In the book they do talk about isolated cases which have turned out well. The challenge the book highlights is broadly there's no real regulation and as a result, much of the work is more of a strip mining operation. Extracting fees without relevant expertise..
I would love to see a real analysis that proves that, even just of a single major PE firm’s held assets.
Based on my conversations with people in the space, stripping a company is a plan B option, plan A is always to grow the company, it’s just much more profitable to do so.
Again, I stress that it’s an industry like any other, with a bell curve distribution of behaviour. It’s just like home builders, or developers, or car mechanics. There are bad players in it. But I’d bet the distribution is more boring than a bestselling book.
KKR’s CHI garage doors exit recently, where it gave employees equity as part of the initial purchase, enough that on average, employees each earned $175,000 on the deal, with some long tenured employees, truck drivers, taking home over $800,000.
There’s plenty of bad players in PE, just like in many ownership structures. A shitty PE firm has absolutely wrecked Canadian newspapers. But to just say it’s bad across the board? I think no one talks about the clean plays, because they are boring.
The other question to ask, though, is what happened to these companies as companies? Did they remain viable, going concerns? Did they continue to make a decent product?
It’s nice that the employees got a payday but I’m also interested in in whether the company itself was looted in the process.
There are many models. I have an acquaintance who runs a mini PE firm, he buys relatively small businesses from people who are retiring, and tries to improve the companies operations. Because he pays a reasonable price based on earnings, he can look forward and run the business well.
Not sure if you had a chance to check out the podcast, but @brendanballou.bsky.social is the author of Plunder! I agree that it’s a really important and enlightening book on the topic.
Comments
Phase One was purchased by PE in 2014, then a very niche camera company. They saw the potential in its software.
Capture One has taken a huge chunk of market from Adobe (competition here was welcomed).
Based on my conversations with people in the space, stripping a company is a plan B option, plan A is always to grow the company, it’s just much more profitable to do so.
It’s nice that the employees got a payday but I’m also interested in in whether the company itself was looted in the process.
Running a business well is usually a much more efficient way to make a bunch of money.
Heres the story on CHI: https://www.buyoutsinsider.com/deal-of-the-year-kkrs-exit-of-chi-overhead-doors/