Posted on 01/29/2012 3:18:05 PM PST by oblomov
The buy-out industry is under attack for destroying jobs. Its returns to investors are the real problem
IF STEVE SCHWARZMAN thought it was valid in 2010 to compare Barack Obama’s “war” against business to Hitler’s invasion of Poland, what can he be thinking now? Private-equity executives must be hoping the boss of Blackstone will keep his opinions to himself. More bad publicity is the last thing the industry needs. Other Republican presidential candidates are competing to see who can say the most damning thing about Mitt Romney’s career at Bain Capital. Newt Gingrich’s supporters have even made a sort of horror movie about what happens when private-equity firms like Bain Capital get their hands on otherwise healthy companies.
The buy-out bit of the industry, which buys mature companies, fixes them up and sells them on, is the one on trial (few have a bad word for venture capital, which invests in start-ups). It is charged with destroying the jobs of ordinary people while enriching the likes of Mr Romney.
Examples of dud deals are not hard to come by. The tax code’s treatment of debt (with interest on debt payments being tax-deductible) and private equity’s thirst for profits have at times driven the industry to saddle companies with too much debt. Between 2004 and 2011 private-equity firms heaped more debt on their companies so they could take out a staggering $188 billion in dividends for themselves, according to Standard & Poor’s Leveraged Commentary & Data, which tracks the industry.
But private equity isn’t employment’s grim reaper. Buy-out firms usually set their sights on companies that they can improve, which means they may buy weaker or more bloated ones in the first place.
(Excerpt) Read more at economist.com ...
Remember a company called Singer Sewing Machines.
IMO Bought out raped and pillaged .
Now they are a shell using the name.
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