Hacker News Reader

Comment by djohnston | Hacker News Reader

I have a question someone can hopefully help me answer. I've heard this narrative for many years now - private equity buys a company and drives it to shit. Recently it was PE firms buying all the vets in an area. If that's indeed the case, wouldn't it make sense to hold out because eventually you'll get all the customers? Like, if there are 10 vet offices in the county, and PE firms buy 8 of them, over time won't everyone end up flocking to the 2 that held out?

View on HN

The eight (owned by some group that owns 800) can undercut the two on price until they go out of business. The eight could refuse to deal with suppliers that deal with the two. The eight can exclusively license products and procedures within the area, which the two would not be allowed to sell. The eight could pour a lot of money into local advertising, and start rumors about the other two to be picked up in the papers. The eight could award itself certifications and awards that are denied to the two, because the 800 represent a lot of pressure in the industry.

Or they could play dirty tricks. I think the previous is what they would be expected to do, and if you were an investor you might be able to sue them if they didn't.

All of these practices ought to be considered illegal anticompetitive behavior.

They are, but you're still out of business, and they have enough money to wrap you up in paper for awhile.

They are, but it takes time to get enforcement – and that's assuming that the PE firms don't do something like buy enough $TRUMP to get a private audience with the regulator's boss. If those two firms don't have enough assets to survive through years of legal actions, they're going out of business even if the other practices follow them.

Even if the PE vultures give up, it can sour areas for a while: they start a price war and force everyone to lower prices, slash staffing, etc. If they give up after a couple of years when it turns out to be harder to corner the market than they thought, the surviving businesses are still in a worse shape and have the unenviable task of trying to restore prices / service to previous levels.

Right, so the government needs to do its job and enforce the law adequately!

Yes, and as you can see, improving enforcement capabilities is clearly a priority of the current administration.

In my experience in my city [Portland, OR, US], PE owns most of the large clinics (NW VCA, BluePearl, Banfield). There are still a lot of smaller vets, but it's harder to get an appointment with them and most don't do urgent care/24hr emergency or have an app where you can do scheduling.

- In an emergency/urgent care situation, you can't really do a price comparison/shop - The pricing is opaque until they you receive the service. Even in routine/non-emergency situations, you get a quote for the services often 20-30 minutes into your appointment, even for annual exams, so it's pretty obnoxious to switch services at that point. - FWIU, Banfield and BluePearl both have a strategy where have lower cost exams to get patients in the door, but then make that up in super high testing/drug fees, e.g. a $300 UTI test that labs charge $30-100 and 10x upcharges on antibiotics readily available from Chewy/neighborhood pharmacies.

It's an information asymmetry problem. If people knew which business were PE owned they would avoid them. This problem often happens when the cost of services is charged after delivery.

> If people knew which business were PE owned they would avoid them.

What? You think the average customer knows or cares about that?

You two just identified a market opportunity

What market opportunity?

If the allegedly poor quality of service isn't enough to drive customers away, why would the customers give a fig about its ownership structure?

The customer cares about the taxi, not the checkers.

The problem is the poor service is delivered before the bad pricing. Stifles the corrective market competition pressure.

That theory is correct for people whom you get the choice to interact with once or twice with in your life, like realtors and funeral home directors or picking your thesis advisor, but really falls apart for anyone who has a regular customer base of people who come back for repeat service.

If my dentist starts charging me double and starts treating me like shit, I really couldn't care less about the practice's ownership structure, or how clean and well-structured, and unit-tested the code that runs on his computer is, If I have a choice, I'll look somewhere else. If I don't have a choice, I'll bitch, but keep going to him.

At no point will I care whether or not the office is PE-owned. It's utterly irrelevant to me.

A lot of Americans pay for dental services through insurance which adds another layer of complexity. The insurance provider negotiates and then just passes through the cost, of course this leads to higher prices than market competition provides. Dental services need to publish price lists, this will allow for price discovery and market competition.

For any non-trivial work, dentists will happily look around in your mouth, and then give you an itemized quote for how much treatment will cost, before they schedule treatment for you. They aren't doctors, they know how much two pills of ibuprofen cost.

You absolutely can comparison shop (Even if the dentist in question doesn't exactly know what % of the bill your insurer will reimburse, and the best they can do for that is to give a rough estimate.)

It's probably not worth it for routine work if you're insured, and absolutely worth it for anything serious, or if you don't have insurance.

One of the best things trump did was forcing hospitals to publish their price lists. Dentists should be regulated and publish their prices too. Allow for comparison shopping.

No, it works for the vet too. I have suspected for a long time that they are fucking us on prices but it's difficult to compare them. I always pay after services rendered.

Regulation and mandatory disclosure is required.

yes

tons of businesses currently advertise their "family owned & operated" status in America. so in the future, seeing marketing around "not owned by PE" wouldn't be a surprise

Any attempts to solve problems by the invisible hand of the Almighty Free Market will fail abysmally when the plurality of people in that market are severely resource-constrained.

Right now, all most people can afford to care about is what's cheapest. Any supposed wisdom about "revealed preferences" is essentially bullshit because of that.

If you want your much-vaunted Free Market Theory to bear any resemblance to reality, you will need to first ensure that

1) Everyone has a plentiful supply of disposable income, after all necessities and basic luxuries.

2) Participants in the market are mandated to fully disclose all pertinent attributes and conditions of their products and services—for instance, their ownership structure, how much lead, asbestos, and cadmium are in what they're selling, etc.

3) There are numerous participants in the market competing on roughly equal footing—that is to say, the market is not a monopoly or duopoly, or anything even vaguely close to that (dozens to hundreds of competitors, not just a handful—with, of course, the numbers dependent on the nature of the particular market).

4) The market in question has elasticity of demand—any attempts to "let the market decide" with things like housing and healthcare will always fail, at least to some extent, because people who lack them for an extended period of time will die, and thus effectively act under coercion.

And note that these things are the absolute bare minimum required for a "free market" to operate anything like Free Market Theory says it should—other conditions can make it operate more smoothly and effectively. And it's entirely possible I'm forgetting some.

The reason PE buys them out is because they can make more money by jacking up the prices. If they had to publish their prices consumers would choose a cheaper option, ie not PE.

1) The best way to ensure this is to make the necessities of life (I'm not sure what you mean by "basic luxuries", but let's lump those both together for now) as cheap as possible. The main reason in our actual world that this does not happen has nothing to do with "free markets" and everything to do with governments putting their thumb on the scales and playing favorites.

2) The only reason you think this is necessary is that for many things, there are too few providers for competition to force all the providers to either provide this information or have no customers. And what's the reason for that? Governments putting their thumb on the scales and playing favorites.

3) Same response as 2).

4) You seem to be ignorant of the fact that, at least in the US, housing and healthcare were once provided in a free market--and given the technology of the time, the average quality was better than it is in the US today. The reason things are messed up today, again, has nothing to do with "free markets" and everything to do with government meddling.

In other words, all the things you're complaining about are not failures of the "free market"; they're failures of government.

"private equity buys a company and drives it to shit."

Allow me to introduce you to VMware. It was bought out by Broadcom. That sounds like a tech firm buying a tech firm. It isn't really.

Broadcom is (not really) run by Robert Redford from the film "Pretty Woman", except this asset stripping exercise is rather more unpleasant than even his efforts.

VMware used to have a flourishing eco system. It managed to largely throw off plagiarism threats from when it was ESX vs ESXi. It was basically Linux (Redhat) with knobs on and fuck you freetards but here's a freebie version that we have cobbled together.

Anyway.

I was a VMware fanboi for roughly 25 years and now I am not. I was also a Windows (MS) fanboi too for some decades. Can't be arsed these days but I will.

Dealing with Windows and VMware is really unpleasant these days.

Meanwhile, Linux just keeps getting better.

I have been developing a Linux desktop using "off the shelf" (Kubuntu) for "enterprise" use, for some years now.

By the word enterprise I actually mean "I've called your bluff"!

In the "enterprise" world you need to do Secure Boot, AV, and encrypted at rest. Debian and Ubuntu int al can do SB. The tricky one for Linux is AV. I deploy ESET, which only supports Debian/Mint/Ubuntu.

AD (LDAP n Kerberos) for auth via Winbind or SSSD etc is an easy given but the equivalent of drive mapping is a bit harder. Especially when VPNs are in use. Windows will keep on trying but the Unix/Linux mounting thing isn't quite so ... forgiving. Neither are perfect but I have no idea on how to even start on a discussion about something that might be called ephemeral mounts.

> Windows will keep on trying but the Unix/Linux mounting thing isn't quite so ... forgiving. Neither are perfect but I have no idea on how to even start on a discussion about something that might be called ephemeral mounts.

Can you make it systemd's problem by making a mount unit that explicitly depends on the VPN service? Or maybe you want something like autofs?

Richard Gere was the lead in "Pretty Woman", not Robert Redford.

From the inside, VMW had a lot of trouble finding the next big market and Broadcom offered impossibly good money for it.

Theoretically, if those two firms are good at their jobs & also good at marketing (including referrals), then yes sure.

Realistically, 75% of professionals aren't worth their salt & so many people will just continue going to the PE firm controlled places since switching won't get them any better service & the 2 hold out firms in this scenario would pragmatically raise their prices.

> since switching won't get them any better service

It will, but as you note it will cost more.

As someone who has extensive experience with many vets due to rescuing and fostering with multiple orgs and having animals of my own, I'll take the local firms any day of the week. Although there are some bad ones, and although it can be hard to get your foot in the door, local vets as a whole offer better availability, a more timely experience, a lack of upselling, someone at the front desk, and generally more competent vets.

Experiences I've had with the other places make it very clear they're paying their vets bottom dollar, want to extract every one of my dollars possible, don't care how much of my time they waste doing it. Strangely, although they always want me to review my experiences, they never seem to take the criticism to heart.

The market can stay irrational longer than you can remain solvent. Yes eventually customers will go to better firms who will beat out the short sighted competition, but that could take years and there's no guarantee your firm will survive to see that day. A risk free lump of cash in hand right now is tough to pass up. Even if you are personally willing to take the risk, other stakeholders like stockowners, partners, or key employees may not. Indeed seizing the disgruntled customers after they become fed up doesn't actually require you to remain in business during the dark times - you could start a new firm with a clean slate, optimized for the situation that exists then with a war chest filled by the very PE firms that demonstrated to your customers how valuable you really are.

I doubt a PE buyout would allow the principal to compete within an X mile radius for Y years post-sale. (PE firms may be a lot of things, but utter idiots is not one of them.)

Well if Y years is less than the expected time for PE firms to lose their customers, then it's a non issue. If Y is longer, then the PE firm is overpaying for their acquisition and will presumably be acquired and gutted by a more efficient PE firm.

A principal yes, but the deputy could always take the rest of the staff with them. Principals usually sell for retirement reasons anyways.

Sure, but my loyalty to our vet is to the main vet, not his deputy or staff. Those people may or may not be great, but they’ve got no (or very little) automatic transference of loyalty from the original vet.

This doesn’t happen as often for the same reason that startups would rather flare out than build a sustainable business: greed.

Most people would rather get rich quickly by selling out, instead of putting in effort to get rewarded far in the future.

Yes... that's one way of putting it, but I liked the sibling comments more. Another perspective on the same thing. The upshot of holding out isn't very great and may in fact get worse if MegaPetCo buys all your suppliers.

It can be not so much greed as running for higher ground when the MegaPetCo tsunami comes to town.

those 2 can only handle so many people... the rest are going to be screwed over by the PE companies

Vertical orientation, so the hold outs still need to source per meds and foods and supplies from somewhere? Mega pet co owns the whole stack.

Is it perhaps integration instead of orientation?

PE-owned vet clinics are cheaper due to economies of scale, and that's all that matters for most people.

Reply on news.ycombinator.com