Tom1200 said:The one aspect that I have no idea how it's legal is the debt being assigned to the company and not the PE. The PE took initiated the loan not the company they bought. To me this is where the majority of the problems come from.
Agreed. One additional thing I don't understand is the PEs presumably get loans from somewhere to fund these operations. Loans that I assume would go unpaid when the bought-out company goes under. Who's willing to loan them the money?
Assembled groups of wealthy individuals that join the "play".
In reply to GCrites80s :
If I built a company like Jegs up and was ready to retire, assuming my children didn't want the company I would look for whoever gave me the biggest check.
That's all this is.
In reply to frenchyd :
I've worked with 2nd generation owners of manufacturer rep firms and I've asked if their children are taking over at some point. Most blow air or laugh and say they don't want this crap seeing how hard I work and the crazy hours. (Of course these are small and PE's aren't interested).
It's a challenge to move companies to the next owner sometimes.
In reply to Datsun310Guy :
My dad spent a few years selling private businesses. These were all successful or had more assets then the asking price.
Only 1 out of 10 sold. He was their most successful salesman.
Later he worked with a development company that did research on what people wanted to buy before starting them. They all sold because part of the deal was they arranged financing.
In reply to Tom1200 :
PE borrows money by way of junk bonds etc. buys target lends money to target at higher rate. Part two is make a really convoluted corporate structure that requires huge charts and copisious quantities of ASA to understand.
In reply to Rons :
I get how it works, I just don't get why it should be legal.........read I don't think it should be.
If loss rules weren't so loose when transferring them between business units you'd see less of this private equity activity.
Every time I see this, I see a successful company brought into the fold, saddled with a bunch of debt to clear the ledger, and allowed to fail. It's the same way toys r us went down.
Tom1200 said:In reply to Rons :
I get how it works, I just don't get why it should be legal.........read I don't think it should be.
And I agree, but any discussion will soon descend into political no go zone. It’s all about greed and avarice, and not doing real work just trading paper and numbers in computers.
"Oh by the way which one's Pink?"
frenchyd said:In reply to GCrites80s :
If I built a company like Jegs up and was ready to retire, assuming my children didn't want the company I would look for whoever gave me the biggest check.
That's all this is.
I would try to find a way to do an employee buyout and leave them an employee-owned company. The employees helped build the business.
This is a lot of the same crap that sunk Toys R Us
einy (Forum Supporter) said:This is a lot of the same crap that sunk Toys R Us
And many other companies.
PE sucked the life out of Bombardier Recreational Products and killed Evinrude. I can’t say I’m aware of a business that one of these firms has taken over that’s been improved by the process.
In reply to 11GTCS :
The PE might have finished them off but Johnson and Evinrude did a pretty good job of killing themselves when they failed to make the transition to 4 strokes.
Rons said:Tom1200 said:In reply to Rons :
I get how it works, I just don't get why it should be legal.........read I don't think it should be.
And I agree, but any discussion will soon descend into political no go zone. It’s all about greed and avarice, and not doing real work just trading paper and numbers in computers.
Kinda like greed has made aftermarket parts buying a real crapshoot too? I wonder if that's ever been mentioned.
And yah, don't question group politics; You might get told to die in a fire.
In reply to AnthonyGS (Forum Supporter) :
The aftermarket crap shoot has been aided by the distribution channels and network. TURN14 and motovicity (who they acquired). Turn offers better customer support for their wholesale customers, however they still bleed parts producers dry and will carry a competing part regardless of origin and if it's based upon your design and violates patents you hold.
Someone once asked me, what's the difference between the GRM community and regular car guys and said for starters, you're not going to find the aftermarket parts we order on a mega distributor website linecard. (There are some exceptions when sourcing bits for fueling and fabricating exhaust setups).
Yes we are, at minimum, Hipster Lite in our parts buying habits.
So long jegs we will miss you.
einy (Forum Supporter) said:This is a lot of the same crap that sunk Toys R Us
Toys R Us didn't need any help running that business into the ground.
The parts manufacturer I worked for was owned at least 10 of the 20 years I was there by PE firms. It was initially a family owned business, but was sold at least 5 times to a few major manufacturers and various PE firms. The company had it's best years and biggest growth under the PE firms and it's worst under a major US manufacturer that everybody here would recognize.
I have bought a lot of stuff from Jegs, however I don't begrudge any family from cashing out. Most good companies are built on long hours, dedication because they loved the business and along the way hard times and reduced salaries and some sleepless nights. In many ways cashing out may even be doing another generation a favor.
The PE's have a pretty simple formula even though it all starts out with "Nothing is going to change".
1. Reduce Payroll: This usually starts at the top with highest salaries with the result going directly to the bottom line. Unfortunately the highest salaries are usually the most experienced, dedicated innovators that made the company what it is.
2. Reduce Inventory: No use having all that money sitting on a shelf in the warehouse. Unfortunately the ability to ship on demand may have been one of the best attributes of the company. Screw the customers.
3. Shake Down Suppliers: Make demands to reduce cost to the PE that are unrealistic. The demands usually include holding dedicated inventory (see #2) the PE can ship immediately or ship direct to customers in PE logo boxes. Suppliers finally get to point it's no longer profitable. PE's then have part reversed engineered in companies in countries I can't pronounce or spell. Customers get low quality junk at the same price they were paying.
The downward spiral begins then PE's take the money and run leaving once good companies in shambles. I once worked for a company taken over and then owned my own Sales Rep business that sold products to companies that were taken over. That said it's hard for small companies and family owned businesses to compete in todays world. My opinion your mileage may vary.
Captdownshift (Forum Supporter) said:In reply to AnthonyGS (Forum Supporter)
Someone once asked me, what's the difference between the GRM community and regular car guys and said for starters, you're not going to find the aftermarket parts we order on a mega distributor website linecard. (There are some exceptions when sourcing bits for fueling and fabricating exhaust setups).
I've bought more car parts from Home Depot than I have from Summit or JEGS. Hell, the Ford coil on my Duster is mounted in a 4" square metal junction box.
I worked for a company that was purchased by a P.E. company. A month later the new VP of sales called me into a meeting and told me my commission rate was being cut in half. Just me, not the other 11 sales guys.
I asked why and he said because I was making twice as much money as the next highest salesman. I pointed out to him that I was outselling the next highest salesman by two-to-one so I didn't see an issue. His response was it wasn't fair I made so much more. To help, I offered to sell less which he didn't think was funny.
I turned in my two weeks notice the next morning. He must have immediately reported it to HQ back east because the big boss called me moments later to say he was coming out to see me the next day. I asked if he was going to put my commissions back and he said no, but we should talk.
I told him not to bother.
Yesterday was the 8th anniversary of my retirement.
In reply to Toyman! :
The G2 2-strokes used 75% as much fuel as their 4-stroke competitors and weighed 75% as much.
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