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Private equity roll-ups are undermining the free enterprise system—and the American Dream
Private equity roll-ups are undermining the free enterprise system—and the American Dream

Yahoo

time12-07-2025

  • Business
  • Yahoo

Private equity roll-ups are undermining the free enterprise system—and the American Dream

America has always been a nation powered by small businesses—local merchants, family-run service businesses, independent companies, restaurants, dry cleaners, and home service businesses. Such companies once formed the backbone of middle-class opportunity, offering a path to economic independence and intergenerational mobility. Entrepreneurship drove our rise, especially among immigrant communities, where opening a storefront or service business meant the difference between survival and prosperity. But today, that small-business lifeblood is being squeezed by a stealth python that is constricting entrepreneurship. Private equity (PE) firms have now increasingly targeted these local businesses by buying up competitors, flooding markets with scale and low prices, getting control of a market, and tightening margins until independent owners are squeezed out. Then, in due time, once they get control of a market, the PE firms raise prices. So, even the consumers don't benefit. Additionally, companies bought by private equity firms are 10 times more likely to go bankrupt than their peers, as Megan Greenwell reports in her just-released book Bad Company. Consider office supply stores. Family-run shops once dotted small communities across the country, but today they've been consolidated into regional giants like Office Depot and OfficeMax—typical private equity roll-ups. Who would realistically ever start a small office supply store to compete with these giants? The result? Local owners become employees, losing the wealth-creation opportunity that is unique to business ownership. This isn't accidental. In fact, it's a textbook PE strategy: Acquire fragmented businesses, lower costs through centralization, underprice competitors, and then, once market share is secured, raise prices for maximum profit. These deals are cloaked in financial engineering, but their real impact is socioeconomic: fewer owners, fewer options, less upward mobility. Venture capital has played a role as well. Consider the decline of owner-operator taxi drivers with taxi medallions. Now Uber and Lyft dominate, backed by VC capital. Have you noticed that Uber prices now look a lot like what taxis used to charge? What was once a launchpad to wealth is now just a paycheck. The data paints a stark picture. As of 2024, the top 10% of households in the U.S. held approximately 67.2% of total wealth, while the bottom 50% held just 2.5%. Startup formation has been slowing for decades, and new-business creation rates are down by 28% since the early 1980s. These shifts show fewer new businesses, fewer owners, and fewer pathways for upward mobility for ordinary Americans. This concentration doesn't just harm small-business owners, it chokes opportunity. As the wealthiest Americans have taken a bigger share of income, jobs at small businesses have dropped by about 5% since 1980. That spells fewer jobs, fewer origins for upward mobility, and fewer communities that thrive locally. Put simply, private equity roll-ups are reversing the heartbeat of entrepreneurship. Wealth and control are concentrating. The outcome? Less competition, higher consumer prices, limited options, and a shrinking middle class, a trend many economists warn flirts with oligarchy. What would happen in 20 years if we continue down this path? Independent entrepreneurship will be a distant memory. Owning your own small business will be as rare as owning a standalone bookstore is today. Workers become permanent employees with a minimal equity stake. Communities lose their character. And the American Dream, once synonymous with starting your own business, becomes a nostalgic myth. What's the antidote? We must restore real entrepreneurial pathways by protecting small, independent businesses from predatory consolidation and support putting ownership within reach. Public policy should limit roll-ups in key local sectors: restaurants, health-care practices, lawn services, local retail, and home services. We should incentivize employee-ownership models. We also need appropriate government intervention early to stave off this trend. This isn't about rejecting capitalism, it's about calming its excesses before it engulfs opportunity itself. Capitalism can only survive if it is constrained. Real competition fosters innovation, accountability, consumer choice, and job creation. But unchecked, the system implodes. Teddy Roosevelt understood this. 'Scale' becomes a weapon against the common man. That is not democracy; that is economic authoritarianism. The real threat is not foreign; it's our own financial system. It's time to release the squeeze. Let's rebuild a landscape where local entrepreneurs can compete, prosper, and uplift their communities. Let's ensure the path to business ownership isn't closed off by Wall Street's python but remains open to every American willing to lift themselves and their families. That's how we preserve not just capitalism, but the American promise. The opinions expressed in commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune. This story was originally featured on Sign in to access your portfolio

Bad Company: Megan Greenwell's book explores human cost of private equity
Bad Company: Megan Greenwell's book explores human cost of private equity

Business Standard

time06-07-2025

  • Business
  • Business Standard

Bad Company: Megan Greenwell's book explores human cost of private equity

Bad Company details how cliched abstractions like "consolidation" and "efficiency" have given cover to real betrayals NYT BAD COMPANY: Private Equity and the Death of the American Dream by Megan Greenwell Published by Dey Street 294 pages $29.99 In 2019, Megan Greenwell had only a 'vague sense' of how powerful private equity had become. Sure, she had heard the stories about Toys 'R' Us, the beloved retailer that went bankrupt after private equity firms bought out the company. 'I knew private equity was a problem,' she writes in her new book, Bad Company. 'I just thought it wasn't my problem.' Greenwell was the editor of Deadspin, an online sports magazine whose mix of investigative reporting and cheeky commentary had attracted a devoted readership. But the magazine and its sister sites were also losing $20 million a year. Enter a private equity firm named Great Hill Partners to the rescue — or not. Greenwell recalls how Deadspin's new owners seemed determined to come up with bad ideas that would run the website's brand into the ground. After three months of being micromanaged she resigned in disgust: 'The firm's goal was never to make our website better or grow its readership. Great Hill Partners, and private equity at large, exists solely to make money for shareholders, no matter what that means for the companies it owns.' It's a business model that Greenwell writes about to potent effect in Bad Company, which emphasises the human costs of private equity. She says she started writing her book 'not out of spite, but out of pure curiosity.' Why did Great Hill Partners flourish financially after reducing Deadspin to a husk of its former self? (Last year the site was sold to a Maltese gambling outfit that uses it to 'drive traffic to online casinos.') Shouldn't a private equity firm make money when the company it buys makes money, and consequently lose money when it doesn't? How could a firm continue to bring in revenue while its acquisitions flounder? Twelve million Americans work for companies owned by private equity, which amounts to about 8 per cent of the labour force. In Bad Company, Greenwell tells the stories of four people whose lives have been upended by the industry. Liz Marin worked for six years at Toys 'R' Us; Roger Gose was a doctor in rural Wyoming; Natalia Contreras was a journalist for a local paper in Texas; Loren DePina lived in a private equity-owned apartment complex in Alexandria, Va. Their stories share a similar arc: Tentative hopefulness followed by a rude awakening. Greenwell offers stories that are textured, not one-note tales of woe. When Liz Marin started working for Toys 'R' Us in 2012, private equity had owned the company for seven years. Although Marin didn't know it, Toys 'R' Us was a retailer in name only; in actual fact, it was a debt-payment machine. Its profits were used to repay the money borrowed by the private equity firms to buy it in the first place. While Toys 'R' Us limped toward bankruptcy, top executives were awarded $16 million in bonuses; the 33,000 rank-and-file employees were simply laid off. But all businesses are part of a larger community: A shuttered store not only inconveniences consumers but also deprives a municipality of tax revenue. And then there is private equity's incursion into health care and housing. Greenwell's chapters on Roger Gose, the Wyoming doctor, show what happens when private equity tries to squeeze rural medicine for profits it cannot produce. The local hospital stopped providing obstetrics services. It also had to pay rent on land it once owned. Greenwell reports that, compared with their peers, companies acquired by private equity firms are 10 times as likely to go bankrupt. Of course, proponents of private equity maintain that this figure isn't surprising, given that private equity specialises in trying to turn around struggling companies, selling itself as 'the hero when no one else is brave enough to shoulder the risk.' But as Greenwell and other critics of the industry have pointed out, private equity firms charge management fees and benefit from tax breaks that sever risk from reward. If a company makes money, its private equity owners make money. If a company loses money, its private equity owners can still make money. Private equity firms collect money from outside investors, including pension funds, to buy companies and run them. Consequently, they like to proclaim that their money making is often done on behalf of public workers like firefighters and teachers. 'The private equity industry argues that working people would be far worse off without it,' Greenwell writes, 'because the returns it generates allow them to retire.' Bad Company details how clichéd abstractions like 'consolidation' and 'efficiency' have given cover to real betrayals. The people in this book wanted only to raise their families and contribute to their communities. Instead they were unwittingly drawn into an opaque system of financial extraction and debt peonage, for which no amount of hard work was ever enough.

The Private Equity Wager: Heads We Win, Tails You Lose
The Private Equity Wager: Heads We Win, Tails You Lose

New York Times

time02-07-2025

  • Business
  • New York Times

The Private Equity Wager: Heads We Win, Tails You Lose

BAD COMPANY: Private Equity and the Death of the American Dream, by Megan Greenwell In 2019, Megan Greenwell had only a 'vague sense' of how powerful private equity had become. Sure, she had heard the stories about Toys 'R' Us, the beloved retailer that went bankrupt after private equity firms bought out the company and saddled it with crushing amounts of debt. 'I knew private equity was a problem,' she writes in her new book, 'Bad Company.' 'I just thought it wasn't my problem.' At the time, Greenwell was the editor of Deadspin, an online sports magazine whose mix of investigative reporting and cheeky commentary had attracted a devoted readership. But the magazine and its sister sites were also losing $20 million a year. Enter a private equity firm named Great Hill Partners to the rescue — or not. Greenwell recalls how Deadspin's new owners seemed determined to come up with bad ideas that would run the website's brand into the ground. After three months of being micromanaged, she resigned in disgust: 'The firm's goal was never to make our website better or grow its readership. Great Hill Partners, and private equity at large, exists solely to make money for shareholders, no matter what that means for the companies it owns.' It's a business model that Greenwell writes about to potent effect in 'Bad Company,' which emphasizes the human costs of private equity. She says she started writing her book 'not out of spite, but out of pure curiosity.' Why did Great Hill Partners flourish financially after reducing Deadspin to a husk of its former self? (Last year the site was sold to a Maltese gambling outfit that uses it to 'drive traffic to online casinos.') Shouldn't a private equity firm make money when the company it buys makes money, and consequently lose money when it doesn't? How could a firm continue to bring in revenue while its acquisitions flounder? What is it like to work for a company whose owners don't necessarily have its best interests at heart? Twelve million Americans work for companies owned by private equity, which amounts to about 8 percent of the labor force. In 'Bad Company,' Greenwell tells the stories of four people whose lives have been upended by the industry. Liz Marin worked for six years at Toys 'R" Us; Roger Gose was a doctor in rural Wyoming; Natalia Contreras was a journalist for a local paper in Texas; Loren DePina lived in a private equity-owned apartment complex in Alexandria, Va. Their stories share a similar arc: tentative hopefulness followed by a rude awakening. 'Bad Company' is definitely a critical take on the industry, told through the point of view of its victims. But Greenwell offers stories that are textured, not one-note tales of woe. When Liz Marin started working for Toys 'R' Us in 2012, private equity had owned the company for seven years. Marin liked the fact that the company gave her the ability to advance and to transfer easily to other stores. Having worked in retail before, she was impressed by what she experienced at her new job. Toys 'R' Us stores seemed busy and well run. She even got a tiny tattoo of Geoffrey the Giraffe, the company mascot, on her left shoulder. Want all of The Times? Subscribe.

How Private Equity Killed the American Dream
How Private Equity Killed the American Dream

WIRED

time17-06-2025

  • Business
  • WIRED

How Private Equity Killed the American Dream

Jun 17, 2025 1:00 PM In her new book Bad Company , journalist Megan Greenwell chronicles how private equity upended industries from health care to local news—and the ways workers are fighting back. Photo-Illustration: WIRED Staff; Photograph:In her new book, Bad Company: Private Equity and the Death of the American Dream , journalist and WIRED alum Megan Greenwell chronicles the devastating impacts of one of the most powerful yet poorly understood forces in modern American capitalism. Flush with cash, largely unregulated, and relentlessly focused on profit, private equity firms have quietly reshaped the US economy, taking over large chunks of industries ranging from health care to retail—often leaving financial ruin in their wake. Twelve million people in the US now work for companies owned by private equity, Greenwell writes, or about 8 percent of the total employed population. Her book focuses on the stories of four of these individuals, including a Toys 'R' Us supervisor who loses the best job she ever had and a Wyoming doctor who watches his rural hospital cut essential services. Their collective experiences are a damning account of how innovation is being replaced by financial engineering and the ways that shift is being paid for by everyone except those at the top. In a review of Bad Company for Bloomberg, a longtime private equity executive accused Greenwell of seeking out sad stories with inevitably 'sad endings.' But the characters Greenwell selected don't just sit back and watch as private equity devastates their communities. The book is a portrait of not only how the American dream is being eroded but also the creative tactics people are using to fight back. Greenwell spoke to WIRED late last month about what private equity is and isn't, how it has transformed different industries, and what workers are doing to reclaim their power. This interview has been edited for clarity and length. WIRED: What is private equity? How is the business model different from, say, venture capital? Megan Greenwell: People confuse private equity and venture capital all the time, but it's totally reasonable that normal people don't understand the difference. Basically, the easiest way to explain the difference is that venture capital firms invest money, usually in startups. They're essentially taking a stake in the company and expecting some sort of returns over time. They're also generally playing a significantly longer game than private equity. But the way private equity works, especially with leveraged buyouts, which is what I focus on in the book, is they're buying companies outright. In venture capital, you put your money in, you're entrusting it to a CEO, and you probably have a board seat. But in the leveraged buyout model, the private equity firm really is the owner and controlling decider of the portfolio company. How do private equity firms define success? What kinds of companies or businesses are attractive to them? In venture capital, VCs are evaluating whether to make a deal based solely on whether they think that company is going to become successful. They are looking for unicorns. Is this company going to be the next Uber? Private equity is looking to make money off of companies in ways that don't actually require the company itself to make money. That is like the biggest thing. So it's less of a gamble. It is very hard for private equity firms to lose money on deals. They're getting a 2 percent management fee, even if they're running the company into the ground. They're also able to pull off all these tricks, like selling off the company's real estate and then charging the company rent on the same land it used to own. When private equity firms take out loans to buy companies, the debt from those loans is assigned not to the private equity firm but to the portfolio company. And so what you end up getting is that private equity is really attracted to companies where you don't have to play the long game. In fact, you don't want to play the long game, which means that you have no interest in doing the hard, slow work of improving a company's fundamentals. It is just not about improving the company at all. It is about, how do we extract money? How did we get to this point where private equity is now taking over relatively large and diverse swaths of the economy, including veterinary clinics, brick-and-mortar retail stores, and all sorts of other businesses. What was the promise of this model? Private equity started pretty small in the 1960s with what were then called 'bootstrap deals,' essentially acquisitions of small, family-run companies that maybe showed promise for expansion but didn't have the capital necessary to grow. So in some ways it was more like venture capital, although it targeted established companies and not brand-new startups. This idea of growth at all costs then just expanded and expanded and expanded and started swallowing more and more and more things. When did private equity start to peak? There was a huge expansion of private equity in the 2010s for the same reason that venture capital exploded: There was a lot of cheap money out there, and cheap money is great for investors. We've seen private equity explore more industries over time, and usually that's because some policy change or broader economic trend all of a sudden makes a certain sector look like fertile ground for them. What are some of the strategies that workers have used to fight back against private equity firms? Have they been successful? What was interesting to me was not prescribing solutions but talking about what people are doing. The four characters in my book are all trying to do something about this in very different ways, and those range from fighting for regulation, to just going head-to-head directly with the private equity firm that upended their own life, to really trying to reinvent their industries from the ground up, which is something that is especially inspiring to me. Do you have one that has stuck with you more than the others? One example that I'll talk about from the book is from the Toys 'R' Us section. Public pension funds are a huge source of capital for private equity firms, and they typically have worker representatives on their boards. So if they're representing teachers and nurses and firefighters, there will be one or more people working in those professions serving on the pension fund board. Toys 'R' Us workers had this very smart idea that those folks would be more likely to be sympathetic to their cause than a bunch of billionaires would. So they started going around the country, standing in front of these pension fund boards and saying 'here is how these private equity firms that you invest in have blown up our lives,' talking in really specific detail about things like how they couldn't find jobs and were worried about feeding their families. The protagonist of that section of my book tells a story about how the members of one board just started peppering her with questions after she spoke in front of them. Some people claim that private equity firms are the primary culprit behind broad economic problems such as income inequality and the housing crisis. Are they putting the blame in the right place? I think by putting all of the blame on them, you end up undermining the criticisms about private equity firms that are more truthful. This is something that I thought really hard about how to do in the book, because I do think it's a mistake actually, but also strategically for people who want to see this system change, to attribute too much to them. Right. The first section of the book tells the story of how the four industries I write about—housing, hospitals, retail, and local media—got themselves into trouble in the first place. In all of those cases, the problems are so fundamental. And in many of those cases, the earlier business decisions were so bone-headed that they essentially opened the door and invited private equity to walk right in. I do think private equity is a villain in terms of the way they have taken advantage of these industries for their own gain, but it is absolutely true that they did not cause the problems.

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