private equity buyouts

[Jim Smith]

Just wondered . Whats with the increase in private equity buyouts? Something seems to be going on but I can't put my finger on it.

 

[Dl5treez]

My theory, two issues.



Investors are very gun-shy of companies with even remotely shady finanical statements. In the day & age of Enron, WorldCom, and a host of others, people are very aware of where their money is going and want every cent accounted for.



This in turn is hurting those companies who have poor reporting histories, histories of creative accounting, and histories of questionable investing of resources... Navistar is a great example due to close ties with Ford, who is financially in a mess at the moment, and their issues with their diesel engine problems, Ford's back out on the light truck deal a couple years ago, it all hurts Navistar... couple that with their decision to release their own 'line' of class 7/8 truck engines in market that is already reeling from emission issues at quite possibly the worst time to try and bring an 'all new' product to market---when truck buyers are wary of the offerings from Cummins, Detroit, and CAT why in the hell would they put faith in a company who can't seem to even get a pickup engine right?... . not saying the big International engines are bad, just saying this is exactly the kind of business decision that can kill a company's image in today's investing world.



Private corporations don't have to answer to anyone other than whoever owns the place; they don't have 8 million shareholders to make happy every quarter..... shareholders who are extremely demanding and wary this day and age.



Case in point--if the multi-millionare owner of a privately held Fortune 500 company decided to give every employee of his outfit a $10,000 Xmas bonus check, 'just for the heck of it', he could without risking his job, his corporation, his image, or anything else... . try that with a public company and see what happens.



Private companies find it easier to operate this day and age as well... . less people making the decisions allows them the flexibility to change operational variables quickly, without fear of a Wall Street fear-induced sell off.



In a nutshell... ...