YouSaid · the spoken record

Matt Stoller

lines on the record: 71
first: 2023-06-13
most recent: 2023-06-13
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Sure. So Carlisle is a large private equity firm. It bought HCR Mannercare, which was once the second largest nursing home chain in America, and then executed a number of tactics that are pretty playbook in private equity land. So they executed a sale leaseback, which is they sold the underlying assets of the nursing home chain and had the chain lease it back for sort of a quick hit of money, but now they've got a long-term obligation. They executed what's called a dividend recapitalization. So Manercare had to borrow money to pay Carlisle and the other investors a profit. Ultimately, staff needed to be laid off. Complaints and health code violations spiked. Unsurprisingly, a resident at one of these facilities dies, you know, without sufficient staff, she has to go to the bathroom by herself. As alleged, she slips, hits her head, and ultimately dies. But when her family sues for wrongful death,”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Talk about that Manor Care example for one second. You lead off the book with it, it's a very powerful anecdote. Carla buys a nursing home chain. They extract profit from it. Walk us through what happened there.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, yeah, yeah. You know And so, you know, generally the ones that are thinking longer term can be 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. If you do that, then it takes more than that to build a factory. It takes more than that to get a new product, you know, a new and innovative product line going. And as a result, they just can't make those kinds of decisions.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“That are successful in the PE deals come on the show. That's what they talk about. Barnes Noble does that. Barnes Traeger did that, right? Like we were going to reset the company, we're going to make it grow, then we're going to go back and become public again. 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?”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Show's about decisions. I ask every executive how they make decisions. There are a lot of themes in how executives answer that question on the show. But the theme they come back to all the time is you need to know what you're doing. 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. And if you just go back and listen to every executive who's ever been on the show, answer the how do you make decisions question, you know, they're different on the margin, but it's some variation of I know what I'm doing and then I try to make decisions to get there as fast as I can. 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 public market. 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. And that is when we've had companies.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Of private equity firms that they sort of get companies to be leaner, meaner, sort of, somebody said that they're like heat-seeking missiles for profit. Fair enough. The challenge that you've got is when things go wrong, private equity firms are very rarely held responsible. And what that means is it tends to lead to risky short-term strategies that if they blow up in somebody's face, it's not the face of the private equity firm. And so it's not that private equity leaders are more greedy or anything like that. It's that the legal structures that we've got around it mean that they just have a different set of incentives.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“You know, it's the timeframe that these firms are considering it 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 you've got. The other, and again, you've already touched on this, is the debt issue, which is private equity firms tend to buy businesses with debt that not they are responsible for, but rather 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, which I just mentioned, was spending as much money just servicing its debt as it was making an income at the time that it went bankrupt. So that's often a drag on the businesses. And then the third, you know, you're talking about the perspective.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“So, there's always going to be a role for capital to play in our economy 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 to go back to what we were just talking about earlier is that one, private equity firms tend to invest for the short term. So, you know, I always joke if I was trying to maximize the investment on my house, I'd, you know, 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.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“So, the positive case on PE, and again, this is the case that goes all the way back to barbarians of the gate, which is, I mean, we're talking about a 40-year argument that 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. They can exit. They can pay a lot of people out because private equity is going to buy the company. The PE company is going to come in. They're going to slash costs. They're going to because they own a bunch of companies. They'll impose some operational efficiency because they've got great managers because they own a bunch of companies. They can simplify your 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 rating a bunch of companies extracting the profits and moving on?”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Part about that is, as I understand it, the private credit market is just significantly less regulated, almost by definition than the public market. And there are voices out there saying that private credit, in large part led by private equity firms, could lead to a bubble simply because of how little transparency there is in it.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, no, it's really interesting. Security is lawyers who know more about this stuff than I will quibble with some of this stuff. I'm a humble antitrust lawyer. 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 sort of 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 they say that a coder, it's really, really taken off. We want to take it to the next level. We're going to buy it from you. Traditional leverage buyout and maybe they improve it. Maybe they don't. 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. You know, we'll treat it just as debt rather than as an equity stake. The really interesting...”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“That part I'm really curious about because we 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 also an exit that might seem attractive, even if it's not attractive for the long-term health of your company.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Short answer on leverage buyouts is no, it's the same basic idea, which is buy a company with a fair amount of debt, try to make some changes and sell it for a profit. That basic business model is the same that it's always been. 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. In fact, there's a really”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“That's funny during the entire Twitter acquisition drama, a bunch of us on the Virge Staff reread Barbarians at the Gate, which is the very famous 1980s book about KKR buying RJR Nabisco. Maybe the classic example of a private equity deal that just went completely sideways in a million different ways. Great book. I highly encourage everyone to read it. Like I said, it's just a classic of the 80s corporate raider genre. Those companies, they've softened their image, right? 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 has 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?”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“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 has sort of drew me to this as a lawyer, but also concerns me as a citizen, is that because of the layered 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.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Surround us in a lot of ways. If you consider them together with their portfolio companies, Carlisle, KKR, and Blackstone would be the third, fourth, and fifth largest employers in America. That order might not be exactly right, but they'd be right behind Walmart and Amazon. And yet most people, I would venture to say, have not heard of those three companies. Part of that is because when Carlisle buys a nursing home chain, they don't brand it a Carlisle company, or when Blackstone rents you a single family house, it's not branded a Blackstone property or what have you. 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 Carlyle Fund 1, 2, 3, 4, and so forth, that have a lot of investors. So often sovereign wealth funds.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“The joke on our show is that this is a show about org charts. Fundamentally, it's a show about how companies are structured and how they work and how they're structured connects to what they make and what their values are. Private equity companies are really opaque in that way. There's a handful of really big ones we've all heard of. There's a few smaller ones. How does a typical PE company work? How is it structured?”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Brennan Balou, you are a federal prosecutor and you served as special counsel for private equity in the Antitrust Division at the Department of Justice. You're also the author of a new book called Plunder, Private Equities Plan to Pillage America. I feel like this might be related ideas. Welcome to Decoder.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“And you'll at least be able to get away from those pesky shareholders and investment analysts. And if you're lucky, you'll end up with a better, stronger company at the end of it. Sometimes that happens. But the modern PE industry has grown virtually unchecked since it kicked off in the 80s, and as Brendan explains, that's had seriously negative consequences for all kinds of markets and consumers, because PE firms have reshaped how business works in America. Private equity affects everything from the modern nursing home industry to the solar winds hack, one of the biggest hacks in US history. This is a wonky episode, but it's essential. Okay, Brendan Ballou, author of Plunder Private Equities Plan to Pillage America. Here we go.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Sold or taken public again for a hefty profit. But don't worry if it doesn't work out, the PE firms are extracting fees at every step of the process, so they get paid no matter what happens. In another world, these PE deals are just boring financing strategies, or maybe the backbone of the occasional juicy corporate takeover story. But in our world, PE is everywhere. If you listen for it, it actually comes up in Decoder all the time because so many companies end up in PE deals one way or another. A few months ago, we spoke to James Daunt from Barnes& Noble, who was installed as CEO in a PE deal that has revitalized the bookstore chain. The CEO of Traeger Grills bought the company while working in a PE firm and looking for his next move after having founded Skulkandy headphones. And of course, there's the most famous PE deal going right now, Elon Musk bought Twitter, took it off the public markets, and is busy doing something to try and make it more valuable. If you're running a company that's up for a private equity deal, the pitch is often alluring. You might just get a hefty payday. The money overall can potentially help your company grow.”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT
“Hello and welcome to Decoder. I'm Neil I Patel, editor in chief of the Verge, and Decoder is my show about big ideas and other problems. Today I'm talking to Brendan Balou, the author of a new book called Plunder, Private Equities Plan to Pillage America. Brendan is also a federal prosecutor and he served as special counsel for private equity in the Antitrust Division at the Department of Justice, so he's uniquely suited to writing a book like this. Although he will be the first to tell you the book does not reflect the views of the DOJ. Now, the idea behind private equity, or PE, is simple. A private equity company gathers up a bunch of cash, raises some investor cash, and takes on a lot of debt to buy various companies, often taking them off the public stock markets. Then they usually install new management and embark on aggressive cost-cutting and turnaround programs, mostly because they have to pay down all that debt pretty fast. Then the company can be”
2023-06-13 · Decoder with Nilay Patel · Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. · IDENTIFIED FROM THE TRANSCRIPT