Thomas Tan
“PE firms are getting more and more short term lately. In the good old days, PE firms more focused on improving the acquired firms long term. They took a long time to aim (improve) then fire (sell). These days, PE firms fire first before aiming, seeking a very quick cash-out. In such short term, there is no way to improve the company materially, and what they do is basically to jack up both sides of the balance sheet, increasing asset and liability, then cashing out on the asset and dumping the liability to the public by IPO. The problem is during an unfriendly credit tightening market like now, the public is holding the bag of those low quality and risky bonds while the PE partners are cashing out with vast wealth in hand.”
I wonder when/if laws could be passed to minimize this type of dealmaking? It would have to be part of a global effort, which makes it next to impossible….
