DIYbanter - View Single Post - Delta DJ-20 question

Scott Lurndal

writes:
On Tue, 18 Mar 2014 00:07:11 -0400, wrote:

On Mon, 17 Mar 2014 19:00:01 -0400, wrote:
I certainly wouldn't automatically assume they'll get worse. The new
company may have more money to spend. ...or not, but we can't know
that from the article.

But, wouldn't you agree that their prime motive usually is profit?

Isn't that the purpose of a corporation? With a public, for profit,
corporation (this isn't), it's the law.

But when a private equity company takes a company private, they do
it as a LBO - they create massive debt to pay the current shareholders.

Then they rake off the cream, and after a while, they re-IPO (or
shutdown) the company that they took private. The newly public
company is saddled with tremendous debt that the private equity
company never actually paid off, and often forces the new
company into bankruptcy after a period of time, when they can't
pay off the debt. (And the cost to service the debt directly impacts
the cash flow, reducing R&D opportunities. It's a downward spiral).

That may be good for the private equity company, but is not so good
for the employees or customers of the firm that they took private.