For a PE buyout to be truly successful, the current owners need to be vastly less informed and/or have access to fewer resources than the fund does. It's a function of both sides of the transaction.
When a PE doesn't think they could get a truly good deal, they are incentivized to flip quickly, potentially at the cost of the long term health of the business.
What this seems to imply is that many "middling" deals are the ones that are going to go sour - ones that worked fine before but where the PE could not figure out how to get it to grow faster. In those cases, the rational choice for a profit-maximizing PE is to use whatever tactics at their disposable to exploit it to the last cent and move on to the next project, as opposed to leaving the business alone.
More money has been going into PE, and businesses consolidate more. Good targets are harder to find, and more incompetent PE managers are coming to the market. What I feel this predicts is that the average experience with PE should decline over time.
When a PE doesn't think they could get a truly good deal, they are incentivized to flip quickly, potentially at the cost of the long term health of the business.
What this seems to imply is that many "middling" deals are the ones that are going to go sour - ones that worked fine before but where the PE could not figure out how to get it to grow faster. In those cases, the rational choice for a profit-maximizing PE is to use whatever tactics at their disposable to exploit it to the last cent and move on to the next project, as opposed to leaving the business alone.
More money has been going into PE, and businesses consolidate more. Good targets are harder to find, and more incompetent PE managers are coming to the market. What I feel this predicts is that the average experience with PE should decline over time.