Tuesday, April 4, 2023

Plunder: the Problem with Private Equity

 Brendan Ballou brings a lot of experience and research to the mechanisms and effects of large private equity firms in his upcoming book, Plunder. Much of the book catalogs the incentives and the resulting problems for acquired companies and their employees—and in the field of healthcare, their patients/clients and families. At the end of the book (ironically, in Chapter 11) he gives solutions to prevent acquired enterprises’ bankruptcies and collapses. Some we can do but most that need regulatory and legislative efforts.

Though he painstakingly describes what’s happened in a few industries by the 800-pound gorillas of the private equity world (e.g. KKR, Blackstone), he attributes a lot of the consequences to malicious intent. I doubt this is the widespread case. Only insane people would sabotage their investment even if they’ve recovered their initial capital outlay. Also, reading this book, you’d think all private equity firms are “evil” and bad for companies, and society. Many investment firms are often prescribing to the hold, secure and grow acquisition model and then sell if the capital is needed elsewhere or there’s an obvious strategic buyer. Though Ballou highlights a few industries and regional markets where PE investments have been detrimental, many more industries have survived and thrived with PE infusions.

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