Private equity is a rebranded leveraged buyout that saddles targets with debt

Evidence

A type of investment strategy that buys, restructures, and sells private companies for profit. This extractive financial technique was originally known as a leveraged buyout in the 1980s and 1990s, but developed such a bad reputation that it was rebranded as the more opaque term private equity. In order to acquire the company, a PE firm, such as Bain Capital or Blackstone, raises the capital from asset managers, institutional investor funds, wealthy investors, and other PE firms. The acquisition is often supplemented by debt, which is raised using the target company as collateral; the target company is then saddled with the debt used to purchase it. This technique is considered leveraged because the PE firm is using borrowed capital, which increases their scale and thus their potential return on investment. In order to profit from their acquisition, the PE firm restructures the company, pays itself dividends and fees, then “exits” the investment by selling the streamlined property or taking it public. Private equity strategies for streamlining include layoffs, reduced wages, increasing debt, offshoring, exploiting bankruptcy law and tax loopholes, selling off assets, and eliminating pensions. — Andrew deWaard, Derivative Media, 492

Categorization

• DEFINE: Core working definition of private equity rollup that the reader must grasp to trace its fingerprints on cultural industries.
• ADDENDUM: Provides the mechanism by which ownership restructuring reaches creative labor: layoffs, wage cuts, pension elimination — the causal bridge from Wall Street to artistic form.