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I don't get why sellers are selling to PE. Can these services not "IPO"? Why do these companies need to sell?
When PE takes over medical practices, my understanding is there just isn't enough capital available for a dentist to "cash out". The options are either they find another dentist to buy it, the close the practice, or they sell the private equity...
Talking to a single buyer is easier than arranging an IPO and I would imagine the diligence far less onerous.
Some finished college and went back to work for their parents, but the dad told them “no, you can have a job within my company, but I’m not gonna hand it to you because I’m still young and you know only 25 years ahead of you in life.” In china they say, “when the grandfather dies, the children prosper.”
The kids either stayed working for their dad, giving him additional agency over their lives as he controls their career, or the kids left to go start their own business within their means using his funding.
Other kids just have no interest in their parent’s industry. They decided not to be a dentist because they like art more. They don’t wanna run a landscaping company, they would rather work for Google in an air-conditioned office and a 40 hour week job.
You can’t just IPO because you want out of the business. There’s lots of reporting and regulatory requirements to ensure you aren’t screwing investors.
Yes, it would be better for the community if people chose to invest locally instead of the SnP 500, but running out of money in retirement is a very real fear and the SnP500 is much better/safer for most people than COIVs.
Shifting private ownership to a publicly traded company is an awful lot of paperwork (especially for accounting) and upfront costs, you need to time it properly, you need to find banks willing to cooperate.
In contrast, selling a private company to a PE is a pretty much straightforward transaction.
Owner gets old or want to quit the business and a PE offer of 2-8x Revenue comes in.
Owner making $200k instantly cashes that $4MM check and walks away.
PE takes contracts, guts all the expenses and cuts staff in half, and purchase price is recovered in <2 years.
Suddenly there is only one HVAC or dentist company that can maintain licenses and insurance.
My assumption is publicly traded company would have access to better financing terms and a diverse set of investors with less "hunger" the financial shenanigans the PE investors have.
The entire stock market is selling floating points of imaginary numbers.
My friend's parent's local services company shutdown when they didn't find a buyer. A business limping under interest payments IMHO is better than a complete shutdown.
What are these "social human constructions"?