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Venture Capital firms love to use throw debt at an asset so that they can have a cash windfall. The result is that the assets can never pay off the debt and end
by sparcpile 5y ago
Venture Capital firms love to use throw debt at an asset so that they can have a cash windfall. The result is that the assets can never pay off the debt and end up declaring bankruptcy.
See K-Mart, Sears, Toys R' Us, and anything that a vulture capitalist touches.
- sayhar 5y agoYes, but you're thinking of private equity.
- airstrike 5y agoYour view of how LBOs work is really misinformed. You picked 3 famous PE deals that failed, but those are exceptions. Apollo alone has done 150 private equity transactions, the vast majority of which have been tremendously successful otherwise investors would not be giving them more money to continue to invest.
- _jal 5y agoA lot of PE follows a well-understood playbook. Buy a player in a settled industry, cut costs (== reduce maintenance, make the workforce cost less, etc.) and milk it for as long as possible. That tends to work for investors; customers and employees, well. The Artist Formerly Known as SolarWinds is PE owned.
- CryptoBanker 5y agoSuccessful from the point of the PE firm is not the same as successful from the point of view of the acquired company
- airstrike 5y agoIt is if the alternative is to be woefully out-competed.
- stu2b50 5y agoVenture Capital firms are early stage private investors. They don't do LBOs with dying companies, since that would naturally be a late stage investment. You're probably thinking of private equity.