Shouldn't you focus on the firms selling to PE's instead?
The PE's can only hostile take over public companies, the rest have to sell themselves.
I think the growth of PE's is due to the firms' owners realizing they don't want to be in business anymore, having the goal of eventually selling to someone (ala selling to FAANG in the DOT COM space), or the owners can't scale their businesses beyond what they are now.
>Shouldn't you focus on the firms selling to PE's instead?
Kind of but I also don't blame someone when PE firm shows up with briefcase full of life changing money and asks to buy. Few people can resist that temptation, especially as they get older.
And for small businesses, there is a massive wave of boomers retiring. Either they sell or go out of business. For the better ones, PE is buying and rolling them up.
It is illegal, as a fiduciary (owner or director of a business), to not take a financially expedient deal (of course someone would need standing, ie as an investor, to sue). It is often seen as immoral to refuse one which would benefit, eg, friends or family who have invested.
> While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires. A for-profit corporation that operates facilities in other countries may exceed the requirements of local law regarding working conditions and benefits. If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well.
Thank you for the info. I am curious: is there a corollary, by which minority owners could sue majority ones, for lost profit? I suppose the key caveat to my argument earlier is that one must have standing to sue: if owners disagree (board decisions need not be unanimous), is there valid standing to sue.
That’s a pretty big over dramatization. You are assuming the company would not be able to operate and provide value to its investors without said deal.
There is a discussion happening below regarding actual law. I would guess in a court, the argument could be reversed: one cannot assume there would be more profit without the deal, absent evidence.
This only applies to public companies. Private enterprises can do whatever they want (within the law of course, and assuming they have majority interest)
And it may not compel a specific action. The law is there mainly to prevent situations whereby corporate officers tank a company on purpose say, for the benefit of another company for which they are the shareholders or receive other benefits. Say, pass on a deal from company X which has more favorable terms vs. company Y for which the CEO sits on the board. In this case the CEO could be held fiscally and potentially criminally liable for acting against the best interests of the company.
Short of a bankruptcy, I'm not sure there is any legal compulsion to sell off any part of a company.
The PE's can only hostile take over public companies, the rest have to sell themselves.
I think the growth of PE's is due to the firms' owners realizing they don't want to be in business anymore, having the goal of eventually selling to someone (ala selling to FAANG in the DOT COM space), or the owners can't scale their businesses beyond what they are now.