Decoder with Nilay Patel Private equity bought out your doctor and bankrupted Toys”R”Us. Here’s why that matters.
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Jun 13, 2023 
Brendan Ballou, a federal prosecutor and author of "Plunder: Private Equity’s Plan to Pillage America," explores the pervasive influence of private equity in the American economy. He dives into how these firms employ aggressive cost-cutting strategies that can devastate markets and consumer welfare. Ballou reveals the harmful implications of financial maneuvers like sale leasebacks, highlighting issues in the nursing home sector. He discusses the complexities of holding these firms accountable and the push for reforms amid their growing dominance.
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PE Firm Structure and Responsibility
- Private equity firms control many companies but often avoid responsibility for their actions.
- This is due to their layered ownership structure, which obscures their control and limits liability.
The ManorCare Example
- Carlisle, a PE firm, bought ManorCare, a nursing home chain, and employed typical PE tactics like sale-leasebacks and dividend recapitalizations.
- This led to layoffs, increased health code violations, and a resident's death, yet Carlisle escaped legal responsibility due to its complex ownership structure.
PE Firms as Poor Operators
- Private equity firms often lack operational experience, focusing primarily on financial engineering rather than running businesses effectively.
- Their expertise lies in finance, not in areas like product development or logistics, leading to operational mistakes.
