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Originally Posted By DDMAN26 Honestly if you look how the Republicans choose they're candidates I think it's just a matter of it's Romney's turn in the batting order.
Originally Posted By Kar2oonMan >>Honestly if you look how the Republicans choose they're candidates I think it's just a matter of it's Romney's turn in the batting order.<< This is true. Republicans tend to go for candidates that have "paid their dues" in terms of running for office a few times. I also think that because Romney was the last truly sane person standing, outside of Ron Paul, they really had no choice. In their hearts, they knew Bachmann, Cain, Gingrich, Santorum were never going to win in a general election. Romney really is their best chance at this point.
Originally Posted By EighthDwarf "How could he have empathy for that and then go and lay off thousands of workers in viable businesses just to increase his investment returns?" Clearly you don't understand how private equity works. You really think "viable" businesses have need of capital infusion from private equity firms? This idea that they hunt for good companies to tear down is out of touch with reality. PE firms put their capital at risk in the hopes of generating returns. I emphasize the word risk, because they often invest in bad businesses with the hope of turning them around (which saves jobs by the way) but they don't always succeed. Many of the country's most successful businesses succeeded because of private equity firms. Countless jobs can be attributed to the handiwork of skillful investors and managers. PE represents a critical form of capital in our capitalistic economy. Don't begrudge those who succeed because our economy relies on them doing so. Thank god those who have capital are willing to put it risk. If they didn't then you would really have something to complain about.
Originally Posted By TomSawyer No, I don't understand how it works. We used to invest in companies because we thought that they were building the best products or providing the best services possible. You bought stock in GM because you believe that GM had the management and plan to build a solid future. You bought stock in Boeing because they built the best airplanes. You bought stock in utilities because they'd always be there with steady income even if they never made you rich. Private equity comes in and infuses lots of capital into a company, but a lot of times that capital isn't coming from the firm but from debt. The recent buyout of Gymboree from Bain cost $1.8 billion, but Bain borrowed that money from Credit Suisse and Morgan Stanley, for example. Now Gymboree is in the business of generating revenue for private equity investors. They aren't like William Boeing who wanted to build the best planes, or Steve Jobs who wanted to change the world with technology, or even like Romney's dad who wanted AMC to build great cars. It's all about return on investment now. But Gymboree and the other companies that were bought by vulture capitalists and private equity firms have something else to worry about - debt payments. What killed Circuit City? They couldn't afford to make payments on the debt that the private equity firms took out to buy the company. Think about the big stores that have gone out of business in the past decade or two. The thing that they have in common is that they were killed by the having to service the debt that the private equity firms borrowed to buy the stores. Their sales were fine, but they were saddled with loan payments. Of course they want the business that they buy to be successful, but there are too many stories of them swooping in to take over a business that has been around for a hundred years only to see it collapse under the crushing debt load. People like Romney are very wealthy, but they borrow money to buy companies. Sometimes they can make the debt payments, sometimes they can't. If they can't, the company gets sliced and diced and sold off piecemeal. But it was a company that did fine for decades before the investors bought it out. PE firms rarely if ever put their capital at risk. They put together loan packages and hope that the debt service is less than their earnings per share. If a company is dying and they can't turn it around, they take what they can out of it and let social services take care of the former employees. Romney's dad busted his backside to turn around AMC, and he did a phenomenal job. But that's because he had a passion for cars. Private equity firms only see a business by how much they can make from it, not because they have a passion for it. It's like Pressler and Harris running Disneyland compared to Matt Ouimet or John Lasseter running it. Romney's dad turned around AMC because he couldn't imagine it not being there. Bain Capital just wants to cut it's losses to go on to the next thing.
Originally Posted By andyll <<Clearly you don't understand how private equity works. You really think "viable" businesses have need of capital infusion from private equity firms? This idea that they hunt for good companies to tear down is out of touch with reality.>> This isn't always true. Our F500 company was hugely profitable and was the target of what then was the largest private equity buyout in history. (bain was a minority investor) The company was saddled with debt to pay back the investment and massive cost cutting was implimented to make the books look great so they could take it back public. When the recession made an IPO impossible they cut to the bone and beyond and the employees (those that are left) are paying the price. My individual company has never had less the a 40% profit margin but we've had multiple rounds of layoffs and raises have been almost non-existence since 2008. US West/Quest/Whatever they are now are another great example. They came in and sold off the most profitable pieces of the company. Huge revenue jump... huge stock price jump... huge profits to the executives holding the stock options. Of course the long term viablility of the company is damaged which effects the employees but who cares about that?
Originally Posted By andyll Another +1 for post #25. I hadn't read it when I made my post. That describes my company to a tee... a highly profitable company now saddled with debt and the employees are paying for it. Private equity investors are company flippers. They need 3 things to successfully flip a company. 1) A current executive group that is willing to take money and throw the company to the wolfs in exchange. 2) Viable enough be able to borrow. 3) In an industry where costs can be cut by massive outsourcing.
Originally Posted By DDMAN26 <<What killed Circuit City? They couldn't afford to make payments on the debt that the private equity firms took out to buy the company.>> Well they also kind of sucked.
Originally Posted By TomSawyer Best Buy sucks too, but they don't have the debt load. Their sales were fine.
