Bain Capital and Private equity

[stone]

Interesting piece about private equity saying leveraged buyouts are an artifact of the tax law whereby if earnings go to pay off the debt taken on to do the buyout, then that avoids corporation tax. They say that such debt financing makes companies function much less well than they would with less debt and more equity:-
http://rortybomb.wordpress.com/2012/01/ ... -tax-code/
"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.
In January — so just in the past 12 days — Hostess, the largest bakery in the country, just went bankrupt. Coach, the largest bus company, just went bankrupt. And Quizno’s is about to go bankrupt. All of these were owned by private equity.
This battle is part of a larger discussion of, in Henry Manne’s phrase, “the market for corporate control.”? The tax code is set to overlever firms, which require increases in earnings to go toward debt payments instead of research and development, expansion, and other things that build the firm."