Private Equity

A Play in One Act

Peter: Hey, how much would you say your house is worth?

Steve: I wasn't considering selling, but I believe it's worth $100K.

Peter: I'm willing to pay extra to get you to consider it. What would you say to $130k? You could go buy an equivalent house for $100k and have $30k pure profit!

Steve: Well, that does sound like a great deal. Do you have the money with you?

Peter: Oh, it's not my money, I'm putting together an investment package. I've found a guy who'll pay $40k for your garage, and your master bedroom is going to this other guy for $50k, the rec room is getting shipped overseas for $30k, and then we'll be combining the three remaining rooms into a condo that should sell for another $80k.

Steve: That adds up to $200k, where does the other $70k go?

Peter: That's my management consulting fee for designing this brilliant plan. So are you in?

Steve: Wait, you make more than twice as much profit as I do? When I'm the only one committing any capital?

Peter: This is free money for you, remember? I'm offering $130K for something worth $100K, you can't turn this down.

Steve: I dunno, it still seems risky...

Peter: No, I mean legally, you can't turn this down. We will argue in court that you're cheating your shareholders and you'll be forced to sell.

Steve: Shareho- oh, you mean my family? Wow. Okay, I guess I'm cornered.

Peter: Great! Sign here.

Steve: Done. So when do I get my money?

Peter: Very soon! All we need to do is... Oof. Bad news, it turns out your garage had termites. Now the garage guy doesn't want to buy it anymore.

Steve: Sorry to hear that, but that sounds like a "you" problem. I just sold you my house, remember?

Peter: If only! No, I'm afraid it's still your house, I am just a simple management consultant. A consultant, I should mention, whose fees are not affected by any sudden changes in the value of your garage.

Steve: Actually, now that I think of it my garage is made of brick. Where did you see termites exactly?

Peter: Don't worry about the details! This is what I do, remember? In fact, I already found someone who'll buy your garage for $30k. You'll still walk away with $115k, which is more than you started with.

Steve: Don't you mean $120k?

Peter: Management consulting fees, remember? Wasn't easy to sell your pest-ridden garage. Also, more bad news, it turns out that combining separate rooms into a condo is not quite as easy as you thought. The toilet wound up in the kitchen somehow. We can't sell it in this condition.

Steve: What? Your contractors moved the toilet? How the hell did that happen?

Peter: Relax, this is very common in these sorts of transactions. In fact, I've already got a guy who can fix it for you, and it shouldn't cost a penny over $10k. Plus, of course, my management consulting fee...