Bad PE is bad. Good PE is good. Bad PE is when financial engineering is the primary rationale for an LBO. When that happens, all the resiliency issues you highlight are less likely to be managed well by management or ownership. Even when a deal is highly leveraged, when there is a strong and informed deal premise, firms can at least react to a changing landscape.
I don't think "focus on short-term gains" describes PE in general or what happened at Red Lobster. In my experience at smaller public and PE-owned firms, the opposite is true. On my first day at a PE portfolio company, the board chairman sat down to explain that he didn't care what our ramp to EBITDA growth looked like - only the ending number and its realization through a sale mattered. But this was a firm started by operators that raised much less than it could have an didn't charge a management fee, so maybe it's the exception.
Completely agree. When I wrote short term, I didn't mean a year. I meant the PE time line (which is maybe more short-med term), which is not a long term one.
Bad PE is bad. Good PE is good. Bad PE is when financial engineering is the primary rationale for an LBO. When that happens, all the resiliency issues you highlight are less likely to be managed well by management or ownership. Even when a deal is highly leveraged, when there is a strong and informed deal premise, firms can at least react to a changing landscape.
I don't think "focus on short-term gains" describes PE in general or what happened at Red Lobster. In my experience at smaller public and PE-owned firms, the opposite is true. On my first day at a PE portfolio company, the board chairman sat down to explain that he didn't care what our ramp to EBITDA growth looked like - only the ending number and its realization through a sale mattered. But this was a firm started by operators that raised much less than it could have an didn't charge a management fee, so maybe it's the exception.
Completely agree. When I wrote short term, I didn't mean a year. I meant the PE time line (which is maybe more short-med term), which is not a long term one.