What was Dennis Berman really saying in his Deal Journal post Wednesday about a class-action suit challenging the private equity industry? Let's translate. He seems to agree that collusion, bid-rigging and illegal conflicts drove the buyout boom -- actually explain the phenomenon -- which the plaintiffs' lawyers try to lay out in graphic form. "The irony of the diagram and the lawsuit is that there are some elements of the explanation that ring true."
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First off, the "irony" here is, to be charitable, unclear.
Apparently, though, Berman accepts the notion that the allegedly problematic deals would never have happened without illegal acts that have, so far, eluded the Justice Department, the SEC and the Delaware courts. On the other hand, there are few facts to back up that charge. And that's sad. "Alas, what might get your head nodding in agreement might not have a chance to stand up in court."
But just wait. The plaintiffs promise to back up their charges with evidence. Always a good idea! "Until then," Berman concludes, "when it comes to explaining how the Great Private Equity Boom of 2004-2007 was really carried off, the facts still get very much in the way of the truth." Alas, this argument just gets our heads shaking in confusion. - Robert Teitelman
Comments
bain purchased K.B. using only $18 of its own money. Paid a special dividend, of which management took some $30. The company could not maintain that level of debt and failed, with a failure to re-pay the money that was still owed to the origional sellers. Hmmm, doesn't seem like rocket science math to me.
By the way, name another business entity whose reputation was, is, so tattered that they changed the name of the business. Come on, I double dog dare ya! Name just one. Yeah, thats what I thought!