41–50 of 167 posts
Competing against amazon with an animated Giraffe and a 3x markup was never going to work. If anything I'm surprised they made it this long. That is not to say that Bain, TPG, etc aren't objectively evil.
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OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? You have to be careful when you get vindictive at rich people; they're also the employers, and it's hard to build a system where such people aren't "the rich". (If you hard-core leveled everyone in the world to equal wealth, nobody would be able to employ anybody else…
OK, what are you looking for? Rich people get one shot at doing something, and if they fail, the government comes riding in and takes all their stuff? I can't speak for the person you replied to, but how about this? Less downside for the workers. We're talking about thousands of people losing their jobs. These people then go into a smaller labour market where they compete with other vulnerable retail workers, affecti…
Anyone who despises private equity should be celebrating this story, in this case, KKR/Bain/Vornado were the suckers in the deal, they bought the rotten apple and suffered massive losses because of it.
https://www.nytimes.com/2004/08/12/business/toys-r-us-says-i... https://www.nytimes.com/2005/03/18/business/company-news-toy...
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In 2003, in the pit of a recession, Toys 'R' Us was still profitable. It got caught flat-footed by the proliferation of Walmart/Target and online sales at the same time. Bain and KKR's turn-round strategy was largely a joke: They basically floated a bunch of trial balloons to the press, arguing that they weren't going to just be a toy store anymore (basically become a walmart or target) but that was scuttled. After t…
The "turn around strategy" was do make the minimum viable noise that a turn around was in progress to avoid legal issues, borrow a metric ass-ton based on the assets that the company had, collect fees, etc. Everyone wins except for whomever was stuck holding the bag on the debt.
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A slowly dying company is still successfully serving some customers and employing people. So, early failure really is worse for both society and the companies workers. Further, leveraged buyouts are funded with loans, those lending money also lose out.
So, you (and the author of this article) are complaining both about the people lending money losing out, and also complaining that Bain et al spent too much money paying the loans back?
If the company had successfully paid back the loans then they would not have failed, but often when that happens private equity simply takes out more loans until the company fails. In such cases failure is both profitable and by design because they effectively sell the company to banks for more than it's worth while profiting from the difference.
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So, you (and the author of this article) are complaining both about the people lending money losing out, and also complaining that Bain et al spent too much money paying the loans back?
No. I am complaining that the company needs to generate profit to pay back loans, and the size of profit generated is insufficient to pay interest on these loans. If the company had successfully paid back the loans then they would not have failed, but often when that happens private equity simply takes out more loans until the company fails. In such cases failure is both profitable and by design because they effectiv…
This is incorrect.
"PE-backed firms are no more likely to default than other firms with similar leverage. Distressed PE-backed firms restructure more out of court, restructure faster, and are more likely to remain an independent going concern following the restructuring, compared to leveraged borrowers that are not PE-backed...Hence, PE investors do not exacerbate the likelihood of financial distress and seem to resolve distress more efficiently than other firms."
Furthermore, "companies that were previously owned by a PE fund that [have] exited within the last five years have nearly a 50% lower default probability than other firms in the sample, including non PE-backed firms with no history of PE ownership. Consistent with the findings in Harford and Kolasinski (forthcoming), this result suggests that PE firms leave their portfolio companies in relatively strong financial shape when they exit."
All in all, PE-backed companies default about 5% of the time versus 3% for population (Table 2).
http://portal.idc.ac.il/en/schools/economics/about/documents...
90% of new businesses fail - most often from not finding or matching/addressing the market. The market also changes so anyone who doesn't adapt end on the Darwinian company list.
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A slowly dying company is still successfully serving some customers and employing people. So, early failure really is worse for both society and the companies workers. Further, leveraged buyouts are funded with loans, those lending money also lose out.
> early failure really is worse for both society and the companies workers The assets don't disappear. They're just being re-purposed earlier. Toys 'R' Us locations nationwide are being purchased and turned into new, arguably more-useful, things.
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> early failure really is worse for both society and the companies workers The assets don't disappear. They're just being re-purposed earlier. Toys 'R' Us locations nationwide are being purchased and turned into new, arguably more-useful, things.
Are you sure about that? When big box stores fail they often sit empty for years causing blight in the area.
Are you accounting for general economic climate? Toys 'R' Us locations appear to be getting purchased [1][2]
[1] https://www.bizjournals.com/bizwomen/news/latest-news/2018/0...
[2] https://www.ctvnews.ca/business/toys-r-us-ends-canadian-stor...