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I get that money is money, but I feel like we desperately need to make conflict of interests prosecutable, so we can kill the self-serving mess that are LBOs.
by rtpg 7y ago
I get that money is money, but I feel like we desperately need to make conflict of interests prosecutable, so we can kill the self-serving mess that are LBOs.
In what universe is "I borrow a bunch of money, buy a company, then force the company to basically borrow money from me" a value-creating operation? Cuz it sure isn't this one.
- radiator 7y agoInteresting ... "money is money". But what exactly is fiat currency? Some would say it is not really money.
- luckydata 7y agoThe only fix required would be changing slightly the definition of fiduciary duty expanding the concept to ALL stakeholders including customers and the people living where those businesses are based and it would become illegal overnight to do that. It will never happen.
- toast0 7y agoThe alternative to leveraged buyouts is probably not a healthy company, it's more likely a slowly dieing company that goes out with a whimper, not a bang. Is one way better than the other?
- pbhjpbhj 7y agoWe should probably just strip all societal assets that might potentially fail and give the money to the richest guy we can find, they're going to acquire all that money and we're going to die poor anyway, indeed we could just round up the poor people and shoot them and give the proceeds of the sale of any assets to that same guy; optimisation, it's what makes capitalism great, huh.
- FireBeyond 7y agoSo you're saying these firms are just being rewarded for putting the beast out of is misery and being the one to fire the gun? The other way is absolutely better. The "bang" you hear is the bursting vacuum of PE sucking all the value out of the company, depositing it in their bank account, and leaving others holding the bag, a bag that's now far bigger because the company now has less to no ability to satisfy its obligations. But the PE firm made billions for (sometimes, less than a year of) "management and consulting fees". These kind of leveraged buyouts are perilously close to what Tony Soprano does to Ramsey Sports and Outdoors - take a controlling interest (albeit by a different method), utilize the business' credit lines, assets and collateral to bring in a lot of (temporary) value, transfer it out of the company, and leave the smoldering ashes of a company massively bankrupt with bad debts all over town, including many it didn't have before the buyout happened.
- greglindahl 7y agoThose aren't the only possibilities. LBOs don't necessarily strip assets. There are already rules that claw back asset stripping prior to a bankruptcy. Perhaps they need to be strengthened.
- acdha 7y agoYou're leaving out the most common case: a company which is viable not generating enough profit growth to excite Wall Street. Most of these companies had solid businesses until their assets were sold off and other short-term profit maximization measures started to impact their long-term viability.
- jeffdavis 7y agoDo they really buy the whole company, or do they just buy enough to control it?