Private Equity Firm Takeover
In the episode, assistant professor Al Sheen relates the idea of a private equity firm to house flippers, or people who take run down houses and renovate them to sell.
Like a house flipper, private equity firms take over an existing business and try to make it better. It is in the best interest of the firm to improve the company by making the business the best that they can, so they can maximize profits. Although this may seem greedy at times, it does not make sense for them to buy a company and then destroy it.
Sheen’s research shows that when private equity firms take over restaurants, the health codes go up.
Sheen said, “Private equity comes in and restaurants get cleaner. They have fewer violations and rats in the kitchen—fewer health code mistakes. People are putting their hair in hairnets.”
While Sheen’s work doesn’t say private equity take over is good everywhere, all the time, in every way, his work challenges the often-cited notion that private equity simply makes all things worse.
Read the Research
