Most private equity companies use substantial debt leverage to acquire companies and flip them as fast as possible. Berkshire is just the opposite. They use mostly their own capital and leverage from insurance float. They buy businesses permanently. They hire good managers, enforce good corporate governance and the business is free from short term performance goals.
Hedge funds always love to claim that they fix companies and make them healthier, but most of them have a reputation for looting them, loading them with debt, and then dumping them at a temporary profit. It's good to see that Warren Buffet actually tries to make businesses healthier.
Obviously, this isn't universally true, but, not all troubled companies can be saved, or really, need to be saved. The standard pivot model just doesn't work on most businesses, while deferred investment and cash flow problems are always fatal.
There are a small number of funds that do growth equity (where they buy a small business and grow it), but so much of it just depends on financial engineering in the way you mentioned in your comment.
Most private equity that uses leverage actually destroys businesses. Just look at what happened to toys r us for example. That's extremely common.
The problem is that when private equity buys a company, it usually uses lots of loans to do so. Then the most experienced people in the business are removed or deincentivized (the previous owners). Finally, this now poorly run and heavily in debt company struggles to survive and goes bankrupt in the next recession.
You will see this pattern repeated over and over with private equity.
It can’t be as simple as that because who is making these loans to companies that are about to go bankrupt? Why would they do it?
When the parasite finishes the digestion of the host and it goes bankrupt, they get to write down the losses against the money made on those fees, and the actual losses are distributed amongst the partners in the syndicate.
The genius of PE is convincing the public that all the bad things they do are actually done by “hedge funds”.
https://www.seattletimes.com/business/real-estate/minorities...
From a follow up article by [one of the] same writer:
> Buffett said the interest rates are influenced by things such as credit score, down payments, earnings and whether the customer owns land. It has “nothing to do with your religion or your color or anything of the sort,” he said.
https://www.seattletimes.com/business/buffett-not-true-that-...
My comment stands:
> Yeah, you've gotta hand it to them, they really commit to the long-term hollowing out of the economy and the wringing of money from poor stones: none of this short-term loot 'em and flip 'em mentality for BH!