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Private equity is bad news for almost everyone — except the less than 5 percent of Americans who are invested in it.
America is becoming the United States of Private Equity, with firms like Blackstone leading the charge in a massive takeover of small businesses and local economies.
With 61.7 million Americans employed by 33.2 million small businesses — which account account for 99.9 percent of all US businesses and 44 percent of all US economic activity — small businesses are the backbone of the American economy. But as private equity firms expand their reach, they are significantly undermining this foundation.
The Private Equity Strategy — Straight Out of Organized Crime’s Playbook
The private equity blitzkrieg has been attacking specific industries across America for decades: see their manufactured bankruptcy strategy.
Typically they buy companies, slash operating costs, degrade service quality, and raise prices — all to maximize profits for investors — at the expense of everything else, such as local communities, local economies, and even local environments.
This model has decimated industries like nursing homes, dentistry, housing, and veterinary services. Now, they’re targeting blue-collar trade businesses such as plumbers, HVAC techs, and electricians.
The private equity organized crime strategy is called a “roll-up,” and it’s simple. Mobsters operated in this exact same way before RICO: A private equity firm buys a family-owned business with offers that can’t be refused — say, Plumber A’s company — offering a hefty payout. Then they repeat the process with Plumber B, C, D, and so on, until they control all the plumbing businesses in the area. The result? No competition, rising prices, and service cuts.
And instead of local owners reinvesting in their communities, profits are funneled to distant corporate headquarters.
The Consequences for Local Communities
This strategy comes with real consequences. Without competition, consumers face higher prices and worse service and financially degraded municipalities. Local economies are drained as profits are sent to corporate headquarters.
Private equity does not actually generate wealth, it just transfers it from local communities mostly to itself and sometimes investors.
Private equity firms are notorious for cutting staff, reducing training, and sacrificing service quality to boost profits, which is detrimental to everyone, especially marginalized populations. Meanwhile, money that once circulated within the community is now funneled out, weakening local economies and leaving small towns with fewer opportunities.
The Challenge for Small Business Owners
Most small business owners are tempted when private equity comes with large offers, even if it’s not in the community’s best interest. Selling to local competitors can be complicated due to financing challenges and the risks associated with seller financing. These hurdles often make the private equity option more appealing, even if it undermines the business’s legacy.
What Can Be Done?
To fight back against this takeover, here’s what you can do:
- Support locally owned businesses.
- Advocate for policy change: Local governments can enact regulations to help with small business succession operations and stop private equity firms from owning entire local industries with stricter regulation for when they do enter a local market.
Private equity funding has infiltrated nearly every industry, from health care to agriculture, media to transportation, and beyond. The days of completely untouched sectors are nearly over.
Currently, there are no laws preventing private equity firms from buying up entire small business sectors in a region.
One reason is that most of the population is submerged in GOP propaganda posing as news claiming that the problem is regulation, but that is a fallacy. While antitrust laws exist, they are rarely applied, and private equity firms easily circumvent them.
These firms, like Blackstone, have already reshaped our entire economy, and are now eyeing blue-collar businesses. All the evidence shows that the roll-up strategy undermines local economies, raises prices, and compromises service, but small business owners are just not equipped to resist these enormous offers.
It falls on citizens to force legislators to create and support policies that keep local businesses and communities safe from the very real threat of unregulated private equity. Our future depends on it because everyone in America lives locally.
How Private Funds Could Hurt Americans Under Trump
The author writes, “Mr. Trump’s family, fund-raisers and financial lieutenants are more likely to be fund managers than any prior presidency, including his first term. Vice President-elect JD Vance and Donald Trump Jr. have been or have become venture capitalists. The president-elect has also tapped Scott Bessent, a hedge fund manager, to serve as Treasury secretary. The investment portfolios and civic institutions these managers govern could hold a clue to what they may likely do: concentrate ever more control over our financial system into substantially less regulated, less transparent capital markets dominated by firms and financiers about whom Americans know very little.”
Senate Report: How Private Equity ‘Gutted’ Dozens of US Hospitals
The author writes, “Thanks to modern tricks of financial engineering, investors can prosper even when the underlying business is failing.”
Don’t Blame the Shrimp: How Private Equity Is Bankrupting America
From the Private Equity Stakeholder Project: “In May, Red Lobster announced it filed for Chapter 11 bankruptcy, closed dozens of stores, and would be selling all its assets. CEO Jonathan Tibus, who was brought in as a restructuring advisor, was quick to blame an endless shrimp deal — where patrons could get unlimited shrimp for $20 — as well as other operational decisions for the closure. The story, however, may be more complicated than a reckless all-you-can-eat deal. The cause of the Red Lobster bankruptcy may have more to do with its private equity past than with the bottomless shrimp.”
The Secretive Industry Devouring the US Economy
The author writes, “The publicly traded company is disappearing. In 1996, about 8,000 firms were listed in the U.S. stock market. Since then, the national economy has grown by nearly $20 trillion. The population has increased by 70 million people. And yet, today, the number of American public companies stands at fewer than 4,000. How can that be? One answer is that the private-equity industry is devouring them.”
Private Equity Is Gutting America — and Getting Away With It
The author writes, “‘Private equity’ is a term we’ve all heard but which, if we’re honest, few of us understand. The basic idea is simple: Private equity firms make their money by buying companies, transforming them and selling them — hopefully for a profit. But what sounds simple often leads to disaster.”
Private Equity: In Essence, Plunder?
From CFA Institute: “Statistically, there is an increased risk of failure with private equity ownership. PE portfolio companies are about 10 times as likely to go bankrupt as non-PE-owned companies. Granted, one out of five companies going bankrupt doesn’t portend certain failure, but it is a startling statistic. The rejoinder, of course, is that PE firms gravitate toward companies in distress, a practice that weighs down their success rate. But to understand what private equity is at its worst is a call to action, personally and professionally. We need to monitor the specific and repetitive activities that benefit the operators and no one else.”
Private Equity is Out of Control and Looting America. This Prosecutor Says We Can Fix It.
From the Institute for New Economic Thinking: “In his … book, Plunder: Private Equity’s Plan To Pillage America, Brendan Ballou, a federal prosecutor who served as Special Counsel for Private Equity in the Justice Department’s Antitrust Division, outlines the dangers of a trillion-dollar industry that hardly anyone understands. He explains how Americans can fight their harmful practices.”
