Comments on: How capitalism kills companies http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: traducere romana daneza http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-53355 Mon, 29 Sep 2014 13:52:16 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-53355 I think other web site proprietors should take this site as an model, very clean and great user friendly style and design, let alone the content. You are an expert in this topic!

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By: Ralphooo http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-35118 Wed, 18 Jan 2012 15:17:20 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-35118 So much truth in one little essay. I have watched the process Mr. Salmon describes, up close. It was an ugly ending for The Little Company That Could. But FifthDecade has a good point. A functioning ecology does not operate by the ethics of Count Dracula. Why not? Because it would not remain a functioning ecology for long if it did. So why are Germany and Japan better at this, FifthDecade? Maybe because you have to start, fight and lose a major war to learn humility in a world overrun by our species.

Oh well, nothing lasts forever! Eight centuries of global human growth have been a great ride.

After us, the deluge.

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By: dbird82 http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-35064 Mon, 16 Jan 2012 23:25:51 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-35064 Yes, socialism is the true creator of jobs Felix. I hate it when people are successful. We should resent them.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34995 Sat, 14 Jan 2012 04:55:09 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34995 realist50, of course, not all PE firms are 95% leveraged. Just the ones who buy companies and load them with so much debt that they go bankrupt.

I invested in some PE funds because I had this image of them buying failing companies, cleaning them up, and turning them around, but that seems to be the exception, not the rule. So many of the large PE funds buy healthy (but undervalued) companies with little money down, then have the company borrow money (because they are healthy) to pay the PE firms a dividend, which is used to pay off the loan used to buy the company. The company then suffers under a huge debt load, and has layoffs or goes out of business.

Maybe not all PE firms should be dismissed as parasitic leeches that add no value to society, but enough of them extract all of the value they can out of profitable companies, leaving nothing but a carcass, to make a lot of readers here question their usefulness.

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By: realist50 http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34993 Sat, 14 Jan 2012 00:14:51 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34993 Theamblerx, the two-part answer is that (i) most of these companies don’t go bankrupt, but it’s only news when they do and (ii) in bankruptcies creditors almost always recover soemthing, which varies widely but in some cases can be close to 100 cents on the dollar. Look up default and recovery rates on leveraged loans and high yield bonds. These asset classes are certainly not solely buyout deals, but buyout financings are a meaningful subset so the averages are a reasonable proxy for what debt investors earn financing buyout deals.

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By: realist50 http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34992 Sat, 14 Jan 2012 00:09:06 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34992 The assertion that most buyout deals are 95% leveraged – meaning 5% equity – is way off the mark. The average equity contribution – this stat is from S&P Leveraged Lending – was 39% in 2011 and at similar or higher levels from 2008 to 2010. From 1999 to 2007, equity contributions usually averaged between 30% and 40%, though the average did drop down to 29% in both 2000 and 2005.

It always makes me laugh if the same commentator mentions responsible, conservative homeowners who buy with a 20% down payment and criticize buyout firms for gorging on debt. Buyout firms use more equity in their purchases!

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By: theamblerx http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34987 Fri, 13 Jan 2012 20:37:23 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34987 But why are people lending the companies the money for such risky deals? What have they missed?

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By: Dollared http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34982 Fri, 13 Jan 2012 19:20:26 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34982 KenG and y2Kurtus, you are hitting the nail on the head. 95% leverage only exists to enrich the PE player while piling all risk onto all other stakeholders. The difference between Warren Buffet and Romney is that one is an investor, the other is a thief.

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By: y2kurtus http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34972 Fri, 13 Jan 2012 11:17:06 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34972 KenG_CA you are right that Berksire uses much less leverage than Private Equity firms. Berkshire is only about 60% levered. Some P/E firms are good stewards… Dunkin Donuts did an IPO in 2011 after being privatly controled for many many years.

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By: KenG_CA http://blogs.reuters.com/felix-salmon/2012/01/12/how-capitalism-kills-companies/comment-page-1/#comment-34964 Fri, 13 Jan 2012 05:19:25 +0000 http://blogs.reuters.com/felix-salmon/?p=11848#comment-34964 y2k, You can’t say the only difference between Berkshire Hathaway and Bain is that BH never sells. BH isn’t 95% leveraged, like most PE deals. They are more like a holding company than a PE firm. And while it’s true they own a lot of insurance companies, their profits are from operations, not trading.

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