I patronized my neighborhood Toys R Us frequently but I noted each time that in comparison to the huge space and all the merchandise in the store there were relatively few browsers on hand. Large brick and mortar stores are failing throughout the country (the Sear’s store a block away from Toys R Us also closed). Venture capital firms can only prey on the already challenged chains. Thriving stores are those with good locations, low rents, sought-after products at attractive prices and not the least: capable and diligent employees. Toys R US had the last requirement in spades but unfortunately was lacking in one or more of the others. Too bad.
well, pretty much the business model of everyone eh?
Kind of like buying the rights to a particular drug or drug delivery system, and jacking the price up 400+% or similar…
What you’re describing here is a value-investing approach, which is different than that of vulture capitalists like Bain or KKR. When Berkshire-Hathaway buys a distressed company on the cheap they do it because they see underlying long-term value in it. As with vulture capitalists, a value investor may make cuts and changes and buy it on debt or sell off units they don’t feel contribute to the core business they want to preserve and grow. Unlike the vulture capitalists they don’t load up the company they just bought with the same crushing debt they used to acquire it and they don’t simultaneously loot it with “consulting fees” while selling it off for parts and screwing over the workers.
Value investors want to revitalise a failing business that still has potential and profit off of it long-term as a portfolio company. Vulture capitalists, as the name implies, are more interested in gorging themselves and leaving a hollow carcass behind for less competent scavengers to pick at.
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My anecdote is a bit different.
Right, but that doesn’t mean the sick and the weak “deserve” to go out this way. No one’s saying that Toy R’ Us would’ve lasted forever without these vultures, rather that it’s probably the worst way for a company to wind down, particularly from the perspective of those dedicated employees.
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There’s a reason most vulture capitalists are Republicans, my friend.
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Companies can be “sick” from things like economic downturns though. Without outside meddling they could tough their way through it and rebuild when the economy rebounds, but instead in a moment of weakness the lions pounce and tear out the jugular.
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Market value is such a slippery term, especially in the property rental market.
Sadly its not about what you deserve but the rights you can assert.
Cory Booker. Tosser wrote asking the PE firm to think again. Perhaps better to write the SEC and the state AG asking them to open an investigation into false conveyancing and fraudulent trading cos it wasnt so long ago the ToysRus paid its PE owners a big dividend.
As soon as one PE firm gets busted for this the others will stop doing it. As soon as politicians like Booker stop taking their protection money the risks will go up for PE firms.
Maplins the hobbiest electronics store in the uk was kiled the exact same way recently. They had been around since 1976. The company was pofitable untill a private equity firm baught them up and bled them dry, leaving massive depts that killed the company stone dead. Private eguity firms are a scurge that kill household names and destroy jobs.
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And it’s hard for individual workers to assert their rights when they’re not organized. There is a reason why wages began to stagnant at the same time, we started producing less, working in retail (feminized labor, as Bethany Moreton called it), and labor unions (which primarily organized industrial labor) became less prevalent. If my cousin had been in a union, I’d guess that they would have gotten more than literally nothing.
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Maybe. Dont know. But of course you are right about the need for Labor to organize. I just wish the AGs would start to hold these PE guys responsible. There are laws against this. Its about the interpretation of these laws. However I definitely think our grandfathers would have prosecuted these thieving scumbags. Labor needs to organize, but the left needs to do a better job on the law.
I have to go to contribute the Teachout’s campaign.
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I dont care about the household names but I do care about the jobs. What gets my goat is the scam works by stiffing creditors. You pay yourself but you dodge paying smaller creditors, like say the employees or the suppliers. So consultancy fees get paid to the private equity firm, and special dividends. God help the unsecured creditors down the line.
For what little its worth, the current President knows a bit about stiffing his creditors.
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No, I think we do know, because we know that wages (especially in the industrial sector) during the postwar period, enough to support a family in a middle class life style.
We’re gonna need a different AG for that, as the current one is far too busy splitting up immigrant families to give a shit about private equity assholes screwing the employees of companies they take over.
That probably depends on the grandfathers! 
Yep!
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This has been happening for a long time.
See: “America: What Went Wrong?” by Donald L. Barlett and James B. Steele
Everyone should read this book.
Many fine US companies in great condition like Singer were gutted by asset strippers and their employees were discarded penniless.
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Nope. Singer was solid and had high cash reserves. Now it’s a name for junk stuff.
But of course vulture capitalists disguise themselves as “turnaround specialists” for distressed companies. A big part of the reason that they go after distressed companies is that then they have the “buy low” part of the “buy low + sell high” equation down. In reality it’s kind of a continuum rather than a black/white dichotomy. After all, most vulture capitalists would rather have something of a going concern left when they have finished their looting and debt hiding to sell off, and most turnaround specialists are good at paying themselves first, even if they are trying to create a streamlined, viable company.
Edited to add. But as others have said, the scummiest part of their playbook is using the debts that they themselves have saddled the company with to justify a bankruptcy filing to shaft all the other creditors.
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