated. They're sitting there in the public markets. They can't grow. They can't increase their stock price. PE company is going to come in, they're going to slash costs, they'll impose some operational efficiency, they can simplify our supply chain, all this stuff, and then they can re-exit the company again. Leaner, stronger, better, faster. And when it works, it works. And when it doesn't, so it goes. But that's the positive case. Do you see that playing out or is it just we're basically raiding a bunch of companies extracting the profits and moving on?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“But part of the reason that happened is fewer companies started going public. And instead, because of series of deregulations that happen, really over the past 20-some years, it's become a lot easier for companies to stay private, essentially solicit money on the private markets rather than go through the work of going public and having the disclosure obligations that come along with it. So private equity sort of enters the picture in two ways. One is through a traditional leveraged buyout where maybe they improve it, maybe they don't, but also through the private credit market where they say, okay, you guys want to grow a little bit. We know that you need a loan. We'll offer you some money. We'll treat it just as debt rather than as an equity stake. The really interesting part about that is the private credit market is just significantly less regulated, almost by definition than the public market. And there are voices out there saying,”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Spend a lot of time talking Adventure Capital on the show once you are actually operating a business the big private equity firms just become a part of the puzzle in a way that is as you're saying invisible to most people in America but invisible even to the people who might be thinking about starting a business today that you're going to get to a certain size and a PE firm is going to show up with a significant interest in your business and maybe change the way you operate or take your business over from you because that's that's also an exit that might seem attractive even if it's not attractive for the long-term health of your company”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“I think private equity firms have very successfully rebranded themselves. And in some ways pulled themselves up by their bootstraps in terms of reputation. And part of that is that private equity firms have just expanded far beyond private equity. A company like Carlisle or Blackstone, a lot perhaps of a majority of its business is now involved in, for instance, private credit, insurance, real estate, and so forth. In a lot of ways, private equity firms have sort of replaced the investment banks of the Great Recession in terms of their importance to the financial operations.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“That's funny during the entire Twitter acquisition drama, a bunch of us on the Vergestaff reread Barbarians at the Gate, which is the very famous 1980s book about KKR buying RJR Nabisco, just a classic of the 80s corporate raider genre. Those companies, right, they've softened their image that the idea that their 80s corporate raiders has kind of gone away and now they're kind of seen as operators or stewards of capitalism in a way. How is that changed? Are we just not seeing what they really are or is there a meaningful difference from what was happening in the 80s to now?”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“So generally what happens is there is a small-ish legal entity that is the private equity firm itself which advises a series of funds. So Carlyle will have Carlisle Fund 1, 2, 3, 4, and so forth, that have a lot of investors. So often sovereign wealth funds, pension funds, and so forth. And then those funds ultimately buy companies, whether it's, as I said, nursing homes, single-family rentals, veterinary clinics, OBGYN practices, and so forth. The really interesting thing about that, and I think what is sort of drew me to this as a lawyer, but also concerns me as a citizen, is that because of the layered ownership structure of private equity firms, oftentimes private equity firms have control of the companies they buy, but very little responsibility when those companies do arguably illegal things.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Private equity acquisitions affect literally every industry in this country, and thanks to pretty broad consolidation over the last 40 years, there's no avoiding them. If you ever need a doctor, a vet, a nursing home, a chain restaurant, or even a grocery store, odds are you'll be spending money with a private equity company. Now to be clear, sometimes this all works out. There are some notable success stories in private equity. For example, Barnes& Noble appears to be doing quite well after a private equity takeover. But most of the time when we hear about PE, it's because something went wrong. And everyone involved is out of luck and out of work. Everyone accept the PE firms who extract fees at every step of the process and always get paid. And the problems aren't going away, if anything, they're getting worse.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“America. And we had a pretty deep conversation about how we just keep hearing the same stories over and over about how some business or another went under because of private equity and how PE acquisitions end up taking all the competitions out of market and ultimately making things worse for consumers. See, the core concept of private equity is straightforward. An investor or a group of investors uses cash in some creative debt structures to acquire a business. The plan is usually to fix things up and sell that business again or maybe put it back on the public stock market to make a profit. And to bridge the gap between acquisition and profit, but often what happens is that to bridge the gap between acquisition and profit, a PE firm makes a lot of aggressive restructuring decisions and cost-cutting moves. And those moves often create a ton of additional debt for the company, which puts it even under more pressure until things just collapse.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT
“Hello and welcome to Decoder. I'm Neil Lipatel, editor in chief of the Verge. Decoder is my show about big ideas and other problems. We come back to a lot of themes on the show over time, and one of the biggest things we keep running into over and over is the private equity industry and how the introduction of PE changes a company. If you pay attention, PE is pretty much always in the headlines, and the news is almost never good. Recently, for example, the restaurant chained Red Lobster filed for bankruptcy after a decade of extremely questionable decisions from PE firm Golden Gate Capital, which acquired the company in 2014. There's also a lot of chatter right now in media circles about Paramount getting acquired, and some of the buyers there are also private equity firms. We're trying some new formats with this second episode over the summer, and one thing we wanted to try doing was remixing an episode we did last year with antitrust lawyer Brendan Blue to explain what's going on with private equity. Brendan was on the show exactly one year ago to talk about his book Plunder, Private Equity's plan to pillage.”
2024-06-13 · Decoder with Nilay Patel · Remix: How private equity took over everything · IDENTIFIED FROM THE TRANSCRIPT