Private Equity Is Playing Musical Chairs With Your Business and You Are the One Left Standing

The Game Has a Name

I call it demonic musical chairs. It is not a complicated concept. Deals get structured so that the insiders get out with their money and someone else gets stuck holding whatever is left. This is not new. I have been talking about this for decades. What is new is how aggressively private equity has become the primary vehicle for this game.

And the frustrating part is that a lot of genuinely good people walked right into it with their eyes open, thinking they were making the smart move.

The Setup

Here is how it works in plain language. You spend years building a real business. Could be a car wash. Could be a childcare center. Could be a small regional company with loyal employees and a solid reputation. The government keeps piling on. Healthcare mandates kick in past a certain employee count. Regulations multiply. The stress of ownership stops feeling worth it.

Then a private equity firm shows up with a number that makes your head spin.

I know people who have been in this exact situation. Smart people. Hardworking people. They took the deal. And I am not here to condemn them for it. The system was designed to make that offer feel like the only rational choice.

But here is what those puffer vest Ivy League types do not put in the pitch deck:

• They load the business with debt the moment the deal closes, often more than the business can reasonably sustain
• They charge management fees, transaction fees, and monitoring fees that drain cash flow from day one
• They cut the people and the culture that actually made the business worth buying in the first place
• They flip it to the next buyer in a few years, pocketing their return and leaving someone else with the mess

The Kendall Roy Problem

I have used this reference before and I will keep using it. The private equity world is full of Kendall Roys. Succession made this painfully clear in fiction, but it plays out in real life constantly. These are people who inherited access, bought credentials, and have never actually built anything. But they can sure talk a good game in a conference room.

The businesses they acquire were built by people who showed up every day, solved real problems, and earned real customer loyalty. The acquirers understand spreadsheets. They do not understand operations, relationships, or the reason a business actually works.

What You Should Know

If you are a business owner being courted by private equity right now, here is my honest advice. Understand the structure of the deal completely before you sign anything. Know what happens to your employees. Know what leverage they plan to put on the business. Know how they are planning to extract their fees.

And if you are a consumer or employee of a business that just got bought by one of these firms, pay attention to what changes in the next six to eighteen months. The signals are usually there early.

The music is always playing. Demonic musical chairs does not stop just because you think you found a seat.