Ishmael
Literotica Guru
- Joined
- Nov 24, 2001
- Posts
- 84,005
The Obama campaign is trying to make hay over Romneys involvement with the private equity company Bain & Company. More than a few are going to buy into the premise that these companies are evil incarnate. Perhaps some few might be interested in what these companies actually do.
Private equity companies essentially target various companies for management takeover. They act in many different ways. They might fund a leveraged buyout by key employees of the company, or actually assume majority stock holder status via the acquisition of publicly traded stock. They target companies that are undervalued or suffering under the leadership of poor management. Their goal is to return the company to profitability in order to sell their ownership position at a profit for themselves and the partners that they entered into contracts with in order to gain control to begin with.
These companies do NOT use all of their own capital to make these purchases. They assemble a host of investors into a pool of capital that is used specifically for the targeted acquisition. The unwashed masses tend to believe that these investors are made up of the super-rich, the Bill Gates, etc. Not true, the biggest players in these investment pools are retirement funds (California Public Employee Retirement Fund being a major player), union retirement funds, etc. In other words entities with huge reserves of cash and a fiduciary responsibility to maximize returns for their contributing members. These 'pool' investors are sheltered from the public eye by the private equity firm, meaning that while entities like Bain are the public face of the actions taken the folks profiting behind the scenes get to remain invisible.
When these companies take over a business the first people out the door is the current management team, a small detail that always seems to be overlooked by the demagogues. And the reason is quite simple, those are the folks that ran the company into the ground to begin with.
Operations are going to be streamlined, plants may be closed, redundant and/or unnecessary employees laid off, certain assets liquidated. All part of the process of returning the company to profitability and increasing return on equity.
Most of the companies targeted by private equity firms, left to their own devise, would merely dwindle away with everyone losing their job. They'd just disappear into the world of bankruptcy. And in some cases that's what happens anyway regardless of the intentions of the private equity management plan. But on liquidation everyone loses, the return is pennies on the dollar in that instance.
Private equity firms perform a valuable service overall regardless of the hardships that might be visited on certain individuals.
Ishmael
Private equity companies essentially target various companies for management takeover. They act in many different ways. They might fund a leveraged buyout by key employees of the company, or actually assume majority stock holder status via the acquisition of publicly traded stock. They target companies that are undervalued or suffering under the leadership of poor management. Their goal is to return the company to profitability in order to sell their ownership position at a profit for themselves and the partners that they entered into contracts with in order to gain control to begin with.
These companies do NOT use all of their own capital to make these purchases. They assemble a host of investors into a pool of capital that is used specifically for the targeted acquisition. The unwashed masses tend to believe that these investors are made up of the super-rich, the Bill Gates, etc. Not true, the biggest players in these investment pools are retirement funds (California Public Employee Retirement Fund being a major player), union retirement funds, etc. In other words entities with huge reserves of cash and a fiduciary responsibility to maximize returns for their contributing members. These 'pool' investors are sheltered from the public eye by the private equity firm, meaning that while entities like Bain are the public face of the actions taken the folks profiting behind the scenes get to remain invisible.
When these companies take over a business the first people out the door is the current management team, a small detail that always seems to be overlooked by the demagogues. And the reason is quite simple, those are the folks that ran the company into the ground to begin with.
Operations are going to be streamlined, plants may be closed, redundant and/or unnecessary employees laid off, certain assets liquidated. All part of the process of returning the company to profitability and increasing return on equity.
Most of the companies targeted by private equity firms, left to their own devise, would merely dwindle away with everyone losing their job. They'd just disappear into the world of bankruptcy. And in some cases that's what happens anyway regardless of the intentions of the private equity management plan. But on liquidation everyone loses, the return is pennies on the dollar in that instance.
Private equity firms perform a valuable service overall regardless of the hardships that might be visited on certain individuals.
Ishmael
