These Are the Plunderers
Case studies of extraction from acquired companies.
Summary
Gretchen Morgenson, a financial journalist, and Joshua Rosner, an analyst, wrote this critique of the private equity industry and its effects on the companies and workers it acquires.
Their argument is that the industry's returns come substantially from transfers rather than from operational improvement: from tax advantages including the deductibility of interest and the treatment of carried interest, from fees charged to portfolio companies and to limited partners, from dividend recapitalisations that extract cash by adding debt, from sale-leaseback transactions that convert owned property into rent obligations, and from reductions in employment and compensation. They document specific cases across retail, health care including nursing homes and emergency staffing, and other sectors, and they trace the outcomes for employees and for the businesses.
They also cover the industry's returns to investors, arguing that when measured properly against public market equivalents and adjusted for leverage, the outperformance that justifies the fees is largely absent. And they cover the political and lobbying activity that has preserved the tax treatment. The book is advocacy journalism and selects its cases, and the industry's defenders argue that the failures are unrepresentative and that the returns evidence is contested. Ludovic Phalippou's academic work supports parts of the returns argument. Readers should treat it as one side of a live dispute with well-documented individual cases.
Key takeaways 7
- The authors argue that private equity returns come substantially from tax treatment, fees and financial transfers rather than from operational improvement.
- Dividend recapitalisations extract cash from portfolio companies by adding debt, which transfers value before any exit occurs.
- Sale-leaseback transactions convert owned property into rent obligations, which improves the sponsor's return and weakens the business.
- Fees charged to portfolio companies are additional to the fees charged to limited partners on the same assets.
- Morgenson and Rosner argue that measured against public market equivalents and adjusted for leverage, outperformance is largely absent.
- Health care acquisitions including nursing homes and emergency staffing produced documented deterioration in service.
- The book is advocacy with selected cases, and the industry disputes both the representativeness and the returns evidence.
Who should read it
Allocators and policy readers who want the critical case against private equity's returns and social effects, read against the industry's response.
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