- My parents ended up being forced by circumstances to move into a retirement home about five years ago. Fortunately, the place turned out to be run by people who mostly cared about their clients and so my parents' lives were basically OK, except that the food sucked (which AFAICT is par for the course at retirement homes). But a few months ago the place was acquired by a different company, which is trying to squeeze out higher profits. Staffing and services are being cut, and prices are going up. Even the food got worse, which I didn't think was even possible. The response when someone complains is, "If you don't like it you are free to leave."
Yeah, right. My barely mobile 90-year-old parents, one of whom has Parkinson's, are just going to pack up and go. They know perfectly well that they have a captive audience.
Thankfully, my mother died before the acquisition, and my father died last week, only a few months after the acquisition, so I don't have to deal with this any more. But caveat emptor: if you ever go into a retirement home, think about what will happen if they change ownership. Even if it looks great, or even acceptable, now, there is no guarantee that it will still be great, or even acceptable, tomorrow, unless you somehow manage to negotiate such a guarantee. I have no idea what a contract provision like that would even look like. But I am going to be facing this problem myself some day, so I'd love to hear ideas.
- I worked for a while selling fractional nurses into for-profit nursing/retirement homes at the end of Covid, got to interview some industry experts, who told me that these for-profit homes are the 21st century equivalent of 19th century insane asylums. If you or your loved ones have to enter one, seek at all costs a home that is not for profit (Catholic orders run some, Jewish organizations others, the VA also offers these homes to vets). Every single one will uphold higher values than the for-profit entities sucking resources from people who are no longer in a position to advocate for themselves.
- The market is perfectly efficient, value is well attributed, lobbying is a social good, being rich means you’re smart and should have special privileges, optimizing for returns on investment is equivalent to optimizing for a better society
Obviously I’m kidding, and something is rotten
by danielparsons
4 subcomments
- I don't understand how PE manages to get debt financing for LBOs? Seems like a big risk for the creditors?
If I buy a corp at 10% net margin for 5x ebidta on 80% leverage, i’ve really paid 1x ebidta. then lets say 20% of revenue was going to R/D and stuff that would only pay off in a few years. I cut all R/D so now its at 30% net margin.
So I can triple my money every year because it’s now generating profits of 3x my original downpayment every year (minus interest payments). After a few years of zero R/D the company has no good products to sell, demand falls, and it’s declared insolvent. Well, I dont care about my 20% equity downpayment because I already got like a 3-9x return. But the debt financers are screwed.
- I got this email in mid-March:
> I’m reaching out to start a dialogue regarding a possible non-executive founding directorship role for a new senior care deal.
> We are doing a roll-up. Acquiring and consolidating various senior living revenue generating companies, eliminating redundant operations, improve and expand service offerings and ultimately exit via private sale or IPO.
It was so bonkers I forwarded it to my wife, who works in a research center on aging, and she was like, "how many red flags can you fit into one email?"
This stuff is depressingly real.
- The authorities need to make leveraged buyouts illegal.
I see no benefit coming out of it apart from pain for society.
Is there any benefit that I am missing? (Apart from the money it generates for the investors and the related politicians whose pockets get lined)
- Operational efficiency and care for the elderly will never have mutually beneficial outcomes. Nor will the expectations of the participants on either side of the transaction be compatible.
I fear the objectives of both will always be mutually exclusive.
by Amorymeltzer
0 subcomment
- The (excellent) Megan Greenwell wrote Bad Company, all about private equity; I'd recommend it. It does a good job of telling the story through a few specific and illustrative examples of people/industries[1], while still explaining everything in detail. Greenwell has a perspective, to be sure, but she's not wrong.
1: IIRC, it's a Toys 'R Us employee, a nurse at a rural hospital, a journalist at local newspaper, and a resident in a PE-owned apartment.
by elephanlemon
5 subcomments
- Could someone (please not an LLM) attempt to steel man the following position for me:
Private equity is overall good for society
- Someone needs to create a kind of JSON for care homes, if you will. Something like a super simple spec of what a goddamned care home object is for, and the minimum number of actually fairly-paid full-time staff one needs to achieve that in practice.
Then it doesn't matter how many baroque shell companies it takes represent the thing internally. Either the thing can output a response in Care Home Object Notation, or it's just a bunch of crafty bullshit disguised as a care home.
You'd just walk in with your one-page CHOM spec and read down the sheet: "Number 1: Can I speak to a full-time nurse, please?" If they respond, "No, but here's two high-school interns in a trench coat," you can just be like, "Not a care home. Got it," and move on to the next one.
by vjvjvjvjghv
1 subcomments
- I have read that the big wealth transfer from boomers won't be as inheritance to their kids but most of it will go the the health and elderly care sectors. Hearing this stuff I totally believe it.
I am thinking about more and more about a plan to off myself once I need expensive care so I am not a burden to the next generation.
- >Private equity relies on a basic technique known as the leveraged buyout, which works like this: you, a dealmaker, buy a company using just a small portion of your own money. You borrow the rest, and transfer all this debt on to the company you just bought. In effect, the company goes into debt in order to pay for itself. If it all goes well, you sell the company for a profit and you reap the rewards. If not, it is the company, not you, that is on the hook for this debt.
——
Not how I've seen this work. These often require a personal guarantee, in some cases the homes of whoever is applying for the loan. So, whoever wrote this article has no idea of the real acquisition process.
by PearlRiver
2 subcomments
- People who think the government is bad have never met a corporation.
- A human ATM is just a teller.
- Private equity is not a free market artifact, it could not exist without the government controlling the currency and providing very cheap loans.
by calvinmorrison
3 subcomments
- Private equity didn't. People did. We really need to get rid of limited liability and corporate fictions.
- Care sector in the UK is a dumpster fire. Corporations get paid often thousands per day per service user, hire incompetent staff at below minimum wage (if you count unpaid overtime) and pocket the massive margin. It desperately need proper regulation.
- I read recently that companies are getting almost resentful that they have to go through yuo to get your money. I keep thinking about that because I think it's true.
I read some of comments here and on other threads about PE and I keep seeing some variation of "this particular PE crime is an outlier, we can fix it". No, no you can't. PE isn't an aberration. It's just the natural extension to capitalism. It's inevitable.
This can be understood easily in Marxist terms, as unpopular as that is. What we're talking about is the workers relationship to the means of production.
You have a nusing home. The people who work there should own it. There's no reason not to. Instead there's this intermediary, some capital owner, who demands to extract profits from that. We've simply replaced the feudal lords of old with investment bankers. It's the ultimate in rent-seeking behavior.
Years ago I remember hearing about PE firms buying up trailer parks. For many this is their last refuge from being homeless. When they are homeless, it's not only devastating to them but it's expensive for everyone. Health issues, going to the ER more often, violence, law enforcement making sure homeowners don't have to see homless encampments, people can't hold down drugs, self-medication with drugs and so on.
We absolutely shouldn't drive up the price of mobile home pricing so rent-seekers can extract profits but we as a society choose that over housing security for people. That's not just wrong. It's state-sanctioned violence.
This nursing home PE squeeze is also state-sanctioned violence. Make no mistake. Arguably, it's even social murder [1].
And once again, it's super easy to understand in terms of the workers relationship to the means of production. Yet everybody thinks they'll be Jeff Bezos one day so it's super-important now to vote in the interests of the billionaire class. Yo uwon't be. And even if you are, do you really want to become rich this way? Is that what you want your legacy to be? That you made the last years of elderly people who needed care miserable?
Why do people think this is good? Or fixable by the politicians who are bought and paid for by the people profiting off of this?
[1]: https://en.wikipedia.org/wiki/Social_murder
- Frankly given the sorry mid/long-term state of the UK economy, yes, this is the absolute essential thing to be moaning about...
And frankly moaning about this used to be right wing conspiracies a few years ago so yey for another pendulum swing...
- [dead]
by charcircuit
1 subcomments
- Every company turns people into ATMs, taking their money for a good or service. It is naive to think that companies do not want people unloading their money and consuming whatever it is the company is offering.
- It isn’t the fault of private equity that banks make excessive loans against assets in a leveraged buyout. Banks (such as per the article, The Royal Bank of Scotland) have a duty to ensure that their loans are of properly assessed risk, and if the PE firm that wants to or has bought an asset does not look qualified to run it, then the banks should not be making the loans. Articles that keep casually dropping triggers like “[t]hey rubbed their hands together and said, 'Sooner or later, as the demand increases, the prices must go up'” are not seeking workable solutions but capitalizing on their ability to raise ire. It’s much more yet another article that does its best to paint a profit motive as an evil, completely ignoring that any endeavor that is not profitable is going to die sooner rather than later, and when it’s a government run endeavor then the taxpayers, who were completely uninvolved in the deicsions of where their money should be spent, are the ones left on the hook - HTF is that better?
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