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@chackm0te744

4 ай бұрын

The first thumbnail was better

@wilsonatore

4 ай бұрын

Can you do a similar video on commercial real estate syndications? Or maybe buying into a Delaware Statutory Trust that owns commercial real estate?

@floydchusset3143

4 ай бұрын

Private Equity LBOs are well on the way to destroying the United States.off topic but i feel Saving for a market slump is also a bad idea. There are different perspectives on recessions and depressions; we cannot always expect significant rewards; and taking risks is preferable to doing nothing. The bottom line is that by diversifying your portfolio and making sensible judgments, you will accomplish exceptional outcomes. In just 5 months, my portfolio's raw earnings increased by $608k.

@smithdavis1362

4 ай бұрын

I know nothing about trading /investment and l'm keen on getting started. What are some strategies to get started with?

@JasonDinero

4 ай бұрын

Interesting, please how can i get more information? i don't want to remain out of ignorance, i really need to stack up this 2024.

Private equity sounds like a mechanism that extracts the most amount of value from a business, and transfers that wealth to the few general partners. Everyone loses - the business, the employees, the local consumers, the tax payers.... except for the general partners

@tahirisaid2693

27 күн бұрын

The people you’re claiming don’t benefit wouldn’t have benefited with or without the private equity buyout. The business was failing before private equity came in, they just more efficiently manage the end of the companies life. Most likely allowing most companies to work there longer than they would have been able to do before.

@Gk2003m

12 күн бұрын

@@tahirisaid2693 That’s flat-out incorrect. Private equity firms do not typically come into the picture as “white knights”. They come in strictly in order to make money. Many a good profitable company has been destroyed by private equity coming in, using the company’s good status to load the company with debt, extracting their bonuses, and walking away.

@chitownkidd33

6 күн бұрын

@@tahirisaid2693The business doesn’t have to necessarily be failing, this isn’t true for every case.

@straightup7up

2 күн бұрын

@@tahirisaid2693 Private Equity targets ALL businesses, not just failing ones but especially profitable businesses with top-heavy expenses . PE will strip those companies to the bone, eliminating excessive salaries, company cars, private jets, first class travel, annual picnics/holiday parties, all the perks go bye-bye. On paper the company is more profitable from lower expenses and bottom-line growth, but all that extra cash is redirected to paying off the aquisition debt, benefiting the PE partners of course - not the company and certainly not the common stock holders.

Since a private equity company started buying up shares in my company, they started cutting benefits and laying off employees to "create shareholder value"

@GeoMeridium

4 ай бұрын

I feel like this problem would would wane if private equity companies were forced to hold onto their acquisitions for longer periods of time.

@JARV9701

4 ай бұрын

​@@GeoMeridiumor just, don't.

@pezz2345

4 ай бұрын

The same thing happened to me - - and I worked at KFC... I didn't even think that was possible lol 😂 (It was a company that bought the franchise from another franchise owner, can't remember what they cut)

@marshallhughes4514

4 ай бұрын

Ahh that sounds like the playbook for when private equity buys into any business. They often do at least 2 things. 1) Raise the prices of whatever is being sold (goods or rent) 2) cut services of the same. (reduce workforce/reduce support).

@TheGbelcher

4 ай бұрын

@@GeoMeridiumIf it didn’t work they would stop doing it. There’s a popular narrative that PE doesn’t work. It scams investors, makes companies less valuable, and creates an environment that makes workers want to quit their jobs. If this were true, PE funds would lose money and no one would invest in them. Clearly, there’s more going on.

Worked for Sears for a decade and got out a few years after the Kmart buyout. Everyone that worked there felt that the executives intentionally drove the company into the ground to enrich a handful of people. The way they axed their pensioners was one of the saddest things I've had to witness in my lifetime. Best not to give a company loyalty these days, unfortunately.

@del7896

4 ай бұрын

No better way to enrich people who bought your company than to... destroy the company? JFC these comments.

@PhoenIXrcrr

4 ай бұрын

short term strategy for shareholders profit is not even close to healthy long term strategy that developed the company to this piont in time. So they are like vampires sucking the blood of the company and leaving them looking good olnly on a paper, but the company will need to recover from this parasite for a long time after they already sold the shares, and disappeared with the money.

@maweitao

4 ай бұрын

Sears was circling the drain for decades before Kmart acquired them. There are legitimate reasons to hate private equity, but people keep perpetuating these false narratives that they swoop in and kill perfectly healthy companies. Those guys were already doomed, just like Toys R Us was.

@draneym2003

4 ай бұрын

​@del7896 These firms get paid their fees regardless. JfC maybe you should have known that genius.

@KLondike5

4 ай бұрын

They absolutely loaded the company up with debt to cash out & had no interest in the brand's future.

Here in the UK, private equity firms are buying up veterinary practices (Vets) and then immediately doubling (at least) the cost of care and provided medicines, because they know people will pay above the odds for the care of beloved pets. It's an absolute cash cow for PE firms. It's not illegal, but morally it's pretty despicable.

@damoneboyd9945

2 ай бұрын

Damn

@nunyabidness3075

Ай бұрын

Been going on in the US for a while. The vets caught on though, so I think it’s getting stopped. Many of the vets don’t like becoming sales hacks who rip off customers who then forego care for the pets. Also, they don’t like the managers. One thing the internet was supposed to do was provide reputation sites, but the sites are all bogus so it simply promotes these schemes.

@drewroosevelt6506

Ай бұрын

This is why capitalism is nonsense when it comes to health care.

@rohitrai6187

Ай бұрын

Why can't people open new practices which don't charge double?

@nunyabidness3075

Ай бұрын

@@rohitrai6187 They can, but there’s a lot of reasons they will simply discount themselves versus the new market price rather than actually going back to the old prices. Some of those reasons are practical, but some are also government. All the rules made to protect consumers end up protecting entrenched interests.

You’re missing how PE acquisition debt works. They acquire a company with it, but force the company to take on the debt. This is why they need to explain to their bank lender how strong the company is. That debt usually has huge interest which the company must pay back, siphoning off profits that any remaining shareholders would get. It is also typically structured as preferred stock with a huge multiple, so it must be paid back (sometimes 2 or 3 times) before converting to common stock. That means no shareholders outside of the PE guys get money until the PE guys get paid back in spades. It’s wild out there!

@spkang2020

4 ай бұрын

Majority of PE equity is pari passu with other shareholders or at most, 1X preferred return. 2x-3x is wild and is more on management for accepting such a shitty deal.

@ralos329

4 ай бұрын

This is an interesting point I don’t know anything about. This could be a great video.

@HapticzRotMG

4 ай бұрын

Well explained. It's important to mention that this time frame will usually be 5-10 years before the exit approaches for the PE firm.

@Lobos222

4 ай бұрын

What do you mean Twitter has more debt? How much it it? X is not a number...

@Here4TheHeckOfIt

3 ай бұрын

Great summary. Most people think they come in when a company is on its last leg when in actuality, they are looking for profitable companies that show growth potential. Then they basically ruin it 😂

the huge problem is private equity buying up nursing homes and medical groups . imagine the nursing home losing 1/2 the staff . now people will be helpless in their beds while the nursing home collects it's fees. then there is the problem of them buying hospitals , cutting nursing and other staff . the rate of infections in such hospitals is like double that of regular hospitals. this should be illegal somehow.

@whatthepick

4 ай бұрын

I agree, private equity firms in the nursing sector are a dangerous road.

@shimotakanaki

2 ай бұрын

Yeah and they can threaten local government with the closure of said hospitals. Total win for the private equity, but at what cost ?

@Joe-xq3zu

Ай бұрын

Just happened to my Grandma, nursing home she was living at got bought out, new company told everyone they had to be out within two months. Should be f*ing criminal.

@TheSpecialJ11

Ай бұрын

If price and performance were more closely linked in our world, most private equity firms would never be able to make money. Their whole strategy is making sure the inertia of the price of services is greater than the inertia of cost. Cut costs, make bank, and sell before prices must come down to match the drop in quality. Or just find monopolistic markets like rural hospitals and be beholden to no market based price correction.

Private Equity is essentially companies that use loopholes to avoid risk and get all the reward. Once you are in the inner circle of Private Equity, you essentially have your own personal money printer that you print from other people's money and debt with almost no risk what so ever. It should be illegal but it isn't for whatever reason. The rules need to be changed to force private equity firms to be responsible for the debt they take out on behalf of other companies.

@d33pblu3

4 ай бұрын

You would think that whoever is lending all that money would wisen up a bit.

@6shot9

4 ай бұрын

“For whatever reason” more like cause no one calls it out

@nHautamaki

4 ай бұрын

@@d33pblu3 What the video left out is how this was all so much easier in the ultra low interest rate environment. Once interest rates started getting jacked up and money is no longer free, the risks are much higher and we are starting to see a bunch of people without shorts on as the tide goes out.

@cardplayer2124

4 ай бұрын

Clearly, you have no idea how private equity works. Yes, yes big corporations bad we understand your brain is the size of a peanut.

@davidwilfand916

4 ай бұрын

@@d33pblu3 Most of the time they get paid back with interest.

Private equity would buyout candy from a baby

@92kosta

4 ай бұрын

As long as the shareholders get paid, I guess.

@mugnuz

2 ай бұрын

so they are in fact the good ones cause babies shouldnt have candy? :)

During the pandemic, private equity bought considerable stakes in publicly traded companies that they saw were vulnerable. I guarantee they will load them up with debt and go out of business, putting workers again on the unemployment line as usual.

@personzorz

4 ай бұрын

Co ops ftw

@evans8488

4 ай бұрын

Explain to me how someone profits from buying equity in a company going out of business.

@PelosiStockPortfolio

4 ай бұрын

@@evans8488The private equity owners can force the company they acquire to pay huge dividends to the private equity owners/partners. In order to fund these dividend payments, the private equity owners also force the company to take out huge debt. This debt may be unsustainable in the long term for the company, and eventually the company will file bankruptcy. But the private equity group is shielded from this bankruptcy, so they just walk away after they extracted all the money in the form of low tax dividends

@TheGbelcher

4 ай бұрын

@@evans8488 You definitely wouldn’t want your company to go bankrupt. That’s not how it works. That’s NOT how money works. That’s not how any of this works. But you CAN make money creating disinformation agitation trash videos on KZread.

@templarknight7

4 ай бұрын

@@evans8488 depends on what assets those companies have. the debt private equity uses to buy businesses becomes the businesses' debt, not the private equity firm's debt. being the owners of the business, they can pay dividends to themselves while the business pays the debt. the PE firm can sell assets the business owns like real estate to another company the PE firm owns at below market rates using the excuse that the asset sale is to quickly pay down debt. when they've extracted everything they can, they can let the business go into bankruptcy. at the end of it, they'll walk away with a profit since they didn't use their own money for the initial buyout anyways.

Years ago I toiled at a company that was bought by KKR. Little was known of PE strategies at the time, but their behavior followed this pattern to a T - going from bad to worse. All they cared about was their EBITDA, for which we received no reward beyond our below-market-rate-pay. A few years after I got out, the company ceased to exist.

@aquaken00

4 ай бұрын

Is PE still exist, but the prey company bankrupt?

@gamemeister27

2 ай бұрын

​@@aquaken00Not only does KKR still exist, but they have half a TRILLION dollars of assets under management.

Private equity is the Bain of human existence.

@THETRIVIALTHINGS

4 ай бұрын

*Bane. Yes, I agree. *Bain means 'bath'.

@HowMoneyWorks

4 ай бұрын

I see what you did there

@spicymemes7458

4 ай бұрын

@@HowMoneyWorks 😉

@THETRIVIALTHINGS

4 ай бұрын

@@spicymemes7458Wait what? Did I miss something here? Is there a wordplay joke here? I wanna know.

@WanderingExistence

4 ай бұрын

​@@THETRIVIALTHINGS Bain Capital is a private equity group closely associated with Mitt Romney.

I was in M&A for four years. Private equity is a death sentence for most companies. Not always, but usually. PE is not a "business" in the usual understanding of that word. Their only purpose is to maximize the value of the assets, and pay their investors. How that happens is usually unpleasant for the employees of the acquired firms.

@pearpo

28 күн бұрын

Totally Agree. 9/10 they destroy quality for clients, customers, partners and employees, and it signals no more expansion of their market reach. Aren’t buyouts usually only considered for debt consolidation?

My only question is how the hell can a cook pot company get away with voiding its warranty on chefs salting their water. That pretty much a requirement for many if not most dishes.

@kkon5ti

4 ай бұрын

True

@Dhydronyc

2 ай бұрын

Because a "LLC" makes them not liable for it. Same principle as a corporation being a legal person. It's not your debt, Joe blow company owes it.

How to become rich while producing absolutely 0 value yourself.

@Tinfoiltomcat

4 ай бұрын

Providing liquidity is king 🤷‍♂️

@guyfurman2463

4 ай бұрын

That's trading. PE at least has to hold on to the asset long enough to cash out.

@ZPS51491

4 ай бұрын

I thought that was realtors.

@codycast

4 ай бұрын

All the groups taking their money would disagree with you. Risking your wealth isn’t providing 0 value.

@AaronVanWolfen

4 ай бұрын

Tbh, everyone who buys stocks produces nothing. Only those who invest at the IPO or buy bonds in fact help the company to grow.

Private equity is the aftermath of extreme inequality. Rich people have so much money, that they don’t know what to do with, that they use private equity as a way to try and make more money from their already insane hoard. They’ve ran out of ways to capitalize their own money themselves, and now look to businesses to get a cut of something people may need or utilize. If something big like AI or green innovation is going to be used by people, then they want a cut of that. That’s also why all these businesses encourage rising inflation and raising the CPI because it just better ensures that anyone starting a business will need a loan from them or the banks.

@theultimatereductionist7592

2 ай бұрын

All economic transactions need to be reduced to quantifiable physical and mental labor and time, tracking how much actual useful physical and mental labor each individual does and what benefits of that labor they receive in return. Reduce all transactions to essentially barter. Then make the laws based on that: no useful labor, not allowed to receive goods and services.

@thespectator5259

2 ай бұрын

@@theultimatereductionist7592That's the thing though. *How does one quantify physical and mental labor?* *Who's word on said value holds more credibility?* Who determines how "beneficial* the end product of the labor is? I'm not completely disagreeing with you, but devil is in the details.

@grandioso3507

Ай бұрын

​@@thespectator5259 labour time is the only metric to see how much work is done. To determine how much should an average worker produce, you calculate it from the average amount of products a definite industry produces in a definite time, eg average worker produces 1 coat in 1 hour in coat industry and 1 average farmer produces 1kg of carrot in 1 hour therefore 1 coat = 1 kg of carrot. What decides what is to be produced is planning, and this production plan obviously should be determined democratically, probably representive democracy or some kind of other social system.

@softwetbread248

Ай бұрын

​@@grandioso3507this woulda done numbers in industrial society (it did actually, its in a little book called Das Kapital). But we've gone so far from industrial society, oppresion of the worker class has evolved into the control of what is available in our minds, rather than what is physically available. Yanis Varoufakis has some good books on the topic

Oh how I love this video, now when people ask me why so many companies are dying, bought, sold, allowed to crash I can send them this video. Thank you for making my life so much easier lol

I worked for a Karl Icahn acquisition. He bought the company cut costs sold assets then sold us for a profit.

@damoneboyd9945

2 ай бұрын

Wow

@scotthartkopf1403

26 күн бұрын

You should spell his name right… CARL Icahn

I worked for a boutique PE a firm fresh out of college, it took me like 2/3 months to figure out that they were actually stripmining companies. It was kinda gut wrenching but also interesting.

@bluecrystalpalace

3 ай бұрын

what was the name of them i'd like to follow them

@jeremylawson6648

3 ай бұрын

@@bluecrystalpalace they firm has changed names a couple times over the years.

Your explanation about private equity is really comprehensive and insightful. Your breakdown of complex concepts especially the 2 and 20 structure and the carried interest loophole were particularly helpful and easy to understand.

@NA-tu7nt

4 ай бұрын

is this written by a bot? lol

@tr0wb3d3r5

4 ай бұрын

It really does sound like it for some reason😂😂​@@NA-tu7nt

@TheSimpleDudeOne

4 ай бұрын

@@NA-tu7nt like legit 🤣🤣 it's gotta be chatgpt, the dude probably runs a bot that scans transcripts of videos then feeds that to chatgpt, chatgpt writes the comment and then he autocomments to thousands of vids per month to gain traction on his channel.

@NA-tu7nt

4 ай бұрын

@@TheSimpleDudeOne Yeah, this comment sounds exactly like those kids who used ChatGPT for online discussion posts that were required for the course. lol

Private equity took over one of the companies I worked for. That company made acquisitions of several similar companies, making it the largest of its kind. I saw how much the company makes--basically money on their services--and bought a few shares; nonetheless, I also saw the decline in product and personnel, and basically walked. But being I have experience in the field--a lot of experience--I think there might be a big opportunity to create competition. Thanks for this great video.

The problem with private equity is that eventually you run out of other peoples' companies.

@courtneymeehan504

4 ай бұрын

Exactly!

@PrinceAlhorian

4 ай бұрын

Simple solution, fund startups... Groom startups... Grow startups... Buy startups... Liquidate Startups... Profit... Wash... Rinse... Repeat... Blackrock has been doing this for years.

@vitsadelhole

4 ай бұрын

You dont

@sd-ch2cq

4 ай бұрын

Yup

@nurainiarsad7395

3 ай бұрын

and that's when they start looking abroad to find other countries' companies to suck dry.

The book Plunder by Brendan Ballou highlights the faults of private equity pretty well

@mudddge

4 ай бұрын

You mean evils

It was NOT suggested by Starboard Capital to not salt the pasta water - they said that Olive Garden made that choice and wanted them to salt it again! Just pause the video at 10:36.

This is why I love HMW, 13 minutes ago I knew nothing behind the veil of how PE works - now I feel like I can do it myself. Gutting worker's livelihoods here I come!

@roscojenkins7451

4 ай бұрын

Oh they grow up so fast. He's Capitalism Incarnate!

@ronblack7870

4 ай бұрын

he said that is only a portion of private equity . then you have companies like berkshire hathaway that buy good companies and invest in them to improve them which improves profits as well. they can provide capital that lets the companies expand - so they end up hiring workers.

@mikhacoffman4522

4 ай бұрын

@@ronblack7870private equity literally is just any private investment company of all kinds lol

@mooneymakes359

4 ай бұрын

You think greed cant exist without a somewhat free market?

@DadsCigaretteRun

4 ай бұрын

I also recommend listening to other videos supporting this type of strategy behavior. HMW is extremely biased, which is fine but he dude flat out hates capitalism

I'm tempted to refer to Private Equity as Vultures, but vultures usually only prey on the already dead -- Private Equity, instead, preys on the living! A better analogy would be that Private Equity are more like biting flies that go after living animals to extract as much from then as possible before they die. But even this analogy misses the mark because the percent of animals preyed upon by biting flies or mosquitoes that are killed by them is small whereas the percent of companies preyed upon by Private Equity that die is very high.

@TheWedabest

2 ай бұрын

PE is basically like a vampire!

Oh look, a totally sustainable business that would normally be able to profit and provide market value with it's current operations. How about I leverage a ridiculous investment or lend an ungodly amount of cash to buy it out completely... Oh look at that, we got so many investors to pay back, looks like our operations are too expensive, I can't believe how inefficient this company is. Looks like benefits have to go, and our valued employees salaries are too high, we gotta replace them with cheaper people, or just cut head count entirely. Wow, we're still aren't making money back for investors, guess we got to liquidate, I totally didn't plan for this.

@KiwiCatherineJemma

Ай бұрын

Thankyou for a one paragraph summary of the rort that is Private Equity and Leveraged Buy-Out.

These are the topics I really love from you; stuff like this and the investment banking video!

I hope I'm not the only one who sees this as absolutely monstrous.

@mugnuz

2 ай бұрын

sadly yes youre so unique

@andrewcopple7075

2 ай бұрын

Thanks, it's better to be all alone than on your team. @@mugnuz

@mugnuz

2 ай бұрын

@@andrewcopple7075 was more of a joke about many normal people thinking the same and the video frames it as predatory but we live in a system were many nieches for exploitation excist. but sure it was a joke about your naive comment aswell...

@lucamckenn5932

Ай бұрын

You are. We sleep while they live. Fight back. The middle class is already dead.

Nice and succinct explanation. If you have not already done so, it would be interesting to have the same type of presentation on publicly-traded Business Development Companies ("BDCs"), and contrast the business models for BDCs with those of private equity companies.

In the vast majority of cases PE firms don't bankrupt companies that they acquire. They do layoff many workers though, damaging workers lives.

These videos are so good. I always learn something before he even hits the midroll ad.

that's a great video, many kudos and thanks Sr! Tomorrow I'll start my Private Equity company, and by the next weekend will be in my pleasure boat enjoying the billionaire life.

OMG...to simplify PE LBO firms primarily use money from pension funds like weapons of mass destruction to extract equity from acquired companies. The acquired company is responsible for the loan that was used to acquire them and any additional loans taken out to pay investors. Cost cutting, off shoring, layoffs and other strategies are used to pay for the debt (leverage). Sometimes companies are targeted for hard assets like the infrastructure they own outright which can be sold then leased back to the company that used to own it. Sometimes the real value is liquidation where the company is worth more dead than alive. Yellow Freight was a case study.

I like how you did this as scenario based learning.

Thanks for an excellent video. ....From a former hedge funder, not in any way related Private Equity, rather in the Muni Bond Arb space :) I was approached countless times to construct and market Private Equity into a hedge fund product, and always politely declined.

The only experience I've had with private equity was when one of the co-founders of the company I worked for wanted to sell his portion. Company didn't have enough funds, since his portion was half the value of the company, which was worth hundreds of millions. So, a PE company stepped in, paid the leaving founder his money, and basically took his place. The PE company began to re-arrange the company, meaning entire depts that didn't align with long-term goals were gone. From what I hear, they gave a decent severance. Eventually, the company went public and a bunch of people got rich, including long-time employees of the company, as they were given equity to ensure they stayed with the company. Overall, the company isn't as great as what it was, since it's now beholden to stockholders, instead of a privately ran company. That said, the PE did a great job of making the company more efficient and bringing in experienced leadership. They definitely knew how to run a large company.

@squabdiggity743

3 ай бұрын

"Overall, the company isn't as great as what it was, since it's now beholden to stockholders, instead of a privately ran company." The company isn't as great because it is beholden to more people? Elaborate please, I don't understand your reasoning.

@wormfood868

3 ай бұрын

@@squabdiggity743 Often, as bad as PE companies are, being publicly traded is even worse; the PE firm might have some strategic vison, and care about the longer term health of the company, either because they want the profits it generates, or want to increase the value to sell it. Publicly traded companies are often at the mercy of short term investors that only care about juicing the stock price to make a quick return, so the long term health of the company is of no concern. Stock buybacks are a major example; it's not uncommon for companies to cut R&D spending, while spending down their cash reserves on stock buybacks, putting them in a bad position when their products become outdated, or there is a slowdown in their business.

@badart3204

3 ай бұрын

@@squabdiggity743it probably became a worse place to be an employee. The problem with shareholders is that you are legally required to try to benefit them which often comes at the expense of the employees

@squabdiggity743

3 ай бұрын

​@@badart3204 "The problem with shareholders is that you are legally required to try to benefit them which often comes at the expense of the employees" Yes this applies to both private and public companies so I don't understand the distinction that is being made here? Private companies still have shareholders, except the "shareholders" of a private company is a closed club, invite only. The big difference between private and public companies is that it is much, MUCH harder for a public company to exploit and abuse its resources than a private company, because there is significantly less oversight, regulatory efforts, and scrutiny on private companies. Private companies don't have to report on business operations with any where near the same level of detail as Public ones. So again what's the point here? There are plenty of totally shit private companies, you just don't know about them because they are private.

@squabdiggity743

3 ай бұрын

@@badart3204 I don't understand your or OP's point. Private companies have shareholders, the boards of private companies have legal responsibilities to those shareholders. The maximizing of value for those shareholders can just as easily be at the expense of employees for private companies. The big difference here is two things: 1. Being a shareholder of a private company is not an inclusive club, it is invite only. Private companies are not required to report publicly who there shareholders are, what percentage of ownership those shareholders have, or how they are compensated. 2. Public companies face MUCH greater scrutiny than private ones, and are much more heavily regulated.

Thank you so much for your information 😊! I love this video

They took over MotoGP a few years ago and ever since the sport has been struggling

really insightful video

Always interesting, thank you.

Thank you for clearly explaining this. I finally understand at least one fundamental aspect of a PE company.

Hope this video shows people they should “run” when they get recruited for roles at a “VC or PE backed company” Also, don’t take a role as operations in a PE firm. They use those people as the fall guy if the deal does not make money. It gives the investors in the PE firm a rationale to keep their jobs and continue to raise funding.

The goal is to gain control of the company, sell off or mortgage all the assets. Once it's leveraged to max and becomes insolvent they flush it with bankruptcy. The same thing there doing to our country USA Inc.

this was extremely useful!

The last few minutes you switched over to Critical Role's low-fi tunes for the background and it had me scrambling for a second to see where my music playlist was coming from. lol Great video as usual.

I work for a company owned by private equity. In a Q&A session of a business meeting during the pandemic, they were asked, "why can't the owning firm loan the business money to keep things going rather than firing employees?" The answer was, "we can't because it's not structured that way." Pretty much told me everything I needed to know about the situation.

I *knew* that Bartholomew Banks guy was trouble! 😂

@withoutatrace52

4 ай бұрын

I too love Dr. Glaucomflecken

Homie literally almost fumbled the bag😂😂 7:14

Buyout funds are tough, I've been involved in selling a business to a buyout fund - they are no longer in business. Our contact explained alot about private equity and jeeesh it's a racket.

@nosonoliento

4 ай бұрын

That's the word I was looking for, thank you.

Great video 🎉

a result of this cutting costs can also lead to rivals in the industry, either existing or up coming companies trying to get in your niche with an easy pitch. "remember when X business was good, before private equity firm Y got to them, we're basically offering that. may not be as cheep but doing business with us is you saying 'screw them' and getting better service." also yeah, this will inevitably crash, since you are rapidly acquiring consolidating, and often destroying so many companies per firm. eventually this will outpace the recovery of new companies entering the game so there will be issues in the industry.

I have worked at 4 companies that were privately owned, were bought by VC and within 5 years had been wound up. They have a model, and it involves asset-stripping, redundancy, crippling debt and then walking on to the next business. I have watched the same thing happen each time.

I love your videos

When you explain it in a way that makes sense, it all sounds really dumb and damaging to a society.

I hope you talk about Sealy and Serta in the US mattress industry.

this is the best channel youtube has to offer ! TO THE MASSES NOW

I have worked for two companies that got bought up this way and wow does this explain those aspects sooo well.

I might have spaced out but I didn’t hear anything about EBITDA and the EBITDA/valuation multiple. There are lots of ways you can increase the apparent value of a company or a portfolio of companies besides cost cutting and “creative efficiencies”. Getting your entire portfolio onto a single backend computer system, for example, is one way to do it. It’s expensive as hell and fairly risky, but it can drive the multiple way up if you take older companies with little to no digital infrastructure and haul them into the 21st century as a group.

Private Equity. Two of the worst combined words in the English language, alongside Leveraged Buyout and SPAC Merger.

This is maybe the first video of yours that I thought was incomplete. I'll delete this comment later because I'm a huge fan and don't want to minimize the enthusiasm you deserve on this but I want to make my feedback known (do you have an email address to which I can send this sort of thing instead, going forward?): 1. A private equity explainer should include the fact that the debt borrowed to purchase a portfolio company is, inextricably to most laymen, placed on the balance sheet of that portfolio company and is *not* guaranteed by the private equity principals/executives or even the fund through which they are making the investment. the fact that this debt is non-recourse and is an obligation by the company, not the people who took out the debt to begin with, is a huge detail that most of the public does not understand. 2. You mentioned the management company but did not mention that this is a huge way by which private equity firms get value from companies that fail: by charging huge amounts of money in consulting fees to help the company make the interest payments on the debt that the PE firm saddled the company with to begin with. This is part of how PE companies make money on portfolio companies that fail -- they charge them exorbitant fees prior to failure. 3. No mention of dividend recapitalizations as a way to extract value from companies that end up failing: by taking the cash on the portofolio company's balance sheet and issuing a dividend with those funds to the private equity funds through which the PE firm has vested their equity interest. Taking your 90% LTV example (which sounds a little rich; I'm unaware of this kind of leverage being possible, but whatever), this means that a private equity firm only needs to pull out $10mm in management fees and dividends before the investment is profitable even if it ends up going bust and the lender loses everything.

@markk3453

4 ай бұрын

i think what you said has gone 99% over most peoples heads. email the channel email and do a full essay style. maybe he will make a part 2

@sillyhead5

4 ай бұрын

@@markk3453 Agreed but it won't go over the head of the channel creator who undoubtedly knows this stuff already but for some reason chose not to include it. I don't think every PE video should have every detail but if you're covering the carried interest loophole (which has nothing to do with how private equity *firms* make money), then it makes sense to include management fees and dividend recapitalizations since those are ways in which PE firms do make money. And the non-recourse debt is what makes it all possible so that's even more important in an explainer video. I'll follow your advice and email him. Thanks.

A great book on these crooks is "Plunder" by Brendon Ballou. Pretty eye opening.

"You will own nothing, and you'll be happy"...

@its9333

4 ай бұрын

Why do you keep repeating the same phrase? I know where it’s from but now you sound like a bot

@WanderingExistence

4 ай бұрын

@@its9333 Lol. What? This isn't really a saying I use too much.

@ebo5739

4 ай бұрын

This quote was never said that way and you´re a sheep repeating stupid stuff.

@zunedog31

4 ай бұрын

Why do people keep saying this?

@Code7Unltd

4 ай бұрын

@@zunedog31 Because it's a constant self-evident truth in quite a bit these days. Business relationships around finance and tech have become quite adversarial, I presume companies twisting their business into knots for fake customers on Twitter is one reason.

I worked for a company that was owned by a PE. Major pet retailer. They eliminated the HR and payroll department and sent it to India. I never worked for a company more obsessed with making money. The most focused on the product and quality work with best ee compensation was employee owned.

Was that Chris Williamson bouncing the door?! 🤣

10:35 isn't putting salt in a pot part of cooking food?

This video just made so many disparate topics click for me all at once. Thank you !!

this was so informative it taught me more about private equity than some books lool

The irony of a video on the downsides of private equity being sponsored by a private equity owned company(Brilliant) as a sponsor ..........

This video was TOTALLY AWESOME!!! 😀👍

Good content as usual but may I suggest that you try to normalize your final audio track to make your own voiceover levels match with your external clips better and hopefully this will help with the overall flow and consistency of your videos.

Will you make a video about taxes and teach us how money Works in that way?

The Brilliant ad ends at 5:35.

❤❤❤The content is interesting, informative, thank you for your useful knowledge and sharing of experiences. Greetings from Chanel XBangkir Indonesia ❤❤❤

2:22 well that sounds easy to break.

This channels lessons and advice is priceless. Seeing how things actually work and how you're not going to get rich will save people tons of money and time. They will probably feel better about their current situation as well. Thanks my man, keep these great videos coming.

Learn so much as always thank you!

@HowMoneyWorks

4 ай бұрын

My pleasure!

I feel like I have missed something here. How exactly do we get to the point where a corporation gets liquidated and sold? And how they end up with a ton of debt?

@AAhmou

4 ай бұрын

The way corporations intrinsically work, for them to grow and expand debt is necessary. If for some reason or another they fail to reach the projected level of growth, well, they still have to pay their debt on time. They can do so, by taking further debt, which is susceptible to initiate a vicious cycle that if not addressed would lead to bankruptcy. From then, the company being liquidated is one of the possible outcomes.

@NelsonGuedes

4 ай бұрын

@@AAhmou that can happen without private equity, though. I was referring to the practice of vulture capitalists to buy a corporation, rack up their debts, pay themselves a ton of money from these debts, and then liquidating the corporation. The whole reason I watched this video was to get some deeper insights about how that happens. The structure of the private equity was informative, but the connection wasn't made... unless I missed it somehow

@DadsCigaretteRun

4 ай бұрын

@@NelsonGuedesI think you’re right, it wasn’t explained at all. Probably because he doesn’t know or it went against his video

@erniefu1610

2 ай бұрын

When the company pays outrageous management fees, the CEO of the company takes out huge debts to pay it off. The private equity firm can also swap out profitable assets the company has with unprofitable assets the PE has.

Private equity bought the company that bought my startup, then decided they didn't actually want us, fired the executives who bought us a year ago, and got rid of my whole team as well. But our team is at a much better aligned company now.

I literally know a exec/head of private equity from the mentioned companies in this vid and lemme tell you this , his house in comparison to those of top-athletes is like castle vs mudhouse .

@absolutpeter7038

4 ай бұрын

so yeah , private equity is basically late stage capitalism and like not sustainable at all but atleast some people make some big money off it 😅😂

@bluecrystalpalace

3 ай бұрын

can you recommend some private equity funds i should look out for, I wanna buy stock or watch the stock of the companies they buy thanks

Extractive middle management 101. A plague of locusts.

You: This is my body... It is priceless, and I must keep it intact for decades... PE Firm: We have a buyer for the heart, lungs and liver... They lowballed us on the brain, so we are going to lease that for 10 years and then sell it to recover any residual value... The eyes are going to our JV partner in Asia but they will be on our balance sheet unless we go underwater... Then we'll stitch up what's left and see if we can convince someone to take it off our hands...

Go into pizza hut. Their pizza was delicious. I still remember the day I had the pizza and I asked my parents if they put oven baked pizza from Walmart into the pizza hut box

So basically nothing. They're just vampires

great video!

@HowMoneyWorks

4 ай бұрын

Glad you enjoyed it

I felt our last accounting was working on the side with the goal to sell out our unlisted family company. We do our own accounting now. It is hard to find an honest accountant if you have one give him a raise. If you're company has too much tax debt start to do your own accounting and do your own audit. Take time out. or ask your wife to do it for example. Maybe the tax debt are prepayments for example you were forced to do by your accountant and they plan to use those assets to

Ive started hearing about family offices more often, could you do an explainor on what they are?

@vitsadelhole

4 ай бұрын

It’s just like any other firm, except they only manage family wealth which means they get to avoid a lot of regulation, but also can’t really scale as well, but use the same strategies as any other firm does

Always wondered why the pasta at Olive Garden sucked.

HAHA warrantee on cooking pots

conclusively… AI and robotics will accelerate the PE way of doing things- it seems to be complimentary w the model

I heard a pretty unique solution: an investor looks to local small businesses and offer a 7-year zero-interest loan for the small local business. Investor gets their money back, smaller local businesses get untethered from the high-interest usury of bank lending, and communities grow stronger because local small businesses grow stronger (which means the community has a more robust economic system where revenue stays in the community instead of funneling profits out of the community to a giant corporate HQ) Yes, it doesn’t profit-maximize the investor’s ROI, but I think this is the only way right now to do “ethical investing” Edit: the 1919 Dodge v Ford decision destroyed America. Basically declared “the purpose of a business is not to improve its product/service or to serve its customers, but simply to grow the value of the shareholders”

@iamlegq

4 ай бұрын

HAHAHAHAH "it doesn't profit-maximize ROI" has te be the understatement of the decade. It literally makes the investor 0 profit. Actually the REAL ROI is negative because of inflation. What kind of investment makes you LOSE money???

@vylbird8014

4 ай бұрын

@@iamlegq Yeah. The only way I can see that happening would be if the business owner happens to have a really wealthy friend or relative and asks for a bail-out.

@bionmccool

4 ай бұрын

​@@iamlegqhonestly, it LOOSES money

@Jibrilfm

4 ай бұрын

Unfortunately that doesn’t make financial sense for the investor. If they put 1 million in today and take out 1 million in 7 years they lost money due to inflation. The only way something like that would make sense is if there were incentives (like low income housing tax credits, revitalization tax credits etc)

Two words: rent seeking. extracting as much money from whatever can be bought. period.

Yeesh! Private equity is wicked business bro 😅

Love and enjoy your content.

I'm trying to write a fiction story for a videogame where Private Equity Companies are the main antagonists.

@Lonovavir

4 ай бұрын

No need, it reality. Dystopian fiction fell off the radar when it became reality.

@paratame105

4 ай бұрын

@@Lonovavir Is that why Cyberpunk was the most hyped game of the past 5 years?

@Koushi82

4 ай бұрын

Marantz rants doing a bit on pe lmao. Main ones are like Bain Apollo Goldman etc

@1O1O11

4 ай бұрын

The idea is more that the community and unions eventually overcome the Private Equity Companies. I mostly just want to make a videogame about property violence, because destructible environments are fun to design.@@Lonovavir

Could you do one on hedge funds if you haven’t already?

I'm interested in this topic,any good resources that you guys can recommend?(Thanks

Fun fact, creating a shit startup that gets venture capital is the fastest way to take money from the rich and give it to the middle class.

If you want to find who all is on the LPA how would you do that?

The first thumbnail was* better.