> They like companies with some kind of moat that makes it hard to unseat them.
The biggest moat is capital.
PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.
PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.
> But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
The better question is, why does a medical practice have a moat? What exactly is the PE firm buying? When the senior doctor retires, what stops the junior one(s) from renting their own offices and taking their patients with them?
The answer is presumably something like, non-compete agreements, or vendor lock-in from EMR systems, or some kind of insurance or regulatory bureaucracy. So then we need to identify what it actually is and do away with it so the next generation's juniors don't have to outbid Wall St to acquire it.
These PE-owned companies create market demand by being shitty. Somehow they are able to keep their margins and their market so that their business model makes sense. That's a puzzle, right?
There is no shortage of investment looking for great returns. A market with huge demand not being met adequately is a dream to investors. Even more when you know the competition must continue to fuck their customers because they paid above market rates for the purchase and the business is saddled with debt obligations it must meet (Leveraged buyouts do that).
What could stop new competition from beating them out?
The PE firm creates market demand for the goods/services that the purchased company used to provide at a better value to the customer.
So yes, the 'creation' is a demand which is sort of a destruction of the value that the customers previously had. In a fair market, this demand can be met. But a PE buys strategically such that this demand is not possible to satisfy because the company they purchased is entrenched in some way (regulation/monopoly).
It is capital? It’s going to the same PEs and private markets.
Who the hell is going to take the risk on and for what? Take x billon dollars to build from scratch or near guaranteed profit to buy 50 practices and shittify them for near guaranteed profit.
Show me an example of trend reversal please of this happening in any sector. These are essentials and basics and they are captured, this isn’t a froyo start up that has a 3 year cycle.
The biggest moat is capital.
PE is buying up things like medical practices, law firms, vets, etc, where typically there would be an upwards path for one generation to hire new blood to cover their markets and then sell partnership stakes to them when they want to retire. But why should an owner of a practice sell to their junior staff when PE is there offering 2, 3, 5x as much?
Consolidation of these kinds of businesses at the hands of PE is endemic of systemic lack of capital acquisition of a generation of people, held down by debt and concerns about practical shit like healthcare.
PE is just a symptom of larger macro economic trends, namely the depletion of the next generation from free cash they could use to become business owners.