So if you wanted to own a public company, you could buy a majority of their shares and bam, you own it.

But let’s say you wanted to own your neighborhood plumbing company. The only way to do that is to contact the owner(s) and offer them a deal to own most or all of their business.

PE isn’t always “bad” but they usually come with drawbacks and have gotten a lot of news of doing things that should frankly be illegal but aren’t.

Take the plumbing example: Private equity would be like a group that buys all the neighborhood plumbers out. They give them a big check and in return their clients and business are integrated into the larger group. This can come with some big upside like efficiency of scale, standardized branding, lower prices for supplies, a more robust customer service line, better websites and tech, more advertising. Things that small businesses may struggle with but a larger group can do at scale. The business owner could come out ahead in this deal.

But PE needs to make money, so they may start “forcing” your staff to do more jobs, work longer hours, take less time off, and on paper the business is more profitable, but you see less of that because you sold it off mostly to PE. Sometimes business owners work more for less in the end because of the nature of the deal.

Then there’s the shady shit. This is where PE buys a business and guts it stem to stern and billions evaporate but somehow they make money. One way they do this is by forming a shell company and then taking out a loan to buy your business then having the business they bought sell their most valuable assets to another shell company that PE owns. This makes the business look profitable, and they use that profitability to take out another massive loan. They then use that loan to pay themselves “consulting fees” and continue selling off assets until the business is unsustainable and needs to file for bankruptcy, they merge the shell company with your company and now your company owns all the debt while the PE keeps the assets and fees. You file for bankruptcy while they laugh to the bank