Last week

Last week I posted a video about how private equity bros are now vibe coding and in it I covered the second largest loss in the history of private equity, which was Thoma Bravo's write off of a software company called Medallia. In the comments I got a question about what the largest loss in private equity history is and the answer makes Medallia look small. The number one spot belongs to KKR TPG and Goldman Sachs in their acquisition of a Texas Power company called TXU. They bought the company for $45 billion in 2007 and it still reigns as the largest leveraged buyout in history. And the craziest part is the entire investment thesis for TXU came down to one sentence. If natural gas prices stay high, then coal and nuclear plants will keep printing money. So KKR TPG and Goldman Sachs loaded $40 billion in debt onto the company and a single bet. Even Warren Buffett bought in with $2 billion in bonds and he later called it a big mistake. Because when they cracked the code on fracking, shell gas flooded the market and prices collapsed. So TXU's coal couldn't compete anymore in this market and the company found itself up a creek without a paddle paying $4.3 billion in annual interest with revenue disappearing by the day. In 2014, TXU filed for bankruptcy with $42 billion in outstanding debt. And with that, $8 billion in sponsor equity was gone. KKR wrote off 90% of its investment. TXU and Medallia failed for completely different reasons. The first being a commodity bet gone awry and the second being a moat that wasn't real. But it was the same structure both times that led to their downfall. A leveraged bet based on one assumption and no room to adapt once it broke. Which is exactly why Bain is vibe coding target companies before they buy them now. They're trying to find the broken assumption before they load on the debt.