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Has any retail company ever gotten better after being bought out (thinking NewEgg, Toys R Us, Guitar Center...)? Some incentive is fucked up if decent businesse

Has any retail company ever gotten better after being bought out (thinking NewEgg, Toys R Us, Guitar Center...)? Some incentive is fucked up if decent businesses are being run into the ground.

cratermoon 6y ago
Toys R Us and Guitar Center are among the retailers bought by private equity firms explicitly so the investors could wring the value out of the company and throw the remains in the dumpster. G.I. Joes was another. https://www.theatlantic.com/magazine/archive/2018/07/toys-r-us-bankruptcy-private-equity/561758/ https://www.theatlantic.com/magazine/archive/2018/07/toys-r-... By the way the remnants of Toys R Us are now owned by Tru Toys and they are looking to make a comeback.
- sampo 6y ago
  > so the investors could wring the value out of the company and throw the remains in the dumpster What does that mean in practice?
  - genericone 6y ago
    Low expected long term business value due to predicted market shifts. Compress all dwindling future value into an immediately extractable source of income at the cost of the existence of the business itself. Basically, squeeze the brand name dry until the brand name itself means nothing.
  - dingaling 6y ago
    > What does that mean in practice? Buy the company with loans, strip the tangible assets for cash, burden the company with the loan repayments and bail out. Basically use the company as leverage to buy it, and then make it pay for having been bought out. It will seldom be able to do so, and eventually will stagger into bankruptcy. Both the company and the creditors lose, but not the 'investors'.
    - kevin_thibedeau 6y ago
      Toys R Us aren't exactly blameless. They were pissing away tens of millions before the buyout for their Times square megastore.
    - cratermoon 6y ago
      This is the best 3x5 card/elevator pitch version of the private equity playbook that I've seen. The part about making the company pay the 'investors' for buying the company is especially poignant. If anyone never quite "got" the rancor directed at Mitt Romney for his association with Bain Capital, this should clear it up.
- stjohnswarts 6y ago
  Also to load them up on with debt from other sources and then let them go bankrupt. Which should be illegal.
  - cratermoon 6y ago
    Can you give an example? I don't disbelieve you, but it's not something I've come across. What do they do, take an accounting liability completely unrelated to the company, "sell" it to the company, thus putting it on the books there and off the books of the investors?
jamiek88 6y ago
Vulture capitalists bleed them to death. Toys R Us is particularly sad as their business was strong.

Has any retail company ever gotten better after being bought out (thinking NewEgg, Toys R Us, Guitar Center...)? Some incentive is fucked up if decent businesses are being run into the ground.

cratermoon 6y ago

Toys R Us and Guitar Center are among the retailers bought by private equity firms explicitly so the investors could wring the value out of the company and throw the remains in the dumpster. G.I. Joes was another. https://www.theatlantic.com/magazine/archive/2018/07/toys-r-us-bankruptcy-private-equity/561758/ https://www.theatlantic.com/magazine/archive/2018/07/toys-r-... By the way the remnants of Toys R Us are now owned by Tru Toys and they are looking to make a comeback.

sampo 6y ago
> so the investors could wring the value out of the company and throw the remains in the dumpster What does that mean in practice?
- genericone 6y ago
  Low expected long term business value due to predicted market shifts. Compress all dwindling future value into an immediately extractable source of income at the cost of the existence of the business itself. Basically, squeeze the brand name dry until the brand name itself means nothing.
- dingaling 6y ago
  > What does that mean in practice? Buy the company with loans, strip the tangible assets for cash, burden the company with the loan repayments and bail out. Basically use the company as leverage to buy it, and then make it pay for having been bought out. It will seldom be able to do so, and eventually will stagger into bankruptcy. Both the company and the creditors lose, but not the 'investors'.
  - kevin_thibedeau 6y ago
    Toys R Us aren't exactly blameless. They were pissing away tens of millions before the buyout for their Times square megastore.
  - cratermoon 6y ago
    This is the best 3x5 card/elevator pitch version of the private equity playbook that I've seen. The part about making the company pay the 'investors' for buying the company is especially poignant. If anyone never quite "got" the rancor directed at Mitt Romney for his association with Bain Capital, this should clear it up.
stjohnswarts 6y ago
Also to load them up on with debt from other sources and then let them go bankrupt. Which should be illegal.
- cratermoon 6y ago
  Can you give an example? I don't disbelieve you, but it's not something I've come across. What do they do, take an accounting liability completely unrelated to the company, "sell" it to the company, thus putting it on the books there and off the books of the investors?

jamiek88 6y ago

Vulture capitalists bleed them to death. Toys R Us is particularly sad as their business was strong.