Are they actually committing themselves to the incumbent role, or do they recognize an industry in decline and then suck whatever profits they can out of the businesses before flipping them? Layoffs, pension raiding, fat trimming, etc.
It's fairly easy, in theory, to take a bloated and inefficient company, cut it to the bone to reduce overhead, then position it as more profitable for resale. On paper, sure, it's more profitable. In reality, it's just a similarly bad company that's been trimmed up and given a new paint job. It's very similar to the real estate playbook: buy a delapidated property, touch up the exterior, then flip it as if it's shiny and new. (The beauty of PE, over real estate, is that PE firms can rig the game to benefit one way or the other, due to debt structuring. If they can flip the company for a profit, they win; if the company goes bust, they're insulated from the damage.)
I would say that an overpresence of PE in an industry is a decent indicator that the industry is in trouble (or is ripe for disruption). But I think PE guys realize that, as well. They're just in it to make the quick, easy buck, rather than take on the burden of reshaping the industry. I wouldn't call them "risk averse" so much as I'd call them opportunistic. It's just a different kind of opportunity, and arguably a less socially valuable one.
I'm not sure what this comment has to do with the question at the root of this thread. You're obviously not a believer in PE. I have no opinion about it. Either way, the issue is, are PE-dominated markets ripe for disruption?
"I'm not sure what this comment has to do with the question at the root of this thread."
It was a response to a particular point raised in the previous comment, specifically, about the position that PE companies are taking in the marketplace. I rambled a bit after addressing the point, and I editorialized a bit. I won't deny that much.
"You're obviously not a believer in PE."
Not generally, no. But I'm a believer in a (relatively) free market, and as such, PE is one of those "I don't agree with a word you say, but I'll defend to the death your right to say it" topics. I think PE has its place, but as most common practiced, it's most often counterproductive in the long run.
"the issue is, are PE-dominated markets ripe for disruption?"
I believe I answered that question in the affirmative. Admittedly, in a discursive way. But yes. I think the presence of a lot of PE players in a market is a pretty good signal that the market can be disrupted.
It's fairly easy, in theory, to take a bloated and inefficient company, cut it to the bone to reduce overhead, then position it as more profitable for resale. On paper, sure, it's more profitable. In reality, it's just a similarly bad company that's been trimmed up and given a new paint job. It's very similar to the real estate playbook: buy a delapidated property, touch up the exterior, then flip it as if it's shiny and new. (The beauty of PE, over real estate, is that PE firms can rig the game to benefit one way or the other, due to debt structuring. If they can flip the company for a profit, they win; if the company goes bust, they're insulated from the damage.)
I would say that an overpresence of PE in an industry is a decent indicator that the industry is in trouble (or is ripe for disruption). But I think PE guys realize that, as well. They're just in it to make the quick, easy buck, rather than take on the burden of reshaping the industry. I wouldn't call them "risk averse" so much as I'd call them opportunistic. It's just a different kind of opportunity, and arguably a less socially valuable one.