alt Hacker News> the should-be-illegal process of putting debt on the acquired company's balance sheet.
I agree it's weird but ultimately the check against dumb lending is natural consequences for the lender, right? If you ask me for billions in loans for your zero revenue company and I give it to you, whose problem is that but my own?
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The lenders get their money back via management fees. Pretty much only the consumers and the employees get screwed over
If it was just you personally, sure. But a bank failure affects lots more people than just the bank.
The people who work at the bought-out company who will then be fired due to PE now gutting workforces to pay off the debt. Laborers are getting the shaft
It's the problem of all the employees (and potentially customers) of the company being plundered.
They have no say in the matter, and given that the lender can probably absorb the loss without, you know, missing mortgage payments or losing health insurance, I would absolutely argue it's not just their problem.
You can certainly hold the opinion that "it's just business" but it feels like an unnecessary part of business that very often has real disruptive and detrimental effects on average working people, for the sole benefit of rich people getting richer.
And yes I get that it's not just a PE problem, but PE is a big one of these kinds of problems.
The problem is that leveraged buyouts allow me to effectively inflict that debt on other companies, making a buyout offer the existing shareholders won't be able to resist and then reorienting its operations around servicing the debt I took out. In fact, lenders arguably favor this, letting me use the company I'm acquiring as collateral to acquire more debt at better terms than would otherwise be available.
In the modern world if you are a bank you will be bailed out eventually, thus your problem becoming everyone's problem.