Private Equity often gets a bad rap, rightly so.  But there are several key reasons they play an enormous part in the value/investment/business ecosystem.  First, their playbook is to bet not just on undervalued assets - but under optimized assets.  Yes returns are juiced by lower valuation - but these lower middle market assets are typically not well run or profitable as they could be.  Secondly, most of these businesses have no clear way to extract value when they want to move on, retire, or access growth capital.  The typical business owner has 90% of their wealth tied up in the business. There is an efficient market to extract that value (in full disclosure, I am a part of this ecosystem, though not in PE). Lastly, capital is efficient - and financial engineering provides an alternative investment for many pension and 401Ks (teachers/firefighters/police/and many blue collar professions).  There are many horror stories - and many successes.  I will say, having been both in a PE owned operation, as well as in the ecosystem dealing with PE every day, there can be a widely varying level of hubris in firms.  Diligence on buyers and investors is always important.

Private Equity often gets a bad rap, rightly so.  But there are several key reasons they play an enormous part in the value/investment/business ecosystem.  First, their playbook is to bet not just on undervalued assets - but under optimized assets.  Yes returns are juiced by lower valuation - but these lower middle market assets are typically not well run or profitable as they could be.  Secondly, most of these businesses have no clear way to extract value when they want to move on, retire, or access growth capital.  The typical business owner has 90% of their wealth tied up in the business. There is an efficient market to extract that value (in full disclosure, I am a part of this ecosystem, though not in PE). Lastly, capital is efficient - and financial engineering provides an alternative investment for many pension and 401Ks (teachers/firefighters/police/and many blue collar professions).  There are many horror stories - and many successes.  I will say, having been both in a PE owned operation, as well as in the ecosystem dealing with PE every day, there can be a widely varying level of hubris in firms.  Diligence on buyers and investors is always important.

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