I don't understand how the LBO companies like Bain still get away with it. I would have thought that the lenders would have gotten wise to it and stopped lending. After all they lose their principal in the almost inevitable bankruptcy.
If something about an large, established industry you don't know all that well seems bizarre and counter intuitive and you think you know better, a good first step is to reexamine your assumptions and seek real data.
In this case, you should look into aggregate losses in first and second lien lending to PE-sponsored LBOs over the past couple cycles. It's almost certainly a lot lower than you think.
Bain has been in the bidding process pretty much from the very start, while Apple and Dell only started getting mentioned as part of the consortium recently.
Strip & Flip Bain loads their acquisitions up with debt to pay themselves off, and then runs for the hills. Like with Toys-R-Us now going bankrupt. Recall Mitt Romney was CEO of Bain. This is the GOP business modus operandi.
Loading down one of their companies with debt and then having it file for bankruptcy is a strategy they've used in the past. I wonder if that's what happened here.
> Loading down one of their companies with debt and then having it file for bankruptcy is a strategy they've used in the past
Bain will lose almost all its money in Toys ‘R’ Us. It has written its equity down to zero, didn’t really take any dividends along the way, and itself holds the most junior tranches of debt.
except you're completely wrong. DRAM business is booming and is/was the most profitable BU of Toshiba; Their reason to selling it is because of the debt and losses incurred as a result of their westinghouse acquisition.
they also had a huge accounting scandal very recently. westinghouse was icing on the cake.
the company has admitted to inflating its net profits by $1.3bn over seven years. then, former top management played a role in the padding of profits by an additional ¥40bn ($339m) over a three-year period.
Their MO:
Buy it with debt.
Charge the company for the debt and huge management fees which will be paid with more debt.
Take it public after milking it to the max, so you can make even more money in the IPO.
The original poster seems to be able to forecast how these companies are going to do. It's arguably harder to do that when a deal is just announced so I'd imagine it's easier with this list of businesses that they've already closed on.
Arguably, Toy R Us... it looks like Bain and its partners put down about 20% of their own money towards the purchase. However, there has been no IPO since that purchase, and they will likely lose most if not all of that investment, so I don't think even that fits the pattern.
Sounds like hiring a javascript ui developer to write real time embedded assembly. I mean, smart people can accomplish a lot, but why would you do that?
One of the reasons I hate being introduced as Dr. KGIII is that I will, almost inevitably in certain groups of people, get asked medical questions. I'm a mathematician, not an MD.
When I explain this, I will frequently get responses like, "Well, you're obviously smart. What's your opinion?" Again, with things like medical questions.
Why this is, I do not know. But, it happens with great regularity - to the point where I actively tell people that I don't want to be introduced as Dr. KGIII. They seem to think that I have expert knowledge in all things. Trust me, I don't.
Why do you characterize investors in public stock markets as "Americans"? I don't think American capital is the majority of the world any more, if it ever was.
