Why do companies choose to sell their companies to private equity firms? How is this different from people investing in the stock market in that company's stock?
A company that has been acquired by PEs for over 15yrs is offering me an MD job with serious equity. Apparently the PE ownership changes every 5yrs, and apparently the equity given has shown important returns (20x level). Cannot verify it though. Also they reassure me that exec management has been there for a while. However I still have my concerns, what are the main risks and how exactly does this equity scheme work?
"Why does PE firm not offer benefits to employees?" The PE firm's objective is to maximize the firm's returns on its investments. The PE firm is only incentivized to offer benefits such that it will maximize the firm's returns, so if they offered benefits beyond that point, the firm would be giving away what would otherwise be the firm's revenue. For example, some of the "squeeze" PE firms secretly offer huge potential bonuses for senior management, based on the company meeting/exceeding the PE firm's target profit margins - the greater the margin delivered to the PE firm, the greater senior management's bonus. Thus, depending on the company, target margins, etc., the actual "squeezing" & divesting is, counterintuitively, performed by the senior management themselves in persuit of windfall bonuses, not directly by the PE firm. The only way to "incentivize" a PE firm to act, is if they believe their margins are in serious jeopardy of outright collapse - hypothetically, maybe if literally the entire company civilly revolted and just refused to show up for work, thereby deploying a "squeeze" strategy against the PE firm until the PE firm agreed to sell the company to the employees as an ESOP.
NO! Never work for them, or any company that isn't directly experienced in the industry. I my experience these idiots are clueless how to run a business correctly and have zero concept of return on investment, ironically.
What other questions do you want to ask during an interview but don't know how to phrase it?
No you just get added workload and not enough staff to deal with it .
True statement...happens a lot on these sorts of deals.
The moment they buy the company, you should look for a new job. Everything will go downhill in the longrun anyway
No bonus for the first time ever (:
Why do companies choose to sell their companies to private equity firms?
How is this different from people investing in the stock market in that company's stock?
A company that has been acquired by PEs for over 15yrs is offering me an MD job with serious equity. Apparently the PE ownership changes every 5yrs, and apparently the equity given has shown important returns (20x level). Cannot verify it though. Also they reassure me that exec management has been there for a while. However I still have my concerns, what are the main risks and how exactly does this equity scheme work?
Amazing Content!
Thanks! Glad it's been helpful for you.
Why does private equity firm not offer equity benefits to employees??
They do...just not to all. Well, let me amend that - they obviously sometimes won't offer a y equity to anyone. But my gut tells me that's more rare.
"Why does PE firm not offer benefits to employees?"
The PE firm's objective is to maximize the firm's returns on its investments. The PE firm is only incentivized to offer benefits such that it will maximize the firm's returns, so if they offered benefits beyond that point, the firm would be giving away what would otherwise be the firm's revenue. For example, some of the "squeeze" PE firms secretly offer huge potential bonuses for senior management, based on the company meeting/exceeding the PE firm's target profit margins - the greater the margin delivered to the PE firm, the greater senior management's bonus. Thus, depending on the company, target margins, etc., the actual "squeezing" & divesting is, counterintuitively, performed by the senior management themselves in persuit of windfall bonuses, not directly by the PE firm. The only way to "incentivize" a PE firm to act, is if they believe their margins are in serious jeopardy of outright collapse - hypothetically, maybe if literally the entire company civilly revolted and just refused to show up for work, thereby deploying a "squeeze" strategy against the PE firm until the PE firm agreed to sell the company to the employees as an ESOP.
Lack of understanding of return on investment.
NO! Never work for them, or any company that isn't directly experienced in the industry. I my experience these idiots are clueless how to run a business correctly and have zero concept of return on investment, ironically.