Quote:
Originally Posted by rcentros
Leveraged buyouts are often what make companies fail. And often it's done on purpose and it's a slimy practice of putting profits before people. It's so obnoxious that it's outlawed in other countries, like England. The U.S., on the other hand, seems to embrace these vultures.
KKR was involved in some slimy dealing. Not quite as slimy as some of the others, however, like Elliot & Associates. Whether KKR is reformed now, or not, I don't know but any time an equity firm gets their talons into one of your favorite companies it's time to start worrying about that company's future.
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You are generally better off if a real equity firm buys your company than you are when someone else in the business buys your company, i.e. competitors. Competitors are much more likely to cut staff (since they already have staff that handles things like IT and HR) or sell off pieces they don't want to keep if they are buying for customer base or IP.
Equity firms tend to try to increase the value of a company so they can sell it off at a profit and frequently hold a company for a number of years. Yes, there are companies that specialize in buying companies, selling the assets then folding the company, but those companies are rarer than newspaper headlines would have you believe.
The so called vulture firms tend to buy failing companies and sell off the assets rather than buy healthy companies and sell off the assets. Remember vultures are carrion eaters, they rarely kill healthy prey.
If the issue, as mentioned by an earlier poster, is that the previous owner thought that it wasn't showing enough of a profit, then it's quite likely KKR simply thinks that with better management, waste and expenses can be reduced, thus increasing profit. That's how most equity firms actually work. Yes, they aren't always successful in turning around a company, but as most investors know, most investments don't strike gold.