Anywhere there is money, making an everyday man some money, these pests creep in. I generally dislike what has become of recreational sports and how the parents are either forced to spend for things that really don't matter, when learning to play. But learning Private Equity is eyeing this give me creeps. There must be some guy who observed how families are spending and decided it would be the next destination for PE.
They have only discovered what lots of small operators in youth sports already knew. Parents will pay stupid money to have their kids participate.
My kids played some travel sports, the tournament organizers were all in it for profit, they also had deals with local hotels and parents were required to stay at the "tournament approved" hotels. They were inevitably rather premium hotels such as Marriott brands and the room rates were high. The tournament organizer got a kickback on every room sold.
Hockey is particularly expensive because the costs to operate a hockey rink are high. Costs to run and maintain chillers are high, especially if you are open in the summertime, and you need trained staff who can drive a Zamboni and otherwise maintain the surface, and you can't just switch that off if nobody's using it. Usually a community-owned ice rink runs at quite a loss to the municipality. A privately-owned rink will have to charge hundreds of dollars an hour for ice time and they often are barely profitable. There's no way to scale beyond about 12-16 hours a day where anyone wants to use the ice, and often 5pm-midnight is the only ice you can sell.
Then there are the "academies" for the parents who think their kid is the next NHL or NBA superstar. They are private schools, operated at or near the sports facility, where kids go to school as well as play/practice their sport. The tuition rates are what you might expect: exclusive, to say the least.
Ice skating varies. The skates for someone into it range from $500-$1500. Those typically last several years unless you're skating like 4 hours a day and doing tons of jumps. It costs $20 to sharpen skates and that needs to happen every few weeks for competitive skaters I think. I like mine slightly dull and usually go a few months at a time. Lessons are like $200+ per month for group or $40+/hour for private. Travel + recitals + outfits + music, would be another thing too, but we don't do the competitive stuff. As a result, I pay a lot more for hockey for my kid. I could see figure skating being a little more expensive overall if we were competitive and did more private lessons. They're both super expensive in general though.
When my kids played hockey the team bought a skate sharpener. Saved a lot of money over the years not paying for sharpening at the rinks (and often the rinks would do a poor job at it, depending on whether the person knew what they were doing).
Youth sports isn't like driving for Uber on the side. It's a giant money fire for the consumers that partake. I'm surprised it took PE this long to say "hey, there's a bunch of money on fire over here let's go get some"
Youth sports have been moving in this direction since long before sports gambling was a meaningful economic force in the US at least. I attended both a high school and a college that started football programs while I was a student because the leadership thought it was necessary to maintain enrollment.
We were discussing cheerleading at a break in one of the office meetings this morning. Varsity Brands, owned by Bain Capital, controls the "sport" of cheerleading in the US. If you want to compete, you must purchase current year's uniforms, pay to enter contests run by VB, stay at hotels that VB decides. A teenager involved in competition cheerleading can easily spend $5k-25k/year. This "sport" injures more teens each year than football does - and that's a high-contact sport with significant protective gear.
>I traced Varsity’s market power to three basic maneuvers. The first was buying up most of the cheerleading competitions in the country, so that entering a competition meant dealing with Varsity. The second was secretly creating and running the nonprofits that govern the sport, such as the U.S. All Star Federation, which gave Varsity the power to write rules for and organize competitions, scheduling, camps, and ancillary services like insurance. And the third was cutting deals with gyms to block rivals. Gyms are where teams of cheerleaders train, and gym coaches tend to have control over what uniforms athletes must buy. The company gave gyms who bought their uniforms from Varsity preferential treatment and special rebates.
>One key result of Varsity’s scheme is inflated prices to the end consumer, which is why Bain bought the corporation in the first place. If there was cash to grab, Varsity tried to grab it. For instance, Varsity makes it very hard for parents to watch videos of cheerleading competition except through the firm’s specific expensive streaming service. There was the practice of 'Stay-to-Play,’ where Varsity would force athletes to stay in a specific hotel if they wanted to enter a competition, with Varsity likely getting rebates from that hotel in the process. The net result is that today it can cost up to $10-20k a year to be an All-Star cheerleader.
>I missed out on two anti-competitive practices in the industry. The first is called “Stay to Play.” For many cheerleading competitions, though not all, out-of-town contestants are required to stay at a specific area hotel or set of hotels, or they cannot enter the contest. This is yet another way to raise prices on cheerleaders, and parents hate it. The second is that Varsity tends to be very aggressive about takedown notices for cheer contest video. If you film your kid at an event and put it up on Facebook or YouTube, Varsity is likely to ask you to take it down because it’s competitive with their VarsityTV streaming app. As one parent told me, it’s basically Varsity preventing you from sharing your memories publicly with your family or friends.
The way the term private equity is used is meaningless. It’s just business, and the same thing happens anytime a business is sold, because the new owners have paid a 5x or more multiple, and the reason they would is if they think they can cut costs and increase prices.
One should expect lower quality and higher prices anytime a business is sold.
You're using the same words to talk about different things.
You're right, in the world we would like to live in, this wouldn't be a thing. People shouldn't expect that a business sale means a quality drop. That would be a good reality.
However, next to that good reality is the one we live in. Where people should expect quality to drop on a business sale, because that's the structure of the world we live in. Wishing the world were different isn't sufficient to make it so.
But it both hasn’t always been the case and still isn’t in large swaths of the country and the world. The 5x + enshittification phenomenon is both recent and a result of PE and “activist investors”.
“We” collectively should demand better. You act as if government is some omnipresent being that makes its own decisions. If citizens start demanding the government act in their best interests by enforcing things like anti-trust laws, it will.
The assumption that "the new owners have paid a 5x or more multiple, and the reason they would is if they think they can cut costs and increase prices", is not universal and in many cases quite new. There are many new owners and buyers for which this is not the case. Your local bar, restaurant, hobby shop, gym, bookstore, daycare and others often transfer without the new owner looking to pay a 5x premium and maximize profits. It's only recently that doctors, dentist, veterinarian offices and other high margin social businesses are getting converted to PE.
It's the enshitification of all the existing third places and extraction of social value for profit, because people will tolerate it due to lack of choice and social need.
Well a lot of times these “businesses” were sold to existing employees or family members who were going to run it themselves and it usually wasn’t for a huge multiple.
In many cases they weren’t sold at all just passed down to heirs. The differentiator is that PE has figured out that they can offer enough to bypass the traditional methods of business continuation.
I would frame it differently. Due to advances in communication and automation with the use of software, business owners can market the business to a far larger group of buyers, and business buyers can buy from a much larger pool of businesses.
Everybody likes seeing those 10%+ annual returns in their 401K (or their local government's taxpayer funded defined benefit pension plan), but no one likes how the sausage is made.
Most of the businesses people are complaining about are inherently local. Doctors, dentists, sports teams, plumbers, electricians.
When PE buys them in the majority of cases they continue to market them like local business and in most cases they go out of their way to lake them look like local businesses.
What you’re talking about happened decades ago when Walmart, McDonalds etc… ran a huge chunk of the mom and pops out of business. This is the next round where they go after businesses that don’t benefit as much from nation wide advertising and branding.
People don’t tend to pick their dentist based on nationwide advertising/brand recognition.
But it's not just that a business was sold; it's that it (usually) was sold in such a way (leveraged buy-out) as to weaken the business and make it more desperate from jump. Doctor's practices et al. used to change hands all the time without much trouble; it's only now that PE is allowed to buy them with massive amounts of debt that they're allowed to use aggressive tactics to pay off (and pay themselves) in just a few years that we've started to have these troubles.
When you buy a house, the mortgage is associated with the buyer, not the house, and you can't just dismantle the house and sell it for parts to cover payments. Could you imagine if we could, though? Pretty soon, we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale). Then, the house declares bankruptcy and the bank is just out all that money. It's preposterous, they'd never let that happen. So, why with businesses?
The non recourse states are Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, Washington.
>and you can't just dismantle the house and sell it for parts to cover payments
You can do this in every state, at least with a conventional mortgage. If you default, they can pursue your other assets, except in non recourse states.
>we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale)
I don't know what "after a nominal sale" means, because if you sell a property with a lien on it, then the lien holder gets paid first. And underwriting would not let people who have a history of dismantling a house and defaulting borrow money over and over, and people need a place to live, so I'm not sure why anyone would take out a mortgage to dismantle a house. The scenario makes no sense, as raw materials are cheap, and labor costs are expensive.
> It's preposterous, they'd never let that happen. So, why with businesses?
Because the lender agreed to those terms. No one forces a lender to lend money without a personal guarantee.
> > and you can't just dismantle the house and sell it for parts to cover payments
> You can do this in every state, at least with a conventional mortgage.
Legally, you generally can't, because the terms of the mortgage will prohibit it. Practically, you probably can get away with it, as long as you actually make the payments, unless the dismantling requires recorded paperwork that comes to the lenders attention, because how will they know? But if you fail to make payments, then the lender is likely to care about the condition of the property, and then, in addition to collecting your debt on the mortgage itself, the lender will have a cause of action against you for breach of contract. (And such breaches of duties under the mortgage also will often be within the scope of "recourse carve-outs" in loans in non-recourse states.)
>>and you can't just dismantle the house and sell it for parts to cover payments
>You can do this in every state, at least with a conventional mortgage.
No you can’t. Mortgages require you to keep the property in good repair. Your lender won’t let you start taking the house apart to sell pieces of it because that lowers the overall value of the property.
extending the example, for PE, the mortgage is actually in the name of the house and you can take out additional loans in the name of the house to pay yourself the down payment that you used to purchase the house (while simultaneously stripping everything of value inside of it)
A "free market" is one in which all the participants of the market have perfect information and act completely rationally. This is, of course, an academic ideal, similar to solving a physics problem that tells you to ignore friction.
What we have here is a "capitalist market", where those with more power (capital) within the market leverage it to exploit the other participants. Private Equity uses their money to extract as much money as possible from a segment of the market, usually destroying it in the process. But for a beautiful moment in time they created a lot of value for shareholders!
> Instead, parents are forced to subscribe to these companies’ exclusive recording and streaming service, which can cost many times more than the streaming costs for professional sporting events. Meanwhile, the firms’ exclusive contracts have prohibited alternative video services from being made available.
> In some instances, parents have been threatened that if they choose to defy the rules and record the game, they may end up on a blacklist that punishes their kids’ teams. Those threats were even reportedly made to a sitting US senator.
> Black Bear’s streaming service costs between $25 and $50 a month, depending on the package and additional fees.
In addition to its recording rules and associated costs, Black Bear is starting to add a $50 “registration and insurance” fee per player for some leagues. That’s on top of what players already spend on expensive equipment, team registration, and membership to USA Hockey, the sport’s national governing body.
Feeling bad for the folks having a hard time pulling the plug on scams like these and going back to a more sensible and sustainable way of life.
It really doesn't get more sensible and sustainable than kids playing team sports and parents witnessing this part of their lives. The blame here is squarely on PEs like black bear nickel and dimming parents. How do you pull the plug on that? It's so gross.
Sure you're right, if that's their thing, having their kids perform the sport and watching them doing it then this is a good solution. The streaming makes it so they can even stay in the car and watch from there.
A private equity company has purchased every sports league, indoor sports complex, pool, and summer camp in my area. They then drop prices to destroy the local competition and then buy them too. After that they raise prices.
Depends on what it is and if there is any competition left. Some things have gone up in price where they have a local monopoly. I think their real play is the underlying land value. They are often able to buy distressed businesses with a lot of land cheaply.
They always do....that's partly how private equity works.
Example, buy out a well-known software product with a lot of customers. Then offshore development to cut costs. Then raise prices to milk customers that are too slow to migrate. Eventually the software dies off.
I feel like this article is trying to make this seem like this is becoming a widespread thing despite the entire thing being about hockey. In my experience hockey was always the sport that the wealthier households participated in due to the costs (equipment, rink time, travel, etc..).
As a parent with two younger kids I haven't run into this at all so I wonder how much of it is more sport dependent where the company controls the infrastructure. Maybe I'm being naive here but I struggle to imagine this is going to make its way very far into other sports where you simply are out in a field.
> I haven't run into this at all so I wonder how much of it is more sport dependent where the company controls the infrastructure
My experience is with San Jose where I'd be really surprised to see this happen. There's a massive six-sheet facility owned by the city and managed by the parent company of the Sharks, so being good for the community and good for hockey might be enough without them having to resort to these tactics.
Yeah, while I know there's parents who get a little kooky about "MY KID IS GONNA BE THE NEXT ____", anything that gets too expensive or restrictive around what amounts to basically a ball and some grass ain't gonna fly with normal folks. We'll just go to the park.
If this is true, why don't they go out of business? I just don't buy the argument that PE takes over businesses and makes them strictly worse. You don't make money doing that.
They will go out of business, in the long-term. What PE does is hot potato: they "trim the fat" off an existing business to goose up margins in the short-term, unload it to someone else, and that someone else is stuck with a business that's unsustainable long-term because that "fat" was actually resilience.
Sometimes, these buyouts are leveraged, with the company itself taking on the debt the PE firm used to buy it, so the PE's own risk is minimal.
That's the problem though. PE firms are stuck with billions and billions of dollars in businesses they can't cash out of because they have no other buyers than other PE firms.
That's why they are pushing the Trump admin to allow 401k funds to take over the toxic PE assets.
There are also a lot of PE strategies. Buying a class of small business and squeezing out value is one, but it's completely different from buying failing businesses and restructuring them, hoping for a turnaround.
Increased costs here, I assume, means to the customer, not to the business. PE buying up medical adjacent practices (vets, eye doctors, dentists) has been growing model over the last decade. They make money just fine because there's no alternatives, and manage to make both their employees and clients more miserable in the process.
Yes, there are some PE takeovers that are legitmately trying to improve things and generate more profit. You don't hear about those because it's not controversial. You only hear about the "slash costs and cash out" types of takeovers.
> I just don't buy the argument that PE takes over businesses and makes them strictly worse. You don't make money doing that.
The effects in health care were studied.[1]
Less competition supports higher prices. People can be convinced to purchase unnecessary services. People are slow to leave trusted doctors. Non compete agreements limit new competition. The time to train new veterinarians limits new competition. Short term profits fund future acquisitions.
In my town it works like this: Vets get taken over by PE, raise prices over time. People move to the old style vets. These are overwhelmed and can’t take more patients, so people have no choice but going to the PE vets.
How many vet clinics do you know about? How often do you take your pet to the vet? Are there any “first visitors” events you need to do?
If someone is going to the vet once a year for blood work and a rabies vaccine; and there’s only like 3 in the whole city, you’re probably not going to rotate between them. What if the next one is even worse?
I have left a single vet over “bad behavior” and most of the other times it’s been over moving and things getting too far away.
The reality is most of their “getting worse” and “increased prices”, etc, is missed because most people come in once a year, so changes over time aren’t especially visible.
You certainly can. It depends what kind of investors you can find. There is often a lag between the time sellers make changes to the business and the collective buyers' reaction to those changes, so if you can line up investors (whether it be equity or fixed income), then you can turn long term good will into short term cash for yourself.
For example, the business in the comment above might be selling veterinarian services, but the new owner's business is actually selling cash flow. The veterinarian services are just a means to an end, so it could be possible to take the built up good will and convert that to cash flow by cutting costs/raising prices in the short term, and then selling the new and improved cash flow.
You might ask, who would buy from this person again when they know the underlying business is being trashed? The answer is usually dumb money, such as defined benefit pension funds where the investor and the beneficiary are far disconnected. As long as it looks like due diligence happened, everyone can kind of get away richer in the short term with no one to stop them.
The hard part is lining up the investors, that requires being in the right networks.
How, exactly, is private equity responsible for our medical system and our massive government budget problems. Please explain to me step by step like I'm stupid.
Not the guy you asked, but PE focuses on short-term profits via high-debt acquisitions, cost-cutting, and price increases. In the context of healthcare, for example, this means higher costs for both out-of-pocket and government payers, fewer staff and lower quality of care, and, in some cases, even closure altogether due to the acquisition debt (which was dumped onto the acquired org itself) pushing the org into bankruptcy (of course only after the PE firm has squeezed all the juice possible out).
Others have pointed out how PE has degraded the medical system. The debt crisis I referred to is the private credit crisis, though no doubt private equity has played a key lobbying role in creating our national debt crisis as well. Regarding private debt, Jeffrey Gundlach sums it up:
"'This is starting to show up to be the problem that I've been referencing… that private credit and private equity, frankly, is being borrowed from private equity. It's sold on a volatility argument, primarily," Gundlach added. "Maybe there's some excess return for your illiquidity that you can get, but it's largely a volatility argument.'
Illiquidity could turn paper losses into real ones, Gundlach cautioned, pointing to the kind of liquidity squeeze that worsened the 2008 financial crisis, when investors were unable to meet capital calls."
>The long and short: In 2010, private equity firm Cerberus Capital Management purchased Caritas Christi Health Care, a struggling eastern Massachusetts hospital system, from the Archdiocese of Boston, converting it from non-profit to for-profit and rebranding it as Steward Health Care. In 2016, after years of continued financial instability, Steward signed a sale-leaseback agreement with Medical Properties Trust (MPT), selling the land and buildings occupied by its hospitals to the real estate investment trust then leasing them back. Steward made $1.25 billion from the agreement—enough to steady its financial footing, pay off Cerberus, and fund a growth spree. The next year, the company purchased 26 more hospitals across the country. But with the agreement came what many viewed as inflated rents.
And here’s a ChatGPT summary of it for the TLDR crowd:
Private equity ownership of hospitals and medical practices is linked to worse patient outcomes, higher prices, and weakened physician autonomy. The paper argues that PE’s standard playbook — heavy debt loading, cost-cutting, consolidation, and short-term profit extraction — is fundamentally misaligned with long-term medical care. Case studies like Hahnemann University Hospital show how sale-leasebacks and aggressive financial engineering can push essential hospitals into collapse. Consolidation of physician groups reduces competition and raises prices for patients and employers, while staff cuts and reduced investment correlate with lower care quality. The author calls for stronger antitrust scrutiny, transparency of ownership, and limits on practices such as asset-stripping to prevent further harm in the healthcare system.
Part of the reason PE succeeds is their choice of things that have a large or lengthy startup cost or other supply restrictions. Most towns will support only 1 hockey arena. Or lately, with veterinarians. New supply is complex and doesn't appear overnight. If PE is to be controlled (so they don't ruin everything), we need to lessen the barriers to create more supply, like in housing. Also, perhaps it would be good to make them actually pay some taxes, if only to mitigate a fraction of the problems they cause. PE is sort of like cigarettes. They exist, and do damage to everyone.
Considering that these people are the class that use youth sports credentials to sneak their mediocre kids into top schools, the situation is bound to get interesting. Tension at the fundraiser ever since Bob priced Janice out of her son's cheap in to UPenn. She's going to have to actually make a donation now.
This article is about deterring everyone from being on their phones the whole time during the event
Most of the people here would be for varying forms of these deterrents in a VC model or some other potentially non-monetized user experience, if it was independent of the owner of the game
Anywhere there is money, making an everyday man some money, these pests creep in. I generally dislike what has become of recreational sports and how the parents are either forced to spend for things that really don't matter, when learning to play. But learning Private Equity is eyeing this give me creeps. There must be some guy who observed how families are spending and decided it would be the next destination for PE.
They have only discovered what lots of small operators in youth sports already knew. Parents will pay stupid money to have their kids participate.
My kids played some travel sports, the tournament organizers were all in it for profit, they also had deals with local hotels and parents were required to stay at the "tournament approved" hotels. They were inevitably rather premium hotels such as Marriott brands and the room rates were high. The tournament organizer got a kickback on every room sold.
Hockey is particularly expensive because the costs to operate a hockey rink are high. Costs to run and maintain chillers are high, especially if you are open in the summertime, and you need trained staff who can drive a Zamboni and otherwise maintain the surface, and you can't just switch that off if nobody's using it. Usually a community-owned ice rink runs at quite a loss to the municipality. A privately-owned rink will have to charge hundreds of dollars an hour for ice time and they often are barely profitable. There's no way to scale beyond about 12-16 hours a day where anyone wants to use the ice, and often 5pm-midnight is the only ice you can sell.
Then there are the "academies" for the parents who think their kid is the next NHL or NBA superstar. They are private schools, operated at or near the sports facility, where kids go to school as well as play/practice their sport. The tuition rates are what you might expect: exclusive, to say the least.
If you think hockey is expensive, you are lucky to have sons, otherwise you'd experience the wrath of ice skating.
Not only it is individual sport unlike hockey, it is also elitist especially because it is completely shut off youtube because... not cp, no. Music!
Ice skating varies. The skates for someone into it range from $500-$1500. Those typically last several years unless you're skating like 4 hours a day and doing tons of jumps. It costs $20 to sharpen skates and that needs to happen every few weeks for competitive skaters I think. I like mine slightly dull and usually go a few months at a time. Lessons are like $200+ per month for group or $40+/hour for private. Travel + recitals + outfits + music, would be another thing too, but we don't do the competitive stuff. As a result, I pay a lot more for hockey for my kid. I could see figure skating being a little more expensive overall if we were competitive and did more private lessons. They're both super expensive in general though.
When my kids played hockey the team bought a skate sharpener. Saved a lot of money over the years not paying for sharpening at the rinks (and often the rinks would do a poor job at it, depending on whether the person knew what they were doing).
Youth sports isn't like driving for Uber on the side. It's a giant money fire for the consumers that partake. I'm surprised it took PE this long to say "hey, there's a bunch of money on fire over here let's go get some"
The problem is mostly how unregulated gambling is in 2025. If you couldn't bet on everything I think sport would be much less infested by money.
One more "great" use case that cryptocurrencies enable
Youth sports have been moving in this direction since long before sports gambling was a meaningful economic force in the US at least. I attended both a high school and a college that started football programs while I was a student because the leadership thought it was necessary to maintain enrollment.
We were discussing cheerleading at a break in one of the office meetings this morning. Varsity Brands, owned by Bain Capital, controls the "sport" of cheerleading in the US. If you want to compete, you must purchase current year's uniforms, pay to enter contests run by VB, stay at hotels that VB decides. A teenager involved in competition cheerleading can easily spend $5k-25k/year. This "sport" injures more teens each year than football does - and that's a high-contact sport with significant protective gear.
>I traced Varsity’s market power to three basic maneuvers. The first was buying up most of the cheerleading competitions in the country, so that entering a competition meant dealing with Varsity. The second was secretly creating and running the nonprofits that govern the sport, such as the U.S. All Star Federation, which gave Varsity the power to write rules for and organize competitions, scheduling, camps, and ancillary services like insurance. And the third was cutting deals with gyms to block rivals. Gyms are where teams of cheerleaders train, and gym coaches tend to have control over what uniforms athletes must buy. The company gave gyms who bought their uniforms from Varsity preferential treatment and special rebates.
>One key result of Varsity’s scheme is inflated prices to the end consumer, which is why Bain bought the corporation in the first place. If there was cash to grab, Varsity tried to grab it. For instance, Varsity makes it very hard for parents to watch videos of cheerleading competition except through the firm’s specific expensive streaming service. There was the practice of 'Stay-to-Play,’ where Varsity would force athletes to stay in a specific hotel if they wanted to enter a competition, with Varsity likely getting rebates from that hotel in the process. The net result is that today it can cost up to $10-20k a year to be an All-Star cheerleader.
https://www.thebignewsletter.com/p/antitrust-and-the-fall-of...
>I missed out on two anti-competitive practices in the industry. The first is called “Stay to Play.” For many cheerleading competitions, though not all, out-of-town contestants are required to stay at a specific area hotel or set of hotels, or they cannot enter the contest. This is yet another way to raise prices on cheerleaders, and parents hate it. The second is that Varsity tends to be very aggressive about takedown notices for cheer contest video. If you film your kid at an event and put it up on Facebook or YouTube, Varsity is likely to ask you to take it down because it’s competitive with their VarsityTV streaming app. As one parent told me, it’s basically Varsity preventing you from sharing your memories publicly with your family or friends.
https://www.thebignewsletter.com/p/what-a-cheerleading-monop...
The way the term private equity is used is meaningless. It’s just business, and the same thing happens anytime a business is sold, because the new owners have paid a 5x or more multiple, and the reason they would is if they think they can cut costs and increase prices.
One should expect lower quality and higher prices anytime a business is sold.
>Really, one should expect lower quality and higher prices anytime a business is sold.
They really shouldn’t. And the fact this is treated as common knowledge kind of speaks to everything that’s currently broken in our country.
You're using the same words to talk about different things.
You're right, in the world we would like to live in, this wouldn't be a thing. People shouldn't expect that a business sale means a quality drop. That would be a good reality.
However, next to that good reality is the one we live in. Where people should expect quality to drop on a business sale, because that's the structure of the world we live in. Wishing the world were different isn't sufficient to make it so.
But it both hasn’t always been the case and still isn’t in large swaths of the country and the world. The 5x + enshittification phenomenon is both recent and a result of PE and “activist investors”.
“We” collectively should demand better. You act as if government is some omnipresent being that makes its own decisions. If citizens start demanding the government act in their best interests by enforcing things like anti-trust laws, it will.
What’s the argument? Sounds like you’re sour on it
The assumption that "the new owners have paid a 5x or more multiple, and the reason they would is if they think they can cut costs and increase prices", is not universal and in many cases quite new. There are many new owners and buyers for which this is not the case. Your local bar, restaurant, hobby shop, gym, bookstore, daycare and others often transfer without the new owner looking to pay a 5x premium and maximize profits. It's only recently that doctors, dentist, veterinarian offices and other high margin social businesses are getting converted to PE.
It's the enshitification of all the existing third places and extraction of social value for profit, because people will tolerate it due to lack of choice and social need.
> It's only recently that doctors, dentist, veterinarian offices and other high margin social businesses are getting converted to PE
And this is the only logical consequence of unregulated capitalism.
Line must go up, always. No matter the damage it causes. Price will always go up, and costs are always cut down.
It sucks because it is supposed to, as long as profits increase.
Well a lot of times these “businesses” were sold to existing employees or family members who were going to run it themselves and it usually wasn’t for a huge multiple.
In many cases they weren’t sold at all just passed down to heirs. The differentiator is that PE has figured out that they can offer enough to bypass the traditional methods of business continuation.
I would frame it differently. Due to advances in communication and automation with the use of software, business owners can market the business to a far larger group of buyers, and business buyers can buy from a much larger pool of businesses.
Everybody likes seeing those 10%+ annual returns in their 401K (or their local government's taxpayer funded defined benefit pension plan), but no one likes how the sausage is made.
Most of the businesses people are complaining about are inherently local. Doctors, dentists, sports teams, plumbers, electricians.
When PE buys them in the majority of cases they continue to market them like local business and in most cases they go out of their way to lake them look like local businesses.
What you’re talking about happened decades ago when Walmart, McDonalds etc… ran a huge chunk of the mom and pops out of business. This is the next round where they go after businesses that don’t benefit as much from nation wide advertising and branding.
People don’t tend to pick their dentist based on nationwide advertising/brand recognition.
But it's not just that a business was sold; it's that it (usually) was sold in such a way (leveraged buy-out) as to weaken the business and make it more desperate from jump. Doctor's practices et al. used to change hands all the time without much trouble; it's only now that PE is allowed to buy them with massive amounts of debt that they're allowed to use aggressive tactics to pay off (and pay themselves) in just a few years that we've started to have these troubles.
When you buy a house, the mortgage is associated with the buyer, not the house, and you can't just dismantle the house and sell it for parts to cover payments. Could you imagine if we could, though? Pretty soon, we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale). Then, the house declares bankruptcy and the bank is just out all that money. It's preposterous, they'd never let that happen. So, why with businesses?
>When you buy a house, the mortgage is associated with the buyer, not the house
In the US, this depends which state you are in:
https://www.investopedia.com/ask/answers/08/nonrecourse-loan...
The non recourse states are Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah, Washington.
>and you can't just dismantle the house and sell it for parts to cover payments
You can do this in every state, at least with a conventional mortgage. If you default, they can pursue your other assets, except in non recourse states.
>we'd have a lot of on-paper debt associated with empty lots that mortgage holders could simply walk away from (perhaps after a nominal sale)
I don't know what "after a nominal sale" means, because if you sell a property with a lien on it, then the lien holder gets paid first. And underwriting would not let people who have a history of dismantling a house and defaulting borrow money over and over, and people need a place to live, so I'm not sure why anyone would take out a mortgage to dismantle a house. The scenario makes no sense, as raw materials are cheap, and labor costs are expensive.
> It's preposterous, they'd never let that happen. So, why with businesses?
Because the lender agreed to those terms. No one forces a lender to lend money without a personal guarantee.
https://www.investopedia.com/terms/p/personal-guarantee.asp
> > and you can't just dismantle the house and sell it for parts to cover payments
> You can do this in every state, at least with a conventional mortgage.
Legally, you generally can't, because the terms of the mortgage will prohibit it. Practically, you probably can get away with it, as long as you actually make the payments, unless the dismantling requires recorded paperwork that comes to the lenders attention, because how will they know? But if you fail to make payments, then the lender is likely to care about the condition of the property, and then, in addition to collecting your debt on the mortgage itself, the lender will have a cause of action against you for breach of contract. (And such breaches of duties under the mortgage also will often be within the scope of "recourse carve-outs" in loans in non-recourse states.)
>>and you can't just dismantle the house and sell it for parts to cover payments
>You can do this in every state, at least with a conventional mortgage.
No you can’t. Mortgages require you to keep the property in good repair. Your lender won’t let you start taking the house apart to sell pieces of it because that lowers the overall value of the property.
extending the example, for PE, the mortgage is actually in the name of the house and you can take out additional loans in the name of the house to pay yourself the down payment that you used to purchase the house (while simultaneously stripping everything of value inside of it)
Just the free market at work
edit: Would like to understand from downvoters how this does not meet free market principles?
A "free market" is one in which all the participants of the market have perfect information and act completely rationally. This is, of course, an academic ideal, similar to solving a physics problem that tells you to ignore friction.
What we have here is a "capitalist market", where those with more power (capital) within the market leverage it to exploit the other participants. Private Equity uses their money to extract as much money as possible from a segment of the market, usually destroying it in the process. But for a beautiful moment in time they created a lot of value for shareholders!
> A "free market" is one in which all the participants of the market have perfect information and act completely rationally.
So, a fairy tale.
> Instead, parents are forced to subscribe to these companies’ exclusive recording and streaming service, which can cost many times more than the streaming costs for professional sporting events. Meanwhile, the firms’ exclusive contracts have prohibited alternative video services from being made available.
> In some instances, parents have been threatened that if they choose to defy the rules and record the game, they may end up on a blacklist that punishes their kids’ teams. Those threats were even reportedly made to a sitting US senator.
> Black Bear’s streaming service costs between $25 and $50 a month, depending on the package and additional fees. In addition to its recording rules and associated costs, Black Bear is starting to add a $50 “registration and insurance” fee per player for some leagues. That’s on top of what players already spend on expensive equipment, team registration, and membership to USA Hockey, the sport’s national governing body.
Feeling bad for the folks having a hard time pulling the plug on scams like these and going back to a more sensible and sustainable way of life.
It really doesn't get more sensible and sustainable than kids playing team sports and parents witnessing this part of their lives. The blame here is squarely on PEs like black bear nickel and dimming parents. How do you pull the plug on that? It's so gross.
Sure you're right, if that's their thing, having their kids perform the sport and watching them doing it then this is a good solution. The streaming makes it so they can even stay in the car and watch from there.
Don't sign up for it next year? Boycott and maybe spin up your own league.
A private equity company has purchased every sports league, indoor sports complex, pool, and summer camp in my area. They then drop prices to destroy the local competition and then buy them too. After that they raise prices.
Have they raised prices yet?
Depends on what it is and if there is any competition left. Some things have gone up in price where they have a local monopoly. I think their real play is the underlying land value. They are often able to buy distressed businesses with a lot of land cheaply.
They always do....that's partly how private equity works.
Example, buy out a well-known software product with a lot of customers. Then offshore development to cut costs. Then raise prices to milk customers that are too slow to migrate. Eventually the software dies off.
I feel like this article is trying to make this seem like this is becoming a widespread thing despite the entire thing being about hockey. In my experience hockey was always the sport that the wealthier households participated in due to the costs (equipment, rink time, travel, etc..).
As a parent with two younger kids I haven't run into this at all so I wonder how much of it is more sport dependent where the company controls the infrastructure. Maybe I'm being naive here but I struggle to imagine this is going to make its way very far into other sports where you simply are out in a field.
> I haven't run into this at all so I wonder how much of it is more sport dependent where the company controls the infrastructure
My experience is with San Jose where I'd be really surprised to see this happen. There's a massive six-sheet facility owned by the city and managed by the parent company of the Sharks, so being good for the community and good for hockey might be enough without them having to resort to these tactics.
Other pro hockey teams are not as magnanimous:
‘They control everything’: How the Dallas Stars monopolized Texas youth hockey: https://www.usatoday.com/story/news/investigations/2025/08/0...
Yeah, while I know there's parents who get a little kooky about "MY KID IS GONNA BE THE NEXT ____", anything that gets too expensive or restrictive around what amounts to basically a ball and some grass ain't gonna fly with normal folks. We'll just go to the park.
https://news.ycombinator.com/item?id=46006518
Friend works for a vet clinic, got bought by PE 2 years ago.
Routine layoffs, increased costs, and worse quality of service have crept in over the past 6 months.
Average turnover went from 4 years to 1 year, hes one of the last few people who are there from when they were purchased.
If this is true, why don't they go out of business? I just don't buy the argument that PE takes over businesses and makes them strictly worse. You don't make money doing that.
They will go out of business, in the long-term. What PE does is hot potato: they "trim the fat" off an existing business to goose up margins in the short-term, unload it to someone else, and that someone else is stuck with a business that's unsustainable long-term because that "fat" was actually resilience.
Sometimes, these buyouts are leveraged, with the company itself taking on the debt the PE firm used to buy it, so the PE's own risk is minimal.
That's the problem though. PE firms are stuck with billions and billions of dollars in businesses they can't cash out of because they have no other buyers than other PE firms.
That's why they are pushing the Trump admin to allow 401k funds to take over the toxic PE assets.
https://www.whitehouse.gov/presidential-actions/2025/08/demo...
They bought 3 other vet clinics, 1 has already been closed.
There's now only 2 emergency vet clinics within 30 miles of each other, there are no other options unless you want to drive nearly an hour away.
There are also a lot of PE strategies. Buying a class of small business and squeezing out value is one, but it's completely different from buying failing businesses and restructuring them, hoping for a turnaround.
Increased costs here, I assume, means to the customer, not to the business. PE buying up medical adjacent practices (vets, eye doctors, dentists) has been growing model over the last decade. They make money just fine because there's no alternatives, and manage to make both their employees and clients more miserable in the process.
Yes, there are some PE takeovers that are legitmately trying to improve things and generate more profit. You don't hear about those because it's not controversial. You only hear about the "slash costs and cash out" types of takeovers.
> I just don't buy the argument that PE takes over businesses and makes them strictly worse. You don't make money doing that.
The effects in health care were studied.[1]
Less competition supports higher prices. People can be convinced to purchase unnecessary services. People are slow to leave trusted doctors. Non compete agreements limit new competition. The time to train new veterinarians limits new competition. Short term profits fund future acquisitions.
[1] https://pmc.ncbi.nlm.nih.gov/articles/PMC10354830/
In my town it works like this: Vets get taken over by PE, raise prices over time. People move to the old style vets. These are overwhelmed and can’t take more patients, so people have no choice but going to the PE vets.
How many vet clinics do you know about? How often do you take your pet to the vet? Are there any “first visitors” events you need to do?
If someone is going to the vet once a year for blood work and a rabies vaccine; and there’s only like 3 in the whole city, you’re probably not going to rotate between them. What if the next one is even worse?
I have left a single vet over “bad behavior” and most of the other times it’s been over moving and things getting too far away.
The reality is most of their “getting worse” and “increased prices”, etc, is missed because most people come in once a year, so changes over time aren’t especially visible.
You certainly can. It depends what kind of investors you can find. There is often a lag between the time sellers make changes to the business and the collective buyers' reaction to those changes, so if you can line up investors (whether it be equity or fixed income), then you can turn long term good will into short term cash for yourself.
For example, the business in the comment above might be selling veterinarian services, but the new owner's business is actually selling cash flow. The veterinarian services are just a means to an end, so it could be possible to take the built up good will and convert that to cash flow by cutting costs/raising prices in the short term, and then selling the new and improved cash flow.
You might ask, who would buy from this person again when they know the underlying business is being trashed? The answer is usually dumb money, such as defined benefit pension funds where the investor and the beneficiary are far disconnected. As long as it looks like due diligence happened, everyone can kind of get away richer in the short term with no one to stop them.
The hard part is lining up the investors, that requires being in the right networks.
Add "Private Equity's New Venture: ..." to the list of sentences that scare me.
"Private Equity's next victim..." From the people who brought you America's medical system, and looming debt crisis.
How, exactly, is private equity responsible for our medical system and our massive government budget problems. Please explain to me step by step like I'm stupid.
Not the guy you asked, but PE focuses on short-term profits via high-debt acquisitions, cost-cutting, and price increases. In the context of healthcare, for example, this means higher costs for both out-of-pocket and government payers, fewer staff and lower quality of care, and, in some cases, even closure altogether due to the acquisition debt (which was dumped onto the acquired org itself) pushing the org into bankruptcy (of course only after the PE firm has squeezed all the juice possible out).
Others have pointed out how PE has degraded the medical system. The debt crisis I referred to is the private credit crisis, though no doubt private equity has played a key lobbying role in creating our national debt crisis as well. Regarding private debt, Jeffrey Gundlach sums it up:
"'This is starting to show up to be the problem that I've been referencing… that private credit and private equity, frankly, is being borrowed from private equity. It's sold on a volatility argument, primarily," Gundlach added. "Maybe there's some excess return for your illiquidity that you can get, but it's largely a volatility argument.'
Illiquidity could turn paper losses into real ones, Gundlach cautioned, pointing to the kind of liquidity squeeze that worsened the 2008 financial crisis, when investors were unable to meet capital calls."
https://www.foxbusiness.com/markets/jeffrey-gundlach-says-cr...
https://hsph.harvard.edu/news/private-equitys-appetite-for-h...
>The long and short: In 2010, private equity firm Cerberus Capital Management purchased Caritas Christi Health Care, a struggling eastern Massachusetts hospital system, from the Archdiocese of Boston, converting it from non-profit to for-profit and rebranding it as Steward Health Care. In 2016, after years of continued financial instability, Steward signed a sale-leaseback agreement with Medical Properties Trust (MPT), selling the land and buildings occupied by its hospitals to the real estate investment trust then leasing them back. Steward made $1.25 billion from the agreement—enough to steady its financial footing, pay off Cerberus, and fund a growth spree. The next year, the company purchased 26 more hospitals across the country. But with the agreement came what many viewed as inflated rents.
Then read below "Consequences of cost-cutting".
Here’s a neat article written for the Missouri Medicine Journal that covers it: https://pmc.ncbi.nlm.nih.gov/articles/PMC11482842/
And here’s a ChatGPT summary of it for the TLDR crowd:
Private equity ownership of hospitals and medical practices is linked to worse patient outcomes, higher prices, and weakened physician autonomy. The paper argues that PE’s standard playbook — heavy debt loading, cost-cutting, consolidation, and short-term profit extraction — is fundamentally misaligned with long-term medical care. Case studies like Hahnemann University Hospital show how sale-leasebacks and aggressive financial engineering can push essential hospitals into collapse. Consolidation of physician groups reduces competition and raises prices for patients and employers, while staff cuts and reduced investment correlate with lower care quality. The author calls for stronger antitrust scrutiny, transparency of ownership, and limits on practices such as asset-stripping to prevent further harm in the healthcare system.
Private equity being able to buy up everything is a stark example of the level of wealth inequality in our society.
Part of the reason PE succeeds is their choice of things that have a large or lengthy startup cost or other supply restrictions. Most towns will support only 1 hockey arena. Or lately, with veterinarians. New supply is complex and doesn't appear overnight. If PE is to be controlled (so they don't ruin everything), we need to lessen the barriers to create more supply, like in housing. Also, perhaps it would be good to make them actually pay some taxes, if only to mitigate a fraction of the problems they cause. PE is sort of like cigarettes. They exist, and do damage to everyone.
In theory, the parents could just vote their feet.
In practice, humans are frogs, and eager to prove their fitness as the pot of water grows hotter and hotter.
Has there been a FPP about cheerleading? There's billions of dollars in a cornered youth sports market.
Considering that these people are the class that use youth sports credentials to sneak their mediocre kids into top schools, the situation is bound to get interesting. Tension at the fundraiser ever since Bob priced Janice out of her son's cheap in to UPenn. She's going to have to actually make a donation now.
This article is about deterring everyone from being on their phones the whole time during the event
Most of the people here would be for varying forms of these deterrents in a VC model or some other potentially non-monetized user experience, if it was independent of the owner of the game