I need help understanding how PE continues to exist, beyond the assumption that they got money out of the deal and will move on to another one…
The Atlantic: When Private Equity Firms Bankrupt Their Own Companies https://www.theatlantic.com/ideas/archive/2023/05/private-eq...
> Interesting, "pension laundering" is a tactic that seems quite abusive.
"U.S.-based Instant Brands Holdings Inc. (formerly known as Corelle Brands Holdings Inc.) is issuing a new $450 million first-lien term loan. The company will use the proceeds, along with $100 million in cash, to refinance its existing $200 million term loan due 2024, $100 million seller notes, and fund a $245 million dividend to shareholders."
If you subtract out the refinanced debt the new owners walked away with $100M in company cash and another $150M in borrowed money.
I don't understand this attitude. If you're in the arts I can understand why you don't want to be a "sellout", but founders/investors? Isn't the point literally to sell out?
Ticketmaster makes no secret of being a for-profit enterprise…
The shady tactics end more commonly as part of the LBO or Distressed style firms.
In its purest form resembling instance, PE is a decomposer. It takes a business that isn't particularly healthy (due to mismanagement, sector headwinds, etc.), and efficiently disintegrates it into raw material (various forms of capital, essentially) for eventual re-allocation elsewhere. It profits and reproduces as a side-effect of playing its role in the recycle of raw material.
It's sad because a company that played a meaningful role for people and other companies is dying and being sold for parts, but it's the cycle of life – not every company is meant to endure indefinitely.
The executives and boards who sell to these kinds of private equity companies know exactly what they’re signing up for. It’s a parasitic relationship, it isn’t dignified, but it’s less wasteful in some global market sense than self-immolation (i.e. ceasing operations).
It's also worth noting that Instant Pot, Pyrex, etc. will almost certainly be back.
Freedom Group's well-deserved bankruptcy (its PE-induced enshittification began in the mid-2000s with Cerberus Capital Group) and subsequent sale of Remington, Marlin, Bushmaster, etc. to other manufacturers in no way suggests their products were not financially viable, which is why the companies that acquired them are still making said products.
Interestingly, just like Pyrex, these companies all face stiff competition from products they made more than a century ago that are still as capable as the day they were made. It's a tough go when you make products that last that long and where the market is already saturated with one's own products, and means that the industry isn't actually as large as their reputation would suggest (which is partially why we never see anything truly new from it- the other part is mostly just technological stagnation over those 100 years).
As far as other firms ruined by PE (for instance, Sears)... well, they won't be back mainly because the decline was slow enough, and competitors were present enough (Amazon, in Sears' case) to make the only valuable thing about the company the cultural cachet its name held 30+ years ago.
It's possible to have a perfectly good and marketable product, and a terribly owned or operated company.
In this case, while the company has given up the ghost, the products are still valuable. Them most likely outcome is that some other company will acquire those products/brands and continue to extract value from them on the other side of a bankruptcy.
To do anything else would be to leave money on the table, which is not what PE owners do.
Why do active investment funds survive (when the evidence for passive indexes is so overwhelming)?
Because people think they can make money.
because there is now a good change everyone with one of these devices is likely no longer going to get support, warranty, or updates. apps will become outdated and fall off the app store parts to repair will no longer be available etc
devices/a brand people enjoyed using is now gone because PE did what PE does and destroyed the brand for a quick buck
sorry
The people approving these loans get to report better quarterly numbers and by the time the chickens come home to roost, they’ve already moved on.
Besides killing the company/jobs, the debt-holders are left holding the bag?
From the article: "Broadly speaking, the CCAA is the Canadian equivalent of Chapter 11 of the U.S. bankruptcy code. Companies enter both processes when they are seeking the court's help to protect them from their creditors while they try to come up with a way to restructure the business and continue to operate."
The linked article talks to management about how unsustainable the $500 million in debt is without noting that it was half of that amount until these jokers took out loans worth $450M to gave themselves $250M.
I think if you're to pick a lesson to takeaway, this is it.
There are other objectives to pursue, than "continue to grow as much or more this year as we did last year". That objective in particular is destined for eventual, guaranteed failure – and an outcome that leads to decomposition (by PE, bankruptcy, whatever).
If you live by the sword of greed, you die by the sword of greed. It's tragic but banal in the 20th/21st Century US – great brands succumb to it every day.
This is an utterly textbook private equity play, the kind of thing that has been wrecking American business and jobs.
There's nothing subtle about this at all, it's looting with a pen.
They acquire the business, load it down with massive amounts of debt, do reckless short term things to boost growth (aka "eating the seed corn") and then take the money and keep it leaving someone else holding the bag.
It has nothing at all to do with how much people do or don't like cookware.
It's a bust out, a racket, just an inch away from organized crime. It happens daily in this country.
PE itself is a bloated industry because we have too much money being extracted out of the real economy going into the pockets of the already wealthy who don't know what to do with it, so they hand it to a money manager (i.e., PE) to make more money for them, not knowing what to do with those potential future earnings either. this is the kind of economic inefficiency that concentrations of capital brings, in direct refutation of the common economic argument that the wealthy are better at investing money (i.e., more capital efficient, which in turn supposedly adds more real productivity to the economy).
small, local amounts of wealth are more capital efficient, but large, distant amounts are not.
Private Equity, as a distinct industry, is fully engaged in looting of the type contemplated by the principal-agent problem:
the principal-agent problem emerges in any business where professional managers are employed (which usually happens when a business gets too big for its britches), so it's not PE-specific.
If you look up the names of some of the PE companies they're quite on the nose: https://macellumcapitalmanagement.com/ Macellum literally means "meat market": https://m.dict.cc/latin-english/macellum.html 'Take an animal (company); chop it into parts and sell those off'
Wikipedia page for Macellum: https://en.wikipedia.org/wiki/Macellum
> Macellum’s campaign resulted in the addition of 4 of 13 directors. Also, as a byproduct of the pressure applied during the campaign, the company sold non-core assets equal to approximately 75% of the market capitalization. Macellum’s price objective were met and we exited the position at the beginning of 2021. Subsequently, a fractured board and new CEO were unable to oversee and execute the turnaround plan Macellum outlined during our campaign and results deteriorated.
Quotes from the article:
> In 2019, his company merged with Illinois-based Corelle Brands, the owner of Pyrex, CorningWare, SnapWare and Corelle.
> In 2021, at the height of its popularity, the company borrowed $450 million US worth of bonds, due in 2028, to expand its business.
Is Corelle the PE firm? Is "expand its business" the standard figleaf PE firms use when looting a business?
But it's constant and blatant and somehow seems to still be legal.
The PE firm here is Cornell Capital.
"Yes, as through this world I've wandered I've seen lots of funny men; Some will rob you with a six-gun, And some with a fountain pen.
And as through your life you travel, Yes, as through your life you roam, You won't never see an outlaw Drive a family from their home."
The article itself and mikeyouse's comment explain the situation most clearly. Standard PE financial (over)-engineering was the primary cause of their problems.
Slowing sales obviously don't help, but changes in the macro-environment can typically be weathered if the companies' financials are appropriately managed.
They're supposed to have recurring maintenance fees. One might do the maintenance themselve, but a significant part of the user base will ask a shop to do it, probably the dealer where they bought it.
> furniture, kitchen appliances, other home appliances
On the higher end it survives by charging years worth of purchase. Like a 4000 bucks oak dining table. Kitchen appliance also either cost an arm and a leg or won't last for 10 years (including buying replacement for the perishable parts)
The lower end is the market IKEA dominates.
> television
They exactly saw this problem front and center and started pivoting to selling viewing data and pushing ads, getting "smart"
> computers
That's exactly why companies (the biggest cmputer purchasers) are led to leases instead of purchases, and those renew every 3 years. On the user side cheaper computers are also the mainstream, and people don't expect those to last 10 years.
The instant pot is like the Bialetti Moka pot - it's a simple device, that doesn't wear down quickly and isn't used enough to wear it down quickly. New devices don't differentiate nearly enough. And the used market is likely flooded with cheap ones that others stopped using.
What is does do it take care of itself. In other words, I can throw a bunch of stuff in the pot, configure it for cook time then turn off the heat, set a timer and know that in 45 minutes it will be ready to serve. In a house hold where multitasking is a necessity, that is a huge boon. Finally, one pot to clean up.
Thankfully most meals have low HP.
If we had European 240V circuits we could have an Instant Pot designed for well over 2000W and it wouldn’t be an issue.
The same story goes for electric kettles. Alec of Technology Connections [1] went into extensive detail about it!
- Hard-boiled eggs. Takes just 5 minutes. Not much time savings, but the eggs are consistently easy to peel and yes, I've tried it Serious Eats way too.
- Incubating yogurt. Makes a perfect batch of four mason jars worth every time.
- Risotto. Saves the 30 minutes of attending to rice where you slowly ladle in the broth.
- Black beans. Start from dry beans in a pinch, no soaking needed.
A top of the line Breville toaster oven was the first, it's fantastic, but it is also silly to compare it to our 25 y/o Viking duel fuel range, waiting to reenter our life.
A week ago I got my Instant Pot Pro, and I've been putting it through its paces. I boiled some eggs. This is what really irks me about IP fans: it does not take 5 minutes. It has some indeterminate amount of preheat, the 5 min., and then a cool down. The eggs are just fine, as flawless as the following method on a quality gas burner stove: Put eggs and water into pot to just cover, turn burner high"ish"; when bubbles just start, turn down to a very very slow bubble generation and set timer for 10m (12-13min at 5500' elevation), scoop out the eggs when the timer expires and put on the counter, peel when cool enough. I very rarely had to spend any attention monitoring this. The IP is just, but only just, as good.
BUT ITS NOT FIVE MINUTES.
Shouting because why do instant pot fans do this?
Now, I am quite interested in the yogurt thing. That sounds very cool, we love yogurt and industrial yogurt, meh. Also strawberries are cheap right now and I'm thinking of making some exotic French confitures, and mixing that with the yogurt.
Risotto? No brainer on a decent stove. Dried beans? I also have a 30 y/o Magefesa pressure cooker that has a thicker bottom than the instant pot "pot" and does dried beans perfectly. No magic, or even "instant", there.
Another gripe: compared to the Breville that roller knob in the center is a gawdawlful POS. Reeks of cheap.
Compared to the 15 y/o electric range that is going to be tossed out the back doors, and then shot multiple times with 12 gauge 3" buckshot loads, the IP is great, so maybe I'm a little sad that the inevitable PE bankrupt/shitify it happened to it too.
With a stove top method, you have to stand there and watch the timer, and manually turn off your stove when it's done.
I am usually still in the kitchen preparing the rest of the meal by the time the alarm rings, so turning off the stove is not a big inconvenience.
There's also another advantage of the instant pot method: because it's cooking under pressure, it compresses the whites very slightly inside the shells as they cook. This means the shells always peel very easily from the eggs! Often when stovetop cooking, I'd get the shells sticking to the eggs which makes them difficult to peel.
In fact, if the Instant Pot has any disadvantage vs doing them in a pot, it's that the texture of the whites isn't as nice. The short cooking time that I use helps with that, but you have to be okay with not fully done yolks (which is something I prefer anyway).
But it's not the end of the world if you don't as it cools down quite quickly when it vents (if set to quick-release). They might be slightly overdone, but certainly not as bad as forgetting them and leaving them boiling in a pot for 15+ minutes. Which I've done more times than I care to admit.
I usually make boiled eggs when I take food somewhere (be it for hiking or a lunch in the park). But I also drop them into cold water once they are cooked to stop the cooking, so they are quickly not that hot anymore.
Not having to worry about the timing does sound nice!
You may hatenjoy the discussion at https://news.ycombinator.com/item?id=36038796 .
(Hmmm... with hatenjoy I may finally have ticked "create a legit googlewhack" off my bucket list. I see some usages that appear to be "Hat Enjoy" jammed together as a domain name or company name but a portmanteau of hate-enjoy Google is not finding for me. Of course Google isn't what it used to be...)
https://www.seriouseats.com/perfect-boiled-eggs-recipe
In my Instant Pot it's about 3-4 minutes to bring maybe 4 oz of water to pressure, 4 minutes to pressure cook, maybe a minute to release pressure and I'll do 8 eggs. So that's like half the cooking time.
Cooling time is the same. I plunge the eggs into an ice bath for 5 minutes before refrigerating.
I don't really do it for the time savings though. I mostly do it because it gives me a more consistent result. My egg yolks are always cooked exactly to the same doneness and the eggs are always easy to peel, even when starting with fresh eggs. (Freshness is the primary determinant of how easy eggs are to peel with older eggs being easier to peel than fresh eggs.)
I found that making them using the Serious Eats recipe I didn't always get consistent doneness (it's a lot harder to get the water temp exactly the same on a gas stove even with a thermometer). I also found they weren't always easy to peel.
So yes, the Instant Pot does save me time even with eggs where the time savings is minimal. More importantly it gives me a more consistent result with less attention from me.
YMMV.
On Rissoto, yes it's easy on a stove. But it requires you to stand there for 30 minutes lading in broth a little at a time. At least that's always the way I've done it to get a really nice result. On the Instant Pot, I can add all the ingredients at once an hit a button and 30 minutes later it's perfectly done w/o having required 30 minutes of my attention. I don't do it for the time savings. I do it because it's easier.
On beans, I didn't own a pressure cooker already.
On the yogurt, I never had consistent results trying to incubate naturally. I also tried a Yogotherm, coolers, my oven, the counter. Nothing worked. So I resolved that I needed to buy an incubator and when I learned the Instant Pot could do that and more, I bought it. It was like $80 on sale. I've been making perfect yogurt for like two years now.
Here's my recipe for creamy and nicely tart Bulgarian yogurt.
(I basically clone White Mountain.)
Fill four mason jars with whole milk. I use the Whole Foods brand ultra pasteurized whole milk. Screw lids loosely in place. Put jars into Instant Pot on top of the trivet. Fill with water till it comes up about 3/4 the way up the jars. Place lid on Instant Pot and set it to sous vide setting, 190° for 30 minutes.
When done pasteurizing, remove the mason jars and place them in cool (not cold or they will crack) water. I do this in my sink. After about 15 minutes remove the lid from one and check the temperature is below 110°. If not wait a bit longer. You could just let them cool on the counter top too but I'm a bit impatient with this step.
Add 1 tsp of starter to each jar and stir lightly. Put mason jars back in Instant Pot. Place lid on. Incubate for 8 hours. Once it's done incubating, place jars on counter for an hour or so, then move to the fridge.
For a starter, I use White Mountain Bulgarian Yogurt for a fresh batch. Then I can chain my own yogurt along as starter for months at a time.
I prefer to mix things into my yogurt when I eat it so I like to keep the yogurt itself nice and tart and don't mix anything in to the jars.
I make the yogurt in the mason jars from the start so I don't have to transfer it when it's done.
Since I start by cloning White Mountain, my yogurt is basically identical and the taste is the same.
I use mine exclusively for single items that I want to cook efficiently in bulk - eggs, beans, potatoes, yams, etc. (Most recently, made a pot full of chick peas this weekend to split between hummus and a quinoa salad.)
She uses hers for single-pot soups, stews, etc. that are ready to eat as-is.
All of those take less time and are just as good if not better than stovetop.
Once I made shawarma in mine, that was pretty neat.
The trick is to use baking soda when you cook the chickpeas in the instant pot, because it dissolves/softens the shells. Then you take them out and rinse thoroughly in water to get rid the baking soda taste, before slapping them into a food processor with tahini and whatever else.
Good quality tahini also makes a difference. Lots of north American brands have a wildly different taste than what's common in the middle east.
Energy efficiency is a big point. Between my Instant Pot and Air Fryer I have few opportunities to turn on the oven. These devices heat up faster, cook faster, and provide more consistent results. This is especially true now that I'm an empty nester and no longer cooking for a large family. It also makes it easy to resist the temptation to rely on processed foods.
As a rice cooker, it cooks rice.
[1] https://www.whelenmassnotification.com/wp-content/uploads/si...
You do need to know how long your food needs to cook up front, or be tolerant of overcooked food.
You may have just described why they're filing for bankruptcy.
While I do not own an Instant Pot, I do own an awful lot of Pyrex cookware that I bought well over a decade ago... My mother has Pyrex cookware she's owned for decades and will likely pass down one day.
It's hard to build a lasting company when your customer's buy once and never again. Perhaps there's really such a thing as "too good".
If the company drags on long enough, all that profit gets eroded away. Pyrex has been around since the early 1900's for instance.
I agree, might not be 100% of what happened here, but it surely has to be a component.