This grossly (and incorrectly) oversimplifies an enormous industry with a number of different approaches. Some PE firms absolutely strip the assets out of businesses and maximize their short term profits, while others buy and hold for the long term and others add value to companies they buy then sell them or take them public.
I hate the whole "PE is evil" attitude from people who don't understand it. Often there are headlines about how a PE firm has taken a firm over and fired hundreds or thousands of people, and the connotation is very much that they are evil and greedy for profit at the expense of people's livelihoods, while the reality is the business in its current form was going to fail and take everyone's job with it, and it was necessary to cut jobs in order to save the business (and thus save the jobs that remain).
I know the industry is an easy target because it's a bunch of rich guys and some of them are definitely greedy profiteers, but it's just unhelpful to label the whole industry based on those. If you go by that logic then the whole tech industry is very much evil because it exploits cheap labor (Uber, DoorDash, etc.).
> while the reality is the business in its current form was going to fail and take everyone's job with it, and it was necessary to cut jobs in order to save the business
As a rate, how many business are actually "saved" by PE firms?
> (and thus save the jobs that remain)
Wouldn't that be simpler with a general bankruptcy? What is gained when a third party, often encumbered with leverage, gets involved?
> but it's just unhelpful to label the whole industry based on those
It's equally unhelpful to expect the minority players in an industry to define that industry.
> the whole tech industry is very much evil because it exploits cheap labor (Uber, DoorDash, etc.).
To engage the hyperbole, the current iteration of it may well be. I expected flying cars and trips to the moon, not face recognition surveillance, deep fakes and manipulative social networks.
Realistically... PE on it's own, and tech on it's own may be neutral concepts, but our current lack of regulation of their specific markets really shows.
You're obviously coming in with an anti-PE bent here, so if you're that interested you can pull up some statistics on PE outcomes and leave them here. My point was that OP's labeling of PE firms is overgeneralized - if you want to talk about percentages of outcomes and what type of PE is the minority then you're welcome to bring that info with you to discuss. I'm not going to do it for you.
> Wouldn't that be simpler with a general bankruptcy? What is gained when a third party, often encumbered with leverage, gets involved?
A bankruptcy is getting a third party (a court) involved to redistribute ownership or sell off assets and redistribute the proceeds and to decide how the company will be run while all of that is happening.
That is a good deal more complicated than simply selling the company to someone who wants to run it differently.
>I know the industry is an easy target because it's a bunch of rich guys and some of them are definitely greedy profiteers, but it's just unhelpful to label the whole industry based on those. If you go by that logic then the whole tech industry is very much evil because it exploits cheap labor (Uber, DoorDash, etc.).
In this case, they were given the kiss of death. Cerberus Capital right as/after they were done striping Chrysler to the bones. They used the same executive to do it, although his name eludes me now. Paid obnoxious amounts of money for niche brands like AAC, then immediately ran them into the ground. Failed to miss every single opportunity to make money by creating a military-only section that ad functionally identical guns they were selling on the civilian side in configurations people actually wanted. Dropped the ball on quality in every plant - then refocused almost everything to an Alabama facility where they continued to drop the ball but all together now. And just generally did everything wrong.
There have been so many chances to sell. The Navajo Nation offered almost a billion in 2014 or so, couple years later a friend of mine in that industry was on a team that looked into buying with another capital company that everyone here would know, and the books showed that the 250 million they were asking was extremely optimistic for their sales and debt.
I have no doubt someone will pick it up now, but at dirt cheap, for name and maybe 20 IP designs that will keep getting made. The 870 and some Marlins will stay, all of DPMS is probably gone, dumb things like the R51 will finally see the garbage pale. The military contracts are worth something, but they largely weren’t suppling much to US mil, except some precision rifle components, and suppressors, their M4 carbines were going overseas.
So... IDK. Left and right and all over just the wrong way to run a gun company.
This is popular to say, but doesn't hold up to reality.
An analysis of "17,171 worldwide leveraged buyout transactions that include every transaction with a financial sponsor in the CapitalIQ database announced between 1/1/1970 and 6/30/2007" found bankruptcy rates around 6% [1]. This isn't exceptionally high.
I hate the whole "PE is evil" attitude from people who don't understand it. Often there are headlines about how a PE firm has taken a firm over and fired hundreds or thousands of people, and the connotation is very much that they are evil and greedy for profit at the expense of people's livelihoods, while the reality is the business in its current form was going to fail and take everyone's job with it, and it was necessary to cut jobs in order to save the business (and thus save the jobs that remain).
I know the industry is an easy target because it's a bunch of rich guys and some of them are definitely greedy profiteers, but it's just unhelpful to label the whole industry based on those. If you go by that logic then the whole tech industry is very much evil because it exploits cheap labor (Uber, DoorDash, etc.).