That's a fair bit of revisionist history trying to make PE look like it's not the bad guy.
Red Lobster was flourishing in the 1990s; it was one of the most popular sit-down chains back then. There were lines around the block at most locations.
In 2013, Darden Restaurants decided to spin-off Red Lobster and Olive Garden by selling them to a PE firm which coveted the ability to exploit these profitable chains. (Average EPS was approximately $0.77/share, and Red Lobster remained the countries' most popular seafood chain until COVID.)
The sale to the PE firm GGC included a sale-leaseback of all of Red Lobster's real estate. The purpose of this was to fund the acquisition, since PE never puts its own money down; it funds acquisitions with the assets of the acquired company. Red Lobster's operating expenses jumped more than 50% overnight, as it now had to pay rent on locations it used to own.
Within 2 years, this PE-driven cash grab had Red Lobster on the verge of bankruptcy. Selling Red Lobster to its biggest supplier didn't fix things because the problem was that PE had the bright idea to ruin the company through the sale-leaseback arrangement.
PE was not just a convenient story, they are the cause for Red Lobster's demise.
Red Lobster was flourishing in the 1990s; it was one of the most popular sit-down chains back then. There were lines around the block at most locations.
In 2013, Darden Restaurants decided to spin-off Red Lobster and Olive Garden by selling them to a PE firm which coveted the ability to exploit these profitable chains. (Average EPS was approximately $0.77/share, and Red Lobster remained the countries' most popular seafood chain until COVID.)
The sale to the PE firm GGC included a sale-leaseback of all of Red Lobster's real estate. The purpose of this was to fund the acquisition, since PE never puts its own money down; it funds acquisitions with the assets of the acquired company. Red Lobster's operating expenses jumped more than 50% overnight, as it now had to pay rent on locations it used to own.
Within 2 years, this PE-driven cash grab had Red Lobster on the verge of bankruptcy. Selling Red Lobster to its biggest supplier didn't fix things because the problem was that PE had the bright idea to ruin the company through the sale-leaseback arrangement.
PE was not just a convenient story, they are the cause for Red Lobster's demise.