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"I work for a big private equity firm. I am horrified"

I work for a global private equity firm in London, and have undertaken various roles in large private equity-backed portfolio companies. I've experienced firsthand how a private equity firm operates.  

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These are my observations:

1.    Buy the company with leverage (often over 50%) 

2.    Offload the debt to the portfolio company

3.    Hire a mercenary team of experience CEO, CFO, executives who have done this before to create "value", with a hockey stick EBITDA target.

4.    Lay off hundreds of people overnight, for the remaining cut salary, cut merit pay increases, cut bonus, cut pensions, cut health insurance, move R&D, customer service, IT all to a low-cost country, reduce R&D spending dramatically.

5.    Use the EBITDA that's generated to pay off debt

6.    Do more M&A (add-on, roll-ups) with more debt on company balance sheet

7.    Exit after around five years. The company is handicapped after its fat and its flesh have been cut to the bone.  

8.    The PE firm gets billions as a payout. The Mercenary CEO and his or her team get tens of millions.

9. Who loses? Employees with no equity in the company. The company, which was once healthy, is now loaded with debt, and cut to the bone, barely able to stand or walk.

10. The money stops flowing in. A handful of people made significant wealth. But a previously healthy company and thousands of hardworking employees and people lose. 

Before I worked in private equity, I read the horror stories of PE-owned nursing homes, public utility companies, schools and I did not believe it, I now see this with my own eyes, and I am shocked. I am finding it very morally challenging to work in this industry. How do other people handle this?

Marco Foster is a pseudonym

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AUTHORMarco Foster Insider Comment
  • Sp
    18 March 2024

    Thank you so much for sharing this. I've watched what private equity has been doing for the last 10-15 years and it's truly horrifying. People without a finance background just don't understand how damaging and predatory PE is, and how it differs from "normal business". I hope you are able to get out of that industry.

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