The idea behind private equity or PE is simple: a private equity firm 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 market. 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 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. In Decoder world, PE is everywhere. Since the modern PE industry kicked off in the 1980’s, it’s grown virtually unchecked, and as author Brendan Ballou explains, that’s had seriously negative consequences for all kinds of markets and consumers. Private equity affects everything from the modern nursing home industry, to the Solarwinds hack, one of the biggest hacks in U.S. history.
Brendan Ballou is the author of Plunder: Private Equity’s 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.
This is a wonky episode, but it’s essential.
Links:
Plunder by Brendan Ballou
How Private Equity Buried Payless - The New York Times
Barnes & Noble is going back to its indie roots to compete with Amazon - Decoder, The Verge
How arson led to a culture reboot at Traeger, with CEO Jeremy Andrus - Decoder, The Verge
Opinion | Private Equity Is Gutting America — and Getting Away With It - The New York Times
Ticketmaster, Taylor Swift, and antitrust – explained - The Verge
What is chokepoint capitalism, with authors Cory Doctorow and Rebecca Giblin
Credits:
Decoder is a production of The Verge, and part of the Vox Media Podcast Network.
Today’s episode was produced by Jackie McDermott and Raghu Manavalan, and it was edited by Callie Wright.
The Decoder music is by Breakmaster Cylinder. Our Editorial Director is Brooke Minters, and our Executive Producer is Eleanor Donovan.
Learn more about your ad choices. Visit podcastchoices.com/adchoices
Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters. | Decoder with Nilay Patel podcast - Listen or read transcript on Metacast
