Aug 6, 2007
The extremely wealthy who run “private equity” or “private investment” firms like to say they will be better at “unlocking value” from companies they buy up. But what does that really mean?
You can see very well if you look at Blackstone Group’s takeover of Travelport Ltd., a group of companies including the Orbitz reservations service. Blackstone borrowed 3.3 billion dollars and charged it to Travelport, not to Blackstone itself. Then Blackstone borrowed another 1.1 billion, charged it to Travelport, and immediately paid it out to Blackstone and its partner investors – as dividends! Blackstone also laid off 841 workers, ten% of the workforce.
This is how they “unlock value.” They put companies deeply into debt to drain out “dividends” on money that was never made! Saddle the companies with debt and interest payments for years to come. Eliminate jobs – and then start looking for another private equity firm, which will buy the remains of the company and try to repeat the draining process.
“Private” equity is really “pirate” equity!