[budududuroiu]

Im gonna speculate they were referring to the part of private equity where you buy businesses to load them up with debt to buy more businesses ad nauseum

[terminalshort]

You can't load someone else with debt. That's obviously illegal. When you buy a company it isn't "them" anymore. And the new owners have exactly the same rights to borrow money as the old ones.

[munk-a]

That's true when the debt is taken it is taken by the company (at the direction of the acquiring firm)... and maybe the bigger issue is that banks should be a whole lot more judicious in extending that debt. But some firms have found a heck of a loophole in buying a company, running an extremely high debt line, paying the acquiring firm (themselves) handsomely and then innocently whistling when the business collapses and a bunch of real economic value is erased.

Doing that to a company isn't an activity that should be rewarded since you're destroying, rather than creating, economic value. It is absolutely an exploit or flaw in our system and no more than one person should have been able to get away with it.

[munk-a]

I have no idea why leveraged buyouts are legal. What a bizarre mechanism for acquisition that feels so easy to just shut down with a relatively simple rule.

Restricting a previously purchased business from taking out debt feels harder to regulate, but someone smart could probably figure out a few good rules to stop the majority of abuses.

[zvqcMMV6Zcr]

Do you think non-recourse mortgage (the dominant type in USA) also should be banned? VC finds a bank that borrows them money to buy X, with X as collateral. It is exactly the same. The mass selloff of assets and absurd cost-cutting is caused by new owners not giving a damn about the future of acquired company, its workers nor clients - it has nothing to do with leveraged buyout itself.

[triceratops]

That's called a leveraged buyout and isn't restricted to private equity.