Synopses & Reviews
An authoritative exposé of the mysterious and potentially dangerous world of private equity
Few people realize that the top private equity firms, such as Blackstone Group, Carlyle Group, and Kohlberg Kravis Roberts, have become the nation’s largest employers through the businesses they own. Using leveraged buyouts that load their acquired companies with loans, private equity firms have generated more than $1 trillion in new debt—which will come due just when these businesses are least likely to be able to pay it off.
Journalist Josh Kosman explores private equity’s explosive growth and shows how its barons wring profits at the expense of the long-term health of their companies. He argues that excessive debt and mismanagement will likely trigger another economic meltdown within the next five years, wiping out up to two million jobs.
He also explores the links between the private equity elite and Washington power players, who have helped them escape government scrutiny. The result is a timely book with an important warning for us all.
"With exhaustive research and a rogues' gallery of interviews, journalist Kosman puts together a convincing and disquieting argument that private equity firms are about to cause the next great credit crisis. Many people don't realize that 'private equity' is just a new name for a leveraged buyout, and that private equity firms make their money by loading their acquired companies with debt, garnering short-term gain at the cost of the businesses' financial longevity. Exposing the pernicious practices of various high-profile firms (including Mitt Romney's company, Bain Capital, notorious for its company-destroying practices), Kosman reveals how they cripple their acquired businesses competitively, limit growth and cut jobs without reinvesting the savings, all without even generating good returns for their investors. But if only half of PE-owned businesses go bankrupt, that would leave almost two million Americans out of jobs. What's to be done? Kosman is a proponent of legislation that encourages buyers of companies to hold on to them for at least five years. This alarming book will keep anxious credit watchers on their toes and hopefully inspire some pressure to keep PE firms from going the way of mortgage brokers." Publishers Weekly (Copyright Reed Business Information, Inc.)
"The Buyout of America
takes a different approach. It is less concerned with blow-by-blow deal-making or personal stories than with the real-life economic effects of private-equity deals. Mr. Kosman brings to the subject a relentlessly critical approach that is refreshing, simply because so many stories about the buyout firms are the sort of puff pieces that result from delicate negotiations for access. He documents dozens of companies acquired in buyouts--such as hospitals, mattress manufactuerers and a car-parts maker--whose service or products went downhill, whose employees suffered pay cuts or layoffs, and whose fortunes plummeted, sometimes ending in bankruptcy.
Time and again, Mr. Kosman details how the rest of us suffer at the hands of the buyout barons, 17 of whom are members of the Forbes 400. The private-equity firms pay lowball prices, he says, shortchanging public investors, by teaming up with management to pre-empt competing bids. They cream fees from their acquisitions, generating profits no matter how the companies fare. The companies cut more jobs than publicly owned competitors and sidestep proposed reforms by currying favor with politicians. Mr. Kosman finds a University of Chicago study showing that, for the years 1980 to 2001, the private-equity firms' investors got returns that fall short of the broad market average, after fees.
Mr. Kosman provides exhaustive specifics."
--Wall Street Journal
Using leveraged buyouts that load their acquired companies with loans, private equity firms have generated more than $1 trillion in new debt. Journalist Kosman explores private equity's explosive growth at the expense of the long-term health of their companies.
About the Author
Josh Kosman has been covering the financial industry for twelve years. He is as an editor at Mergermarket.com and a former senior writer for The Deal and senior reporter for the trade publication Buyouts Newsletter. He appears frequently in the media as a private equity and mergers expert.
Table of Contents
The Buyout of America Prologue
Part One: The Buyout of America
Chapter One: How Private Equity Started
Chapter Two: The Next Credit Crisis
Part Two: The LBO Playbook
Chapter Three: Doctoring Customer Service
Chapter Four: Lifting Prices
Chapter Five: Starving Capital
Chapter Six: Plunder and Profit
Chapter Seven: Leaving Little to Chance
Chapter Eight: A Different Approach
Part Three: What Now?
Chapter Nine: The Next Great European Credit Crisis
Chapter Ten: What's Next?
Chapter Eleven: Handling the Fallout
Appendix: The 1990s LBO Track Record