3 ms·
Like Sears and Hertz?
by rchaud 2y ago
Like Sears and Hertz?
- dehrmann 2y agoThere are different strategies. You can buy up dying companies and try to turn them around with management changes (and debt), you can sell off companies for scrap, you can buy up money printing machines and run them hotter.
- lotsofpulp 2y agoJust to show that these bets are not without risk, the Sears bet failed bigtime. Lampert lost a ton of money.
- dehrmann 2y agoPeople love to vilify PE for destroying companies, but a lot of these companies were dying anyway, and PE was trying a last-ditch, high-risk reorg to save them.
- mywittyname 2y agoIt's still possible to make money in this situation. Buy a company, then have it buy itself back using debt. The PE firm gets most of its initial capital investment back then secures a revenue stream in the form of management fees. The company can still go bankrupt, but as long as it sticks around long enough to pay back enough to the parent company that it turned a profit, things worked out. The bond holders can fight over the scraps post-bankruptcy.