Private equity firms use borrowed money to buy undervalued companies, suck the cash out of the companies in the form of special dividends and other fees, and then rake in more fees when they unload the damaged and desperate company to another private equity firm, which squeezes more value out of it, repeating the cycle until the company is bankrupt.
In the short video accompanying a New York Times article about the 133-year-old Simmons Bedding Company's fatal entanglement with the private equity industry, Charles Duhigg, a financial projects reporter, remarked, "When I was in business school, there was nothing sexier in this entire world than private equity. It's exactly where you went if you wanted to one day own an island -- and one of my classmates just bought an island."
These private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then, not long after, they often borrowed even more money, using the company’s assets as collateral – just like home buyers who took out home equity loans on top of their first mortgages. For the financiers, the rewards were enormous.
At Simmons, Bought, Drained and Sold, Then Sent to Bankruptcy
Twice after buying Simmons, THL [Thomas H. Lee Partners of Boston] borrowed more. It used $375 million of that money to pay itself a dividend, thus recouping all of the cash it put down, and then some.
A result: THL was guaranteed a profit regardless of how Simmons performed. It did not matter that the company was left owing far more than it was worth, just as many people profited from the mortgage business while many homeowners found themselves underwater.
Uganda is so poor that few can afford medical care, giving it one of the lowest life-expectancies on the planet — this toxic combination made the country ripe for infiltration by Tiens, a Chinese Multi-Level-Marketing “nutritional supplements” cult whose members set up fake medical clinics that diagnose fake ailments and proscribe fake medicines, then rope […]
Yahoo’s sale to Verizon means that Yahoo’s sub-companies — Flickr, Tumblr and a host of others — are now divisions of a phone company, and as you might expect, being on the payroll of a notorious neutracidal maniac with a long history of sleazy, invasive, privacy-destroying, monopolistic, deceptive, anti-competitive, scumbag shakedowns has changed the public […]
What was last week posed as an indefinite leave of absence is now for good: Travis Kalanick, CEO of scandal-wracked rideshare company Uber, announced that he is leaving the company. “I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to […]
Even though credit cards now feature an EMV chip for securing transactions, they still have to include the magnetic strip for compatibility with older point of sale systems. Because of this, there’s no way for the chip’s new security capabilities to protect against card skimmers in the wild.How do you protect yourself from legacy-technology-induced fraud? […]
As the old saying goes, “You should sit in meditation for 30 minutes every day. Unless you are too busy, in which case you should meditate for an hour.” Since most of us have an endless list of things to do and people to see, carving out quiet time can feel impossible, especially when most […]
The Bragi Dash Truly Wireless Smart Earphones are far more than your run of the mill Bluetooth earbuds. While the earpiece design makes these earbuds ideal for exercise and activity, and passive noise cancelling is conducive to a more serene listening experience, these buds go well beyond just playing music.First of all, they can actually […]