LBOs vs. VC - what's better for the world!?
I've been in PE for about 20 years. My firm has a variety of funds targetting LBOs, growth equity, VC, and also there are secondary funds. This is pretty controversial to say, but I've honestly found little good to come from some of these LBOs - we are just pumping companies full of debt, hoping for single digit CAGRs and modest multiple expansion to make our return. It begs the question, what good are we actually causing for these companies and the world as a whole? We fire staff, make things lean, automate, and once again, pump full of leverage and cash out long before the company could ever come close to paying off their debt load....
I contrast this to VC, and to a certain extent growth equity investing...we are looking for the brightest minds, future leaders, we are injecting fresh equity into these businesses to help them grow and build something, hire people, and to a certain extent, change the world. There is zero debt or structuring involved to make our return.
Anyone else just feeling pretty apathetic to the whole LBO craze?
I feel like this is not a hot take at all. LBOs you just lever up companies that already exist and use financial engineering to benefit from the hard work someone else already did. VCs/GE you’re helping bring something new to scale, so obviously it will be more impactful
I guess there are varying levels of GP involvement in LBOs. Bain is notorious for installing new management and using BCG as their consulting arm to revamp things. Vista is similiar in that regard, where as others just use existing management teams and are more hands off. It's just hard to see how much value is truly created. Thinking about the Bain Canada Goose flop - they still freaking own that garbage and are charging management fees while it is public. Insane.
How is Bain / Canada goose a flop? Looks like they bought in at a $250M valuation and it’s worth $4B now with a ton of growth. Feels like this is an example of a PE firm actually growing a business which I think does have actual societal benefit
This industry overall does not have a “mission-driven purpose” other than primarily making people who work there relatively well off. frankly, I think for the next generation, the lack of purpose combined with a poor WLB will be real obstacles to recruiting and as importantly, retaining talent.
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