| richardhutnik said: Ok, I will say I can see a case of where a conglomerate, that was assembled and running poorly, would benefit from being broken up, and the different parts sold off. If a company has negative synergy with its assets, it makes sense to break them up. However, what I wanted to ask about this this form of leverage buy-out: Investors borrow a bunch of money and buy up a company, and pledge the assets of the company they purchased as collatoral for the loan. They get their cut of doing this. At this point, the company is now saddled with a lot of debt, and has new owners. So, my question is, what makes this scenario good? |
Because, in order for the investors to make money on such a move, they have to improve the company and make it profitable. Its just like the stock market, buy them low, sell them high. Companies targeted in such a move usually have problems that the person buying them out thinks they can solve. So they get the capital together to buy the company, fix the problems if they can, the company becomes more profitable, and then they sell their stake in the company after the price of their shares have risen. it's pretty straight forward.
So then the question is, why do you think it is bad?
