There’s a simple math to business. In a small shop, it’s just you, the customer, and the product. You provide a service, they get a result, and you keep a profit. It’s honest. When a business gets bigger, it adds employees. The customer gets better service, the owner gets a larger profit, and the workers get a paycheck. That’s a fair trade for everyone.
But once you add shareholders, the math changes. Now the owner has to pay a “royalty” to people who didn’t do the work but want a piece of the pie. That payback usually comes out of the customer’s wallet and the employee’s paycheck.
Then Private Equity Shows Up#
When private equity enters the mix, the goal changes again. They aren’t looking to build something; they’re looking to strip it down and sell the pieces for a quick profit. At that point, the customer and the employee are just squeezed until the company is nothing more than a shell of what it used to be.
The typical playbook is a leveraged buyout. A private equity firm buys a company mostly with borrowed money, and then that debt gets put on the company it just bought. The business now has to make big loan payments that it never had before. To cover them, the new owners cut staff, cut quality, sell off real estate and lease it back, and raise prices. The firm collects management fees along the way. If the company survives, it gets sold a few years later. If it doesn’t, the debt goes down with it, and the workers are the ones who lose their jobs.
You’ve probably seen it without knowing it. Toys “R” Us went bankrupt in 2017 while carrying billions in debt from its 2005 leveraged buyout. Private equity has also been buying up veterinary clinics, nursing homes, physician practices, and even local plumbing and HVAC companies. The sign out front stays the same, so most people don’t notice until the service gets worse and the bill gets bigger.
Monopolies: One Price and No Choice#
Monopolies are great because they give you one price and no choice!
When a handful of companies own most of what we buy, it’s not just about prices going up. It’s about choices disappearing entirely. Three local stores consolidating means one price, one brand, and one stock of inventory. I can’t compare anymore, and I just have to accept whatever they charge. Nationally, it affects even more people.
Consolidation doesn’t help anyone except the business owners and shareholders. One company making four different brands of frozen pizza, fewer and fewer movie studios and streaming services, and everything falling under one megacorp umbrella or another puts us at their mercy. We end up paying more without getting better service or innovation.
It’s like trying to find a needle in a haystack, but the haystack is owned by the same person who made the needle. It’s good for their business but bad for consumers.
What a Regular Person Can Do#
You can’t personally break up a monopoly, but you’re not powerless either:
- Shop local when you can. A family-owned hardware store or diner keeps the money in town and keeps at least one more choice on the map.
- Ask who owns it. When your vet, dentist, or doctor’s office “joins a network,” it’s fair to ask who bought it.
- Pay attention to mergers. The FTC and state attorneys general often take public comments on big mergers, and they do read them.
- Support competition. Even when the big option is a little cheaper today, keeping the small one alive keeps prices honest tomorrow.
Business works best when the math is simple: good product, fair price, fair wage. Every layer added on top of that wants its cut, and it’s never the people at the top who pay for it.
