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Yet it's also common for PE to take a perfectly fine business, lever it up in pursuit of higher returns, and watch it shrivel under the debt load. That risk may
by cheriot 7y ago
Yet it's also common for PE to take a perfectly fine business, lever it up in pursuit of higher returns, and watch it shrivel under the debt load. That risk may be fine for PE investors, but there are a lot of industries where the "creative" side of creative destruction can't keep up with the debt cycle.
- dehrmann 7y agoDoes PE usually go after "perfectly fine businesses?" Usually they go after businesses with some sort of problem.
- valuearb 7y agoYea, a perfectly fine business sells for a perfectly high price. There is little room to improve it and sell it, and leverage can only go so far, and brings lots of risks.
- cheriot 7y agoKraft wasn't taken over buy 3G because it was loosing money, it just wasn't profitable "enough". That someone thinks there's more money to be made is not the same thing as a problem. The Sealy LBO is another one that got more attention than usual because of Mitt Romney's association.