[alexpotato]

> By year 3 they start the squeeze, layoffs, asset selloffs (stripping), and lowering quality, raising prices. That is where the real teeth of wolf are shown.

To play devil's advocate:

Doesn't this also open the market to new entrants?

e.g. young person looking to start a HVAC company in the old days couldn't compete with the established firm that already had contracts and the local market wasn't big enough for two players.

If the established firm gets bought by PE and driven into the ground, wouldn't the newer more nimble firm now have a better competitive market position?

[the_sleaze_]

As long as customers choose services based on quality.

The HVAC for example - the large firms around you do not run HVAC/plumbing/electrical, they run marketing companies that happen to schedule and bill H+P+E service appointments.

That being said I've never heard or encountered a single services company in the US that can't find business, in fact it's the opposite. They're trying not to drown themselves in front of a fire hose.

[quickthrowman]

> The HVAC for example - the large firms around you do not run HVAC/plumbing/electrical, they run marketing companies that happen to schedule and bill H+P+E service appointments.

Maybe if you’re talking about the small residential market, that’s not where the money is.

The large HVAC/Electrical/Plumbing contractors in my area all perform their own work, including the one I work for. Large contractors do commercial and industrial work, not service calls for homeowners. Doing service calls homeowners sounds like a nightmare, personally.

Bain Capital just bought Service Logic which is a holding company for HVAC contractors. They own a couple of the local HVAC shops and they all have their own PMs, sales, estimating, and field staff.

[mbesto]

> As long as customers choose services based on quality.

If the market doesn't reward this then maybe quality isn't important to the customer. Could be price, location, availability, etc. - PE can absolutely create that value even when they roll up 70% of your local HVAC market.

[donmcronald]

I think part of it is that as the incentive for new entrants goes up, some of those entrants are downright awful. So, there’s a risk of getting someone terrible, the reward of getting someone awesome, and the existing choice of getting predictable mediocrity.

A lot of small business owners in the trades are pretty bad at the business side of things, even if they do great work.

[roenxi]

Yes, if it is possible. The issue when economic strip mining becomes the best strategy are usually from somewhere deeper in the system. It wouldn't be a shock if the root cause was some inane regulatory decision that means the market isn't being allowed to reach a sensible equilibrium.

[cyberax]

A lot of markets can't support more than a couple of competitors. And in many cases, you can't easily open a new company because of upfront expenses. E.g.: an emergency room.

[FireBeyond]

> And in many cases, you can't easily open a new company because of upfront expenses. E.g.: an emergency room.

Let me introduce you to the Certificate of Need.

If you want to open a new hospital or facility like this in a town, you need a Certificate of Need from the Department of Health in your state. This ostensibly shows that there is a need for your facility because it is underserved. In actuality, it asks your competitors to say whether they'd reduce services or close beds if you opened your facility. While there is some community research etc., a lot of it comes down to "do your competitors think they can stay profitable enough if you open up shop?", and if they don't, no CoN for you.

[alexpotato]

This is true but to use your example of an emergency room:

It's not uncommon in more rural areas to find a business that is essentially "more than an urgent care but less than an emergency room". e.g. they aren't doing trauma surgery but they can deal with broken limbs, severe lacerations etc that an urgent care couldn't handle.

My point is that while it's true that there are "step functions" in certain services, this is not always the case.

[bell-cot]

When it's an essential service for "everyone", and the economics make healthy competition unworkable, the traditional solutions have been municipal ownership and publicly regulated utilities. Those include Fire Departments, Water & Sewer Dept's, Electric & Gas companies, ...

[alexpotato]

> Those include Fire Departments

I remember watching a discussion about privatizing the local fire department aka the town pays a private company to run the fire department.

Opposition folks use the line:

"You used to have a shield on your building that denoted you had paid for fire coverage. The old fire departments would drive past the unshielded buildings while fighting the fires."

(this is, of course, no longer the case but love to mention this discussion when ever privatization comes up)

[FireBeyond]

This is fairly recent. And of course even if you have coverage, there's no real guarantees.

Grants Pass, Oregon, has privatized fire. And there's three companies that service it, one is good, one is alright and the other... well, I was going to tell you to watch a YouTube video but after years its been deleted. Some hints: Title "Worst Fire Department in America". They roll up to a fully involved house fire with two engines that are 50+ years old, are hamstrung by the fact that they are staffed with kids in jeans and wildland coats (bunker gear, let alone SCBA, are nowhere to be seen), actually getting water on the fire is an issue because 1) someone has to sit in the cab to keep their foot on the throttle to give the pump any power (this "notmally" is controlled from the panel) and even then the pump is screaming at 3000+ rpm about to die any minute (this is maybe 2, 2.5 times what the pump runs at), there's no sense of strategy.

They call for mutual aid from Rural/Metro who shows up, helps them get a little ground on the fire, only to be told to leave the scene (so the company doesn't have to pay them) and the fire predictably takes over. It was horrific.

At least, though after too many of these calls, the Oregon Fire Marshal actually de-certified this company.

[cyberax]

> (this is, of course, no longer the case but love to mention this discussion when ever privatization comes up)

But this very thing happened not that far in the past: https://www.nbcnews.com/id/wbna39516346

[Spooky23]

That happens, bro. Pretty common in some places.

[xboxnolifes]

Unless the new company ends up more competitive than the pre-PE company, does it matter? Thats not a good outcome, thats just a period of bad time between 2 good times.