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by agrover 971 days ago
> It's not like Toys 'R' Us stores disappearing in 2018. That happened because big-box toy stores were simply no longer viable as a category.

I thought getting bought and pillaged by private equity was the reason.

2 comments

No. Private equity was part of why it went bankrupt at the speed it did.

But private equity had nothing to do with why nobody was willing to buy it to keep it going post-bankruptcy with a fresh balance sheet.

How can you pillage what you own?
It's easy when you spend other people's money to buy something, extract value from the purchased company, and then have the company declare backruptcy.
The other people give you their money voluntarily, and you buy the company fair and square from the previous owners. Seems all legit to me, and I still don't see where the ravaging comes in?
Depends on your view of companies. If you believe they exist solely to enrich their owners, then your above statement is reasonable. If you believe they're economic engines which should gainfully employ people, then stripping away assets with an eye towards ultimately declaring bankruptcy (and/or dissolving the company) is pillaging.
As a social function, companies as an _institution_ are there to benefit lots of people (like owners, employees, customers, investors, etc).

But individual _companies_ are under the controls of their owners (modulo applicable laws). That's because we empirically figured out that this model works well, and also because we want to incentivize people to start and run companies in the first place.

Also keep in mind that in some sense companies are just legal shells. If you strip assets like eg machine tools, in order to make money you actually need to sell them. But if you do that, someone else has them to use them. They don't just disappear.

Yet another thing: not all companies should be kept around. It's good for less inefficient companies to go bankrupt, and for people to change jobs. (Especially as long as the overall unemployment rate is low enough. But you don't keep that rate low by making it harder to fire or harder to 'pillage' companies. Just the opposite, you get more job creation the easier you make it for people to benefit from creating companies and jobs.)

It comes in when the business is destroyed?

I can pillage my retirement savings any time I want.

Well, you can use the term like that. But you don't impoverish anyone else when you 'pillage' your own stuff.