Imagine you have a lemonade stand, and you’re doing pretty well. A rich person comes along and says, I’ll buy your stand and make it even better!
But instead of using their own money, they borrow a LOT of money in your lemonade stand’s name. Now, your stand has to pay back that big debt.
Then, the rich person takes a bunch of the money your stand makes and gives it to themselves and their friends. But your stand still has to pay the debt, and soon, there’s no money left to buy lemons or cups.
Now your stand is out of business, and the rich person walks away with a big bag of money.
You forgot the part where they sold the toy store building that the company already owned to a real estate firm the investor owns and now the toy store has to pay rent to them to stay open.
No? You're example still has your nonsense idea that YOU, the original owner of the lemonade stand, has to pay back the loan that the PE firm took out to buy your stand from you. Utter bullshit and completely ignores the facts. You sold the company, you pocketed the cash, they are on the hook for the loan. They are the ones running THEIR newly purchased lemonade stand. You are relaxing at home or on the beach with the cash they paid you.
Not really. They put down less than 20% of the purchase price of the lemonade stand, and takes out loans for the rest. The income of the lemonade stand is then used to pay the loans. Anything they have to cut out to pay those loans is acceptable.
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u/Borntwopk Feb 14 '25 edited Feb 14 '25
Imagine you have a lemonade stand, and you’re doing pretty well. A rich person comes along and says, I’ll buy your stand and make it even better!
But instead of using their own money, they borrow a LOT of money in your lemonade stand’s name. Now, your stand has to pay back that big debt.
Then, the rich person takes a bunch of the money your stand makes and gives it to themselves and their friends. But your stand still has to pay the debt, and soon, there’s no money left to buy lemons or cups.
Now your stand is out of business, and the rich person walks away with a big bag of money.