This site is intended to pick up where the Buyout of America book leaves off.
We would like it to be a forum where we tell you what is presently going on with private equity companies and the private equity debate.
There is a new push to end “carried interest”, the ability of private equity fund managers to claim capital gains tax treatment on their commissions (a 20 percent tax rate insted of 39.6 percent). President Obama April 10, 2013 proposed eliminating carried interest in his budget. However, Congress will likely not introduce the measure except as a part of broader tax reform. Also, some Senate Democrats (especially in the NY area) are not anxious to see carried interest eliminated.
The Private Equity Growth Council in this video says carried interest is fair. No mention of how private equity firms collect fees that cover their investments, and then some. Or how the CEOs at their companies run their businesses so they also provide limited sweat equity.
Private equity titans, though, are more worried about a movement to end corporate interest tax deductibility than carried interest.
Corporate interest deductibility allows companies to take the interest they pay on loans, even if used to finance LBOs, off their taxes. Several key Republicans are open to limiting the loophole, including former Republican Vice Presidential Nominee Paul Ryan!
Senators Wyden, Coats and Begich in April 2013 were meeting in hopes of re-introdcuing their bill this year that would limit interest tax deductibility, the decudction that is the lifeblood of leveraged buyouts.
I explain in a timely video (clip is from the documentary CorporateFM) how private equity works, and why it does not make any sense. Also, I explain that ending corporate interest tax deductibility in corporate takeovers would end destructive buyouts.
President Obama on Feb. 22, 2012 also unveiled plans to reform the tax code including reducing corporate interest tax deductibility.
The Bank of England (the equivalent of our Fed) in a March 2013 quarterly report said “the amount and maturity profile of buyout debt could present risks to UK financial stability.” It goes further stating that it will be important to monitor the use of debt in acquisitions. The Bank cites the Buyout of America in the report!
This is quite a turn: Meg Whitman-led Hewlett-Packard reacting to Siver Lake Partners’ $24 billion buyout of Dell said Feb. 6, 2013, “Leveraged buyouts tend to leave existing customers and innovation at the curb.” She is a long-time friend of Republican Presidential Candidate and Bain Capital founder Mitt Romney.
Carlyle Group, and unofficial private equity spokesman, founder David Rubenstein admits in February 2013 that the biggest buyout deals have not yielded great returns.
A European labor leader at Davos 2013 tells CNBC’s Maria Bartiromo in a must-watch discusssion that the world is suffering from a private equity mentality.
Private equity owned Hostess Brands has gone bankrupt leading to the firing of 18,000 workers. Private equity firm Apollo Global Management bought its snacks business out of bankruptcy.
A judge in March 2013 allowed a bombshell private equity suit to proceed. This is a bid rigging case involving many of the biggest private equity firms, including Bain Capital, and more than $100 billion of leveraged buyouts. The charge is the firms teamed to buy businesses paying prices that were artificially low.
Meanwhile, the public pensions who invest in private equity firms are successfully pressuring them to stop charging their own companies fees. They do not want to see PE firms make money even when their investments fail.
The California Teachers pension pressured Cerberus in December 2012 to sell Freedom Group, the country’s biggest gun manufacturer.
Please read my Oct.2 Salon op-ed about how Mitt Romney says on his web-site that he helped build Sealy, and how that does not square with upstart Tempur-Pedic agreeing to buy Sealy in September for only $2.20 per share.
Former Reagan Budget Director, and private equity investor, David Stockman writes a scathing Newsweek feature revealing that Romney did not make money by building businesses but instead from financial manipulation. He follows several Bain Capital deals and makes a convincing case.
Hilarious, and largely accurate, video on how private equity firms hurt small business owners.
ProPublica does a nice job in September showing how Romney often bought profitable businesses that could handle debt, not companies needing turnarounds. The article also highlights how Bain often used outside brokers to find companies to buy and then did not pay them after it bought those businesses.
I appeared on CNBC’s Squawk Box August 6, 2012 explaining why I believe private equity firms hurt the economy to Andrew Ross Sorkin.
The New York Times in August 2012 did great investigative reporting revealing how private equity owned HCA, the largest hospital chain in the country, put profits over patients to pay debt and performed unnecessary heart surgeries. A second story showed exactly how it boosted profits. That is consistent with what I found in my book when examining the private equity owned Iasis hospital chain. It is also similar to what ProPublica found in examining private equity owned dental chains. Texas in Jan. 2013 announced it wanted to take action to regulate dental chains. Then, Salon wrote an investigative story about how Bain owned CRC Health Group, the largest provider of residential troubled teen and drug recovery centers, neglects and abuses patients. Very scary pattern.
Also, private equity and health care shows the dangers of privatizing public sectors.
Vanity Fair in its August 2012 issue discloses how Romney evaded taxes, and pushed tax laws to the point he might have broken them. The reporter, Nicholas Shaxson, quotes me speaking about how Bain brags about how it uses more leverage in its buyouts than other private equity firms.
Romney, like other private equity titans, buys overseas companies, strips them dry and collects profits for mainly US investors without paying local taxes. Italy knows the score and the country’s residents are angry at Mitt.
My Rolling Stone May 22, 2012 op-ed on “Why Private Equity Firms Like Bain Are The Worst of Capitalism”.
I debate University of Maryland Professor Peter Morici May 22, 2012 on MSNBC . He argues that private equity firms buy companies in need of help; while I maintain they typically buy profitable businesses and cripple them.
Village Voice Media in an April 24, 2012 cover story interviews me about Romney’s Bain record. Powerful feature.
On the Jan. 18, 2012 PBS NewsHour I debate a partner at a private equity firm about how the PE industry impacts the economy.
Appearing Jan. 13, 2012 on Fox Business, I reveal what Romney considered when buying companies and criticize Steve Rattner’s op-ed defending Romney and Bain Capital.
I explain to Lou Dobbs Jan. 12, 2012 how Mitt Romney’s claim of creating 100,000 jobs makes little sense since he is combining venture capital investments in which he did not control the businesses, with companies he controlled through leveraged buyouts. TPM has a nice story explaining the difference between private equity and venture capital.
MSNBC’s UP With Chris Hayes interviewed me Jan. 7, 2012 to learn about how Mitt Romney made money by hurting businesses (my segment is at the bottom of link).
A Huffington Post columnist says Dec. 30, 2011 that Obama advisor David Axelrod used the Buyout of America as the basis for his Romney attacks.
Nationally syndicated columnist Robyn Blumner Nov. 13, 2011 said the Buyout of America showed that Mitt Romney made money by plundering companies.
A Los Angeles Times article does a very good job focusing on Bain’s 10 biggest investments during Romney’s time at the firm. Four of those companies went bankrupt.
A Boston Consulting Group partner in a Los Angeles Times op-ed captures what Romney did at Bain and explains how few would benefit if he ran the country in a similar manner.
Private equity investor Leo Hinderey Jr. says an honest assessment of the private equity industry shows it has plenty of warts.
My February 2011 story in the New York Post revealed how Mitt Romney’s past made him a Working Class Zero.
We ask you to send in reflections on your experiences with private equity owned companies, which will be shared with readers, and thoughts on the subject.
Portfolio published the paperback of the Buyout of America Nov. 30, 2010.
There are new updates throughout the book, which is more timely than ever with the public concerned about how Wall Street impacts Main Street.
|Private Equity Updates
Share Your Experience | Private Equity News
Private equity owned cos, in this low-rate environment, have refinanced much of their debt thanks to easy credit. US non-financial cos, as of the end of 2012, had $645 billion of below investment grade debt that needed to be paid by 2017, according to a Moody’s report. The most, 40%, comes due in 2017.
A Moody’s December 2011 report found the 40 biggest US LBOs in the 2006-08 period had revenue growth of four percent through June 30, 2011 compared to 14 percent for the broader universe of non-financial rated companies. But earnings kept pace with peers indicating “PE firms may have been more aggressive in reducing costs.”
WATCH & LISTEN»Josh Kosman Debating the merits of Private Equity March 3, 2011 at Sciences Po University, Paris Watch Josh Kosman speak»|Watch Panel Discussion (heated exchange starts at 42:00)»
Josh Kosman speaking at media lauch party for the November 17 release of the paperback edition of Buyout of America at the Empire Room (on the ground floor of the Empire State Building) where the crowd drunk "Screwed Worker" cocktails. Watch Josh Kosman's speech»
Featured on PBS Newshour's Potential Risks of Buying Companies on Borrowed Money Examined on July 16, 2010 Watch PBS NewsHour Report»
Listen to NPR's Joshua Kosman, Predicting The Next Credit Crisis on November 16, 2009 Listen to NPR Radio: Fresh Air with Terry Gross»