One private equity and one management story about ailing companies and the people who profit from them from the NYT today: The first is an exposé from the NYT about Simmons mattress company, having been bought and sold several times over is now filing for bankruptcy. Their previous owner, Thomas H. Lee Partners of Boston, have made over “$77 million in profit” from the filing. The second, about Tribune Corporation and how Sam Zell has loaded the company up with debt, filed for bankruptcy and is now asking for large bonuses from their bankruptcy court.
Both stories showcase how a few people are fleecing giant companies before they are about to sink – an age old story in American business but one that seems even more revolting in a time of 10% unemployment rates.
At the risk of sounding naive, I wonder if American business isn’t eating themselves to death? It seems that the companies who produce – in this case a bed-maker and a newspaper – are looked upon as nothing more than a host with assets and money for the taking. In the case of Simmons, I am reminded of a parasite who lives off of its victim until it finally dies.
So What’s Next for American Companies That Produce?
With the understanding that Tribune is facing problems going far beyond just its management (dying newspapers, for one)
This story is all too familiar. Did not Gordon Gecko say himself “I create nothing. I own.”? It seems to be the mantra of corporate governance – particularly in the case of management and private equity.
What will help the US in the long term is divesting itself from companies that are being syphoned dry and spiraling into debt because of the their managers and owners. Instead, investing in companies that are nimble enough to stay ahead of predatory management techniques and PE buyouts and (that can turn a profit without being squeezed because of massive debt) is the key to longevity in American businesses.
Where are some American manufacturers and content producers that exist not just because they are ripe for the taking? What producers are leading in production and innovation? It is companies like these who who willl help the US economy – both from an employment perspective, as well as from an investment perspective – as they find ways to profit from their own innovation.
As as this site finds them, it will be sure to point them out.
Filed under: Bankruptcy, Business, Management
