mastodon.social is one of the many independent Mastodon servers you can use to participate in the fediverse.
The original server operated by the Mastodon gGmbH non-profit

Administered by:

Server stats:

354K
active users

Jen Sorensen

Latest comic on the looting of Red Lobster by private equity

@jensorensen Also: these four panels are FAR more clear about this topic than *ANY* of the many articles I have read about this. Excellent work.

@jensorensen @chuck Not really private equity-- more like corporate raider. We knew about these parasites back in the eighties.

@jensorensen Private equity firms are parasites. >:(

@jensorensen and the people who made the money never ate there anyway.... So the closure doesn't affect them, but on the plus side for them is they made a lot of dosh

Capitalism at its finest

@jensorensen Great comic. Private equity firms are indeed awful & predictable. Every customer I've had that's been PE-funded has had some colossally shitty directives aimed at them, all for short term financials:
1. Audit customers, pull in short term revenue & burn down futures & relationships
2. Kill growth projects, close depts & reduce ops costs
3. Eliminate open headcount & layoff staff down to the bare bones to keep the lights on
4. Sell off business in 1yr with "shiny, new financials"

@kurtsh The part I don’t understand is how step 4 works. Is it pure fraud? Are they selling to foreigners whose due diligence looks at different things than domestic firms? (For example, for Red Lobster, presumably the value of the real estate was figured into what the PE firm paid to buy them. Then they sold the real estate and pocketed the cash. But then when they sold out, shouldn’t the value have dropped the same amount? Seems like if the books were honest, it would be a wash at best!)

@Hotdog It's not fraud. It's just... blank canvas, may be a way to describe it? "Lean" companies with fewer liabilities (real estate) & lower opex (fewer employees) but with cash flow projections to grow is generally perceived by the market as a major positive.

(Hence the reason everytime there's a layoff, the stock of the company goes 🆙📈🆙)

What makes this ugly & heartless is that there are real people's livelihoods involved. Which is why I refuse to work at startups & small/med businesses.

@kurtsh but isn’t the real estate also an asset? And don’t the new lease terms increase the opex? Or are you saying they lower the other opex enough to hide it, even if it means it takes 90 minutes to be seated and get food? (Which of course doesn’t show on the balance sheet.) Not arguing, trying to understand. Really appreciate your helpful reply.

@Hotdog You nailed it. Opex increases get buried in the cost cutting while liabilities drop off. I can't specifically speak to the situation with Red Lobster but things like customer sat aren't generally criteria for acquisitions. It's all optimum accounting & potential. (And a f-ck ton of tax writeoffs)

This doesn't always work BTW. IndyMac Bank went bankrupt & in the early 2010s did all of this but couldn't get a buyer until Michael Dell came & bought their assets at 10 cents on the dollar.

@jensorensen Didn't that private equity firm also hold stake in the businesses that Red Lobster had to buy the shrimp from or something like that?

@AbyssalRook The private equity firm sold Red Lobster off to a seafood supplier in 2020, who then monopolized the shrimp sales to the restaurant.

@jensorensen Public companies also sell and lease back land. The real problem is wealth preferring to just own land at any price even if its an empty building. Because scarcity will push prices higher.

@jensorensen
Business Looting this way should be a crime.

@jensorensen ☝️Paging @pluralistic this reminded me of your Red Lobster article :)