So, you know. Caveat Emptor! (Buyer Beware)
Joanna
Michael Pollak wrote:
>[Doug put this much more tartly in this week's issue of The Nation
>http://www.thenation.com/doc/20070716/henwood -- But I was thinking
>perhaps the appearance of this report today from Moody's was another sign
>reinforcing his suggestion that PE has reached its top.]
>
>July 8 2007
>Financial Times
>
>Moody's slams private equity
>By Francesco Guerrera and James Politi in New York
>
>Moody's, the credit rating agency, will on Monday launch an attack on the
>booming private equity industry...
>
><snip>
>
>In its report, to be issued on Monday, Moody's takes issue with the
>argument that private ownership frees companies from the short-term
>pressures of the equity markets, enabling them to invest and plan for the
>long term.
>
>The claim, often repeated by buy-out executives, is central to the
>industry's efforts to prove its activities benefit portfolio companies and
>the economy as a whole.
>
>Moody's report says: "The current environment does not suggest that
>private equity firms are investing over a longer-term horizon than do
>public companies despite not being driven by the pressure to publicly
>report quarterly earnings."
>
>The agency says buy-out funds' tendency to increase a portfolio group's
>indebtedness to pay themselves large dividends runs counter to their claim
>of being long-term investors. The report cites as examples of this trend
>the dividend received by Thomas H. Lee, Bain Capital and Providence Equity
>following their takeover of Warner Music in 2004 and the one paid to
>Blackstone after the purchase of Celanese.
>
>The document also takes aim at private equity's claim that improvements in
>companies' performance are driven by more focused management teams rather
>than financial engineering and higher debt levels.
>
><end excerpt>
>
>Michael
>
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