alt Hacker NewsCan someone steelman private equity, please? I'm honestly looking for the upsides (for non-investors) of when PE moves into an industry like medicine and begins buying up businesses that traditionally aren't already large chains.
I already hear the downsides frequently from someone whose work is directly affected.
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Easy to imagine practices where the primary owner is going to retire and looking for an out.
Maybe they find a buyer in a doctor, maybe they don't, but PE provides them an exit that keeps the practice operating in the community.
Many people don't really run businesses efficiently. There was an interesting video I saw recently where a sole doctor practice made a few changes to their workflow that allowed them to hire more doctors and handle 2x as many people - I would expect a PE firm would pursue similar changes that help increase the number of people they can service, increasing competitiveness and lowering prices in the long run.
I don't know how these tradeoffs interact with patient care, but I wouldn't inherently expect PE to be worse at this than any other operating model.
> Can someone steelman private equity, please?
Step back and look at what it fundamentally is.
Person A has a business they want to sell.
Person B has a pile of money and thinks that that business is (or can be) a good investment.
That's it.
So, what happens if person A is prohibited from selling their business? Are they forced to keep working because they don't have enough other savings to retire on? Do they shut the business down in order to retire? Something else?
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Calls to ban private equity are attempts to play "shoot the messenger".
Small(er) businesses can be poorly run. In theory private equity takes knowledge already in practise in other locations and shares it with this new location, improving results. Downside of course is that they care a lot less about that specific location than the previous owners would have.
One specific practise I’d like to see banned is private equity buying companies with debt the company then assumes. It staggers me that it’s legal.
Pe is good when it is taking big risks on something new. That is hard so that is not what most pe does. Most pe is just figuring out ways to insert artificial inefficiencies into the system to syphon money off. Ie tax arbitrage, patent/copyright abuse, geographic or other market power abuse, etc. Basically find a way to move money around the system with no net benefit to society while having a bunch of it fall in your pocket is 90% of what pe does and its poison. The other 10% is vitally important to continued growth and prosperity and its often hard to tell which is happening until its over.
While not perhaps the best argument is the private equity provides liquidity for founders that want to exit. If you started business X, you’ve grown it for 20-40 years and you want to retire, selling is typically the answer. Let’s say the business makes $1m/yr after tax cash flow, PE might buy for $10m, besides PE there aren’t a bunch of likely buyers for your business (of course maybe there is a big competitor, and maybe you could sell it to an employee (but they probably don’t have the money and would need you to seller finance etc)). So for entrepreneurs with a successful small business (say $2-5m+ of ebitda) selling to private equity is the clearest path to a liquidity event for them.
Private Equity allows an owner to sell their income generating but slowly dieing company for its value today. The company will keep operating for 3-5 years and then rapidly shutdown.
This is valuable for business owners, because it gives them a way to get the value out of a failing business without having to ride it all the way into the ground.
It's valuable for consumers because it provides locations to shop for halloween supplies.
> Can someone steelman private equity
PE attacks organizational sclerosis, can save companies that otherwise slowly deteriorate, reallocates resources faster, creates an unusually powerful form of corporate governance, Debt can impose useful discipline, can provide capabilities that smaller companies couldn't build themselves.
A society doesn't necessarily benefit from preserving every existing job. It benefits from creating increasingly productive jobs.
written by someone who worked in private equity for 20 years:
https://www.bloomberg.com/news/articles/2025-06-06/private-e...
The upside is to the folks who sold the businesses they owned.
Should they be outlawed from selling to certain classes of investor? Which?
PE exists because a lot of companies are poorly managed. It's better for your local hospital to be taken over by a PE firm than to go out of business. You can say that it would be even better if the government ran the hospital, and you would be right, but that would require a radical overhaul of the American healthcare system. Until that happens, PE plays a major role in keeping things working.
The most obvious answer is that freedom needs no justification, restrictions on freedom need a justification.
Many medical practices (and other businesses) are poorly operated and administered. I think of my dentist: terrible website (even by 1995 standards), awful at follow up, weird insurance coverage (since she doesn't have time to follow up with new plans it seems) and almost no appointment reminders. There are obvious things to do that could drive business for her.
It makes sense to me that someone could come in and say "hey, let me run the business + finance side of the house while you practice medicine" and at least on paper I can see a real world where that works out for everybody.
Of course, soon you end up with dentists pushing unnecessary procedures and more, so it doesn't always works out that way.
PE staff are more intelligent and more shrewd than the people running the businesses they buy. Being a good doctor doesn't make you a good businessman.
I'm not a huge fan of PE but the point of economics to deliver cheap and quality goods to consumers not keep people in a job.
In healthcare in US in particular I think the main thing that capital should be (if regulators allow) boutique / specialists that e.g. are the best in the biz at doing MRI scans, in some states my understanding is that it's literally illegal to start a business aiming to make one small part of the process better.
Many new medical treatments/approaches involve heavy capex (robots, light and ion sources, imaging systems, etc) and removing private money that doesn't belong to individual physicians personally will suck a vast amount of capital out of healthcare, creating significant forces against innovation and deployment.
These businesses would simply stop existing if no purchaser came forward. Many first-world economies face a demographic cliff where boomers are retiring and there is nobody in the next generation who can afford to take over the local dentist office, the HVAC company, etc.
Easy. PE 99% of the time buy businesses that were already failing and provide a lifeline. A failing business can't afford to pay for expensive medical treatments without a loan that a bank will not provide since it is failing.
People who are vehemently against PE generally do not have any idea of how the system works
Private equity just means controlling a company outside of the public stock markets, it is incredibly broad, and covers everything from blackrock buying every vets office in an area, to a plumber buying out another plumber when they want to retire.
The steelman argument is that private equity is just property rights. If I build a business I get to decide what to do with it.
What most people are arguing against is a specific kind of PE where an institutional investor will either use aggressive financial engineering to force a profit, even if it kills the business, or when those same investors aggregate market share to the point where it is detrimental to consumers. Sprinkle in a little bit of heartless MBA bullshit, and that is what people specifically don’t like.