3 ms·
Not necessarily. One pattern of PE is to buy a company, make the company borrow money, spend that money on the PE firm's other interests, and then declare bankr
by srtjstjsj 8y ago
Not necessarily. One pattern of PE is to buy a company, make the company borrow money, spend that money on the PE firm's other interests, and then declare bankruptcy to discharge debts.
https://en.wikipedia.org/wiki/Corporate_raid https://en.wikipedia.org/wiki/Corporate_raid
Wikipedia has a nice overview of the topic of this thread:
https://en.wikipedia.org/wiki/History_of_private_equity_and_venture_capital https://en.wikipedia.org/wiki/History_of_private_equity_and_...
and of course KKR was the most famous corporate raider in America:
https://en.wikipedia.org/wiki/Barbarians_at_the_Gate:_The_Fall_of_RJR_Nabisco https://en.wikipedia.org/wiki/Barbarians_at_the_Gate:_The_Fa...
- sonnyblarney 8y agoIf you own a company you can do what you want with it, so I'm not sure the term 'corporate raid' always applies. And yes - as part of the acquisition, it's usually loaded up with debt, which is the weird reason why a company should always take on debt (if they are cash flush, then 'raiders' can borrow money to buy the company and load up up with debt since there is room for it). If you mean 'reputation' - well - yes, if you sell to a known 'raider' well, then they'll do as they please. As far as 'spending on their own interests' - well that actually can create problems as minority shareholders can sue.
- mrunkel 8y agoAmusingly, this is the exact strategy explained by Ray Liotta's character in "Goodfellas" when the restaurant owner gets in bed with the Mob. Somehow it's illegal there.
- sonnyblarney 8y agoCorporate raiding is not money laundering.