Private Equity Firms (Billionaires) Buying Everything

[Carvaged]

Not many in the press seem to have really remarked much about this process, but all these private investment/equity firms (aka vehicles for billionaires to squirrel away ill-gotten gains) have been buying firms left right and centre around the world, and taking them off the market in many cases, over the last decade or so and with increasing pace in recent years.

I see today it's KKR trying to buy Telecom Italia, but really not a day goes by now without the billionaires snapping up more of the formerly visible economy and taking it off into the shady margins where they hide.

KKR makes buyout offer for Telecom Italia​

Deal would be among biggest private equity purchases of a European telecoms group

KKR makes €33bn buyout offer for Telecom Italia

Deal would be among biggest private equity purchases of a European telecoms group

www.ft.com

 

[StoneRoad]

Not all of them do that ...

Some private equity sources buy up struggling firms. The new owners take the time to understand the problems affecting their purchase. They then have an upper management & policy shakeup to rescue that firm and re-invigorate it.

 

[Carvaged]

Not all of them do that

Oh, well for sure. I mean, sometimes it's even sunny and warm in the UK. But In the majority of cases it's about breaking the businesses up, stripping assets and selling them off, then loading what's left with an unsustainable debt. Either way, it all becomes vastly more opaque.

 

[NoXion]

Not all of them do that ...

Some private equity sources buy up struggling firms. The new owners take the time to understand the problems affecting their purchase. They then have an upper management & policy shakeup to rescue that firm and re-invigorate it.

That sounds a lot like hard work. Much easier to just asset-strip and run it into the ground, and then sell it on when the reputation has been trashed. I think I can guess which happens more often.

 

[Yuwipi Woman]

... and farmland:

Why Is Bill Gates Investing in Farmland? How Much Does He Own?

Bill and Melinda Gates own more private farmland than anyone else in the United States. Find out why bill gates is investing in farmland.

farmfolio.net

... and water:

Investing In Water

With political uncertainty soaring around the globe and most stock markets fully valued, investors need to make sure their portfolios include investments that will provide attractive returns over an extended period of time. Opportunities that benefit from demographic trends or from the...

www.forbes.com

... and houses:

How corporations are buying up houses — robbing families of the American Dream

One morning in 2012, Phoenix real-estate developer Geoff Jacobs was playing golf when he got a surprising phone call. One of his employees, trying to bid on a house they wanted at auction, told him…

nypost.com

... and utilities:

Southwest Gas Says Carl Icahn’s Board Plan Is No-Premium Takeover

Southwest Gas Holdings Inc. said billionaire Carl Icahn’s bid to replace its board of directors amounts to a no-premium takeover of the utility owner.

www.bloomberg.com

 

[StoneRoad]

That's odd, because I know of both versions happening ...

And the asset-stripping happens even when big companies takeover other firms.

 

[Artaxerxes]

Not all of them do that ...

Some private equity sources buy up struggling firms. The new owners take the time to understand the problems affecting their purchase. They then have an upper management & policy shakeup to rescue that firm and re-invigorate it.

 

[Yuwipi Woman]

I've noticed a cycle with some stocks. For example GE. It started out as the highest valued corporation on the planet. Then it got scrapped out for parts. Their household products division, finance, and other units got parted out. A few months ago they consolidated their stocks 8 into one share. They now have three units left: power generation, healthcare, and aviation. Those are being spun off into three separate companies over the next year or two. With the CEOs they've put in charge, it appears that they're committed to rebuilding those companies, but when they're done, GE won't exist anymore.

GE Will Split Into Three Units, Ending Conglomerate for Good

(Bloomberg) -- General Electric Co. will split into three separate companies in a stunning breakup of the iconic manufacturer founded by Thomas Edison whose sprawling businesses once made it the world’s most valuable company. The shares surged.Most Read from BloombergWhy Hong Kong Is Building...

news.yahoo.com

 

[mx wcfc]

It is happening a lot of levels. From big national household names

Morrisons strikes £7bn takeover deal with US private equity group

Supermarket chain accepts improved offer of 285p per share from Clayton, Dubilier & Rice amid bidding war

www.theguardian.com

to smaller unquoted companies no-one has heard, here and everywhere else, I expect.

The concentration of capital in the hands of a small number of people.......

Thing is, a lot of it is "highly leveraged" (using borrowed money).

I'm sure I've heard that phrase in the past.

 

[Ming]

Wait till Brexit really hits. Lots of opportunities for these types to buy up distressed assets/organizations/sectors at fire sale prices.

 

[AnnO'Neemus]

It is happening a lot of levels. From big national household names

Morrisons strikes £7bn takeover deal with US private equity group

Supermarket chain accepts improved offer of 285p per share from Clayton, Dubilier & Rice amid bidding war

www.theguardian.com

to smaller unquoted companies no-one has heard, here and everywhere else, I expect.

The concentration of capital in the hands of a small number of people.......

Thing is, a lot of it is "highly leveraged" (using borrowed money).

I'm sure I've heard that phrase in the past.

That's how the Glazers purchased Manchester United, ie by loading the club with loads of debt.

 

[8ball]

Not all of them do that ...

Some private equity sources buy up struggling firms. The new owners take the time to understand the problems affecting their purchase. They then have an upper management & policy shakeup to rescue that firm and re-invigorate it.

Yep, am at a company that is in the midst of this. I think they didn’t know quite what they were taking on.

We suspected an asset-stripping motive, obv.

 

[equationgirl]

Some of the suppliers I use at work are increasingly being bought over by hedge funds. One in particular, whilst not cheap to begin with, has year on year increases that are quite breathtaking extreme. I put this down to the hedge fund owner needing to justify their investment.

 

[pseudonarcissus]

Yep, am at a company that is in the midst of this. I think they didn’t know quite what they were taking on.

We suspected an asset-stripping motive, obv.

We had that…a lot of the staff were shareholders before the sale to PÉ. We got some cash, some shares, and some “loan notes”. I could never find the staff loan notes on tue balance sheet…but the PE company ones were there earning 10%. They recently sold the company to a competitor for the outstanding loans on the balance sheet..staff shares and loan notes worth nothing .

 

[8ball]

We had that…a lot of the staff were shareholders before the sale to PÉ. We got some cash, some shares, and some “loan notes”. I could never find the staff loan notes on tue balance sheet…but the PE company ones were there earning 10%. They recently sold the company to a competitor for the outstanding loans on the balance sheet..staff shares and loan notes worth nothing .

We don’t have any shares. The plan would be to either sell us to another parent company or re-float. I think they much prefer the latter option.

 

[pseudonarcissus]

We don’t have any shares. The plan would be to either sell us to another parent company or re-float. I think they much prefer the latter option.

I suspect the real plan would be to pay themselves handsome management fees and interest, generously remunerate their advisors before dumping the remains

 

[8ball]

I suspect the real plan would be to pay themselves handsome management fees and interest, generously remunerate their advisors before dumping the remains

I don’t think any of it is structured in such a way where any of that is possible.

 

[pseudonarcissus]

We had that…a lot of the staff were shareholders before the sale to PÉ. We got some cash, some shares, and some “loan notes”. I could never find the staff loan notes on tue balance sheet…but the PE company ones were there earning 10%. They recently sold the company to a competitor for the outstanding loans on the balance sheet..staff shares and loan notes worth nothing .

Hey, I got a lot more back than I bought the shares for, and we were bought by a company that is listed and had no debt before the purchase. I have a lot more confidence in the new management

 

[pseudonarcissus]

I don’t think any of it is structured in such a way where any of that is possible.

Are you on the right thread? This is the private equity thread.
I hope all goes well

 

[8ball]

Are you on the right thread? This is the private equity thread.
I hope all goes well

Well, they bought the whole shebang late 2017 and no asset-stripping has happened. I’d have lost patience with things a long time before now if it was me.

 

[pseudonarcissus]

Well, they bought the whole shebang late 2017 and no asset-stripping has happened. I’d have lost patience with things a long time before now if it was me.

We had an MBO 20 years ago (I was not and am not management) from a benign “venture capital” company, as they were then called. I’m sure they are not all bad. The good examples where intervention from overpaid bean counters are few and far between.

 

[8ball]

We had an MBO 20 years ago (I was not and am not management) from a benign “venture capital” company, as they were then called. I’m sure they are not all bad. The good examples where intervention from overpaid bean counters are few and far between.

I’m sure it’s all going to fall apart in some way. Will report back..

 

[Ming]

Yep, am at a company that is in the midst of this. I think they didn’t know quite what they were taking on.

We suspected an asset-stripping motive, obv.

This resonates with me. My dad was a salesman for Coles Cranes in the post war period. They had to fight off an aggressive take over bid by an asset stripping pair called Slater Walker (one of the pioneers of asset stripping). They ended up selling to Acrow to avoid the bid.

 

[SpookyFrank]

That's how the Glazers purchased Manchester United, ie by loading the club with loads of debt.

ASDA more recently. Fucking stinks how they got that deal past the quote unquote regulators.

 

[Chilli.s]

See the thing about asset stripping in the uk is that land that can become housing and is always a safety net for asset strippers

 

[NoXion]

Some of the suppliers I use at work are increasingly being bought over by hedge funds. One in particular, whilst not cheap to begin with, has year on year increases that are quite breathtaking extreme. I put this down to the hedge fund owner needing to justify their investment.

Hedge funds need to fucking die.

 

[Carvaged]

Looks like Bain Capital's first attempt to take down and asset strip LV= has been pushed back by members - for now...

LV= members block US private equity takeover

Approach by Bain Capital pitted group’s leaders against campaigners and politicians in year-long battle

www.theguardian.com

 

[Yuwipi Woman]

Charlie Munger from Berkshire Hathaway weighs in on share buybacks:

MSN

Share buyback used to be considered illegal stock manipulation. Now its legal and Munger is complaining about taxing it at a minimal level???

TBH, he's always seemed less reasonable than Buffett, but I don't recall him quite seeming this entitled before.

One interesting thing about their shareholder meetings in Omaha... about half the attendees are Chinese nationals. They pay top dollar for the middlin quality Hilton across the street for the week of the meeting. I went to one of these and mistakenly wandered into a huge ballroom that was full of Chinese men in dark suits listening intently to the simulcast in Chinese. If you look closely at their investments, Berkshire Hathaway is busy investing in Chinese companies, including a solar energy company and an electric car business.