The brand reputation gets milked while cost cutting measures result in subpar products and services. Growth targets are gone, now you optimise for cutting costs faster than you lose market share.
It’s not a Ponzi scheme, it just feels like a scam when consumer brands cash out at your expense (the loyal consumer) and slowly bleed the company dry.
You do have to note that this is not a universal feature of PE-backed business.
Take for example power tools, where most of the big players are privately held and owned by PE firms. Reputation and customer loyalty are profitable in this line of business, so QA and product development are alive and well.
It’s not a Ponzi scheme, it just feels like a scam when consumer brands cash out at your expense (the loyal consumer) and slowly bleed the company dry.
You do have to note that this is not a universal feature of PE-backed business.
Take for example power tools, where most of the big players are privately held and owned by PE firms. Reputation and customer loyalty are profitable in this line of business, so QA and product development are alive and well.