this post was submitted on 10 Sep 2024
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Cars - For Car Enthusiasts
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Private equity installs middle management with benefits and salaries to pay.
Use excessive production which increases costs.
Almost, private equity buys out companies by giving the owners big buyout cheques with debt that will be saddled on the new company.
So when they “buy Hoonigan for [undisclosed amount]” what they really did was go find a bank that would give them a billion dollar loan for the “value” of the brand they bought and then after buying the the brand, the loans go to the company they bought.
If the owners are smart, they take a cash buyout and bail as soon as possible. Ken Block died before any of that could happen, but others like Hert and Vinny bailed. I don’t follow them enough to know if they were stakeholders in Hoonigan, or what Scotto is up to, but I suspect they all got big cheques when that deal went through.
Then the private equity lets the now empty brand go bankrupt and guess who eats all the debt? Our retirement funds!