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August 20, 2012

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MattL

I personally know someone who worked for a company that was "LBOd". This was over 10 years ago. He made out VERY well and is still at the company. Apparently this works out well only for companies that satisfy certain conditions (mainly financial).

The comment I still remember from this person was "I can't believe this is legal".

So is that Crony Capitalism or is it just smart guys that know how to exploit this?
Crony Capitalism versus Crony Socialism... which is worse?

Both of those last 2 quesions are meant as rhetorical.

Kevin

That's a great definition (or more accurately, one scenario) for "LBO's are evil and I'm voting for Obama." It completely ignores the fact that many private equity investments - like Bain has done for many years - more times than not save a company from ruin and grow a company long term, which benefits everyone - employees, management and investors. That's called free markets, or capitalism, or "how America was built." The ignorance around that is astounding sometimes!

Laurelannk

This is an example of how to create wealth, but not necessarily jobs. As our buddy points out above, LBOs are great for everyone as long as the company does well (or as long as the company is saved from ruin and grows in the long term.) If it doesn't, employees lose their jobs because the LBO made their company more vulnerable to failure, but investors have come out ahead. It's not a fairy-tale "win-win" for the general electorate and does not play well in the press.

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