Private equity groups are about extracting cash flow for themselves and investors. The PEG model is about buying businesses with applied leverage, strip assets over the holding period, squeeze as much profit out of businesses, then sell it or liquidate. They now spend time improving the businesses, but for the short term, to maximize sales price at exit. Give employees stock is good, but if your base salary is low and working 80 hour weeks, you really not sharing wealth creation with employees. PEG is the renamed LBO corp. raiders of 1980's. Warren Buffet discusses PEG's regularly
Depends on the firm. In the oversaturated market we’re currently in with too many PE firms chasing too few good deals - desperate to engage dry powder and incur the resultant management fees - inevitably they’ll end up overpaying with insane valuations driven by high leverage. Especially with increased interest rates, it’s going to put enormous pressure on the portfolio company. The priority being not to go bust, PE firms will take these sorts of detrimental measures in some cases. This is the inevitable result of 10 years of bull market where everyone can make easy money, leading to 5000 PE firms in the US. It’s ridiculous, and massively skewing the supply demand equation. This is symptomatic of the banking world’s inherent risk aversion (cowardice) in pioneering the model in emerging markets. Everyone boards the hype train until it details due to oversubscription. The PE industry will have to be culled and 100s, if not 1000s of firms to be driven out of business to rectify the scene to normal, where artificial and unsustainable leverage based multiple expansion is no longer widespread as it is out of hyper inflationary competitive necessity. With the can of stagnating markets no longer being able to be kicked any further down the road, I hope it will force LPs to look to more promising applications of the PE and GE model in new markets - where value is genuinely created through investing in partnerships of high inherent value businesses in frontier economies with promising potential. But it will have to get worse before it gets better. I hope for improved regulation to shape the scene more to this mentality in the future. That’s my opinion as an observer.
The question is own how much? If employees owe 10% and private equity 90%, the problem was not solved. They want with that to pump up the share price and bail.
I think that's a great idea, as a thought experiment imagine if every McDonald's employee owned a dividend share of the restaurant they worked at. Could you imagine how good the service would be, or at the very least how clean the toilets would be? Do you agree, disagree or have an interesting joke to recount?
Maybe. Most people don't want it, they want cash. I think it would be a good idea, but the people I work with would just sell it. No matter how much they work, they are always broke as in less than $10 at the end of the week.
@@davemollet5754 it's very true, a lot of people play to lose. No matter how you encourage them to do the right move, they gravitate towards the crappiest option.
Private equity groups are about extracting cash flow for themselves and investors. The PEG model is about buying businesses with applied leverage, strip assets over the holding period, squeeze as much profit out of businesses, then sell it or liquidate. They now spend time improving the businesses, but for the short term, to maximize sales price at exit. Give employees stock is good, but if your base salary is low and working 80 hour weeks, you really not sharing wealth creation with employees. PEG is the renamed LBO corp. raiders of 1980's. Warren Buffet discusses PEG's regularly
Depends on the firm. In the oversaturated market we’re currently in with too many PE firms chasing too few good deals - desperate to engage dry powder and incur the resultant management fees - inevitably they’ll end up overpaying with insane valuations driven by high leverage. Especially with increased interest rates, it’s going to put enormous pressure on the portfolio company. The priority being not to go bust, PE firms will take these sorts of detrimental measures in some cases. This is the inevitable result of 10 years of bull market where everyone can make easy money, leading to 5000 PE firms in the US. It’s ridiculous, and massively skewing the supply demand equation.
This is symptomatic of the banking world’s inherent risk aversion (cowardice) in pioneering the model in emerging markets. Everyone boards the hype train until it details due to oversubscription. The PE industry will have to be culled and 100s, if not 1000s of firms to be driven out of business to rectify the scene to normal, where artificial and unsustainable leverage based multiple expansion is no longer widespread as it is out of hyper inflationary competitive necessity. With the can of stagnating markets no longer being able to be kicked any further down the road, I hope it will force LPs to look to more promising applications of the PE and GE model in new markets - where value is genuinely created through investing in partnerships of high inherent value businesses in frontier economies with promising potential. But it will have to get worse before it gets better. I hope for improved regulation to shape the scene more to this mentality in the future.
That’s my opinion as an observer.
The question is own how much? If employees owe 10% and private equity 90%, the problem was not solved. They want with that to pump up the share price and bail.
I think that's a great idea
He wants management to pump up the share price, that's what.
Grabango ❤
Goood Move!
I think that's a great idea, as a thought experiment imagine if every McDonald's employee owned a dividend share of the restaurant they worked at. Could you imagine how good the service would be, or at the very least how clean the toilets would be? Do you agree, disagree or have an interesting joke to recount?
Maybe. Most people don't want it, they want cash. I think it would be a good idea, but the people I work with would just sell it. No matter how much they work, they are always broke as in less than $10 at the end of the week.
@@davemollet5754 it's very true, a lot of people play to lose. No matter how you encourage them to do the right move, they gravitate towards the crappiest option.
They don't know any better due to their environment and upbringing