Here is an interesting interview with with Josh Kosman, author of the book, “The Buyout of America.” He discusses what a private equity firm like Bain Capital does, how they evolved, and how they abuse the tax code to leverage buyouts and maximize profits.
Some snippets …
Private equity and buyouts started as a way to take advantage of tax gimmicks, not as a way of saying “we’re going to turn around companies.” And now it’s out of control. I look at the 10 largest deals done in the 1990s, during ideal economic times, and in six cases it was clear that the company was worse off than if they never been acquired. Moody’s just put out a report in December that looked at the 40 largest buyouts of this era and showed that their revenue was growing at 4 percent since their buyout, while comparable companies were growing at 14 percent [...]
What I’d like to see Mitt Romney do is to show an example of a buyout that went well. The only success stories he’s talking about on any level are venture capital investments — Staples and Sports Authority. Personally I like venture capital, I think it provides a lot of value, but that’s not what he did mostly, and that’s not what these takeovers are about.
Private equity firms like Bain are particularly heinous money-making schemes. They really are perfect examples of what’s gone wrong with our so-called “free-market system.” I think as voters learn about what a private equity firm is and does, Mitt Romney’s arguments that any criticism of them is an attack on “free enterprise” and that he is a “job creator” will look increasingly ridiculous to all but the most deluded.