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.
They're making shit up. PE firms aren't purposely trying to kill the businesses they purchase, they just run it in a way that's shit because they think they can make everything lean (aka cheap) as possible until they find some equilibrium point where they can still profit. Possibly even somehow increase the value in the short term and then sell it to someone else. Clearly, most will earn some profit because lenders are still lending them money.
Im still confused, because even thought that isn't the goal, it's what usually happens or no? Because the loan isn't in the PE name, so they don't take responsibility for the loan but the company does?
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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.