The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis

by Joshua Kosman

Book Overview

Few people realise that the top private equity firms such as Blackstone Group, Carlyle Group and Kohlberg Kravis Roberts have become America's largest employers through the businesses they own.... This description may be from another edition of this product.

• Format: Hardcover
• Language: English
• ISBN: 1591842859
• ISBN13: 9781591842859
• Release Date: November 2009
• Publisher: Portfolio
• Length: 280 Pages
• Weight: 1.10 lbs.
• Dimensions: 1.0" x 6.4" x 9.3"
• Age Range: 18 years and up
• Grade Range: Postsecondary and higher

Customer Reviews

Eye-opening look into PE hyper-greed, but also one sided

Josh Kosman writes as a journalist experienced in coverage of Wall Street and other large financial deals. He brings his extensive journalistic background of about 10 years data gathering to bear in this sweeping indictment of Private Equity (PE) firms. Kosman has a mountain of data and stories to tell which clarify the dangers PE firms impose on our economy. It's not just the 10% of American workers that are either terminated or extremely overworked being affected. The investors marshaled by the PE management also often come up short - losing money in pension funds, investment bank loans and other macro-economic areas that further hurt the economy. The author provides names and extensive details making his book a strong opening salvo for the discussion he wants to bring the American people (and others) into. He has a web site listed in the book that is also for this purpose. Kosman predicts that defaults on PE investment loans between 2012-15 will lead to the next credit crisis and it is about the same size as the mortgage crisis we are in now. The same easy lending policies that allowed subprime loans for houses also funded massive leverage buyouts via PE financiers. The PE financiers are so greedy in Kosman's account that it is incredible, yet he backs it up pretty convincingly. The lavish lifestyle and cavalier attitude towards society of LBO kings is pretty well known anyway, but this book details the savage business practices that leave a wake of destruction where only the PE interests are assured of walking away whole. It is amazing how much these PE financial wizards get away with in Kosman's accounts and that leads to what I think is the books' primary weakness. Despite his mountain of data, I am left wondering: why doesn't the investment community sort these guys out for what they are? Setting aside the damage to companies and individual careers, if they do not deliver for their investors any more than Kosman says how do they keep getting funded? In several places the author indicates he tried to get comments from PE spokesmen but usually could not attain it; no surprise there since they probably feel they have better things to attend to - where's their upside in helping him? As another indication Kosman may not be thinking broadly enough, he barely offers a single sketchy scenario on how the next PE induced credit crisis can be avoided, and that is easier corporate lending so the PE debts can be refinanced for another round. This idea is not really explored, just mentioned. Even if that life vest is available, it just postpones a calamity over a period of years so it is not so intense all at once. If he's right then maybe there are no good ways out, but I would have liked to have seen an opinion from an investment banker or other economist who might be more objective about the potential options. I work for a PE owned company and have seen both good and bad effects. We are much more focused and centrally organized with

How Private Equity Will Cause the Next Great Credit Crisis

In //The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis// Joshua Kosman, a business reporter at the New York Post, indicates that it is likely half of the 3,188 American Companies bought by private equity companies between 2000 and 2008 could collapse. He also analyzes the links between the private equity elites and Washington power players who have helped them avoid government scrutiny. One of the highlights is the notion that the takeover of seven of the fifteen largest for-profit hospital chains by private equity firms was to the detriment of their patients' health. The author does a superb job of discussing the story of private equity leading up to the early 90's. This period that became prevalent during the "junk bond" age and the savings-and-loan meltdown in the 1980's. Many books have been published on the financial crisis in 2009, but this present volume should be on everyone's financial bookshelf. Reviewed by Claude Ury

The Snake Eats Its Own.....Tale of Austin Fitt's Tapeworm.

Treasury secretary Nicolas Brady(King George 1 & 11)said that when you put together a leveraged buyout, what you essentially do is eliminate the 34% that used to go to the Federal Government in the form of taxes. This means the shareholders make out like banditos on the speedy gonzales track but in the long term its the communities, employees, & bonholders who end up with the toxic realities. The system has, since FDR been shifting(Shaft Change) the burden of tax from the FIRE sector to labors back(I'am Shocked!). Josh Kosman has made a clear cut case that the next shoe to drop will be the private equity market. A straw thats really several tons of hay, this the camel back won't needle its way out of the rich man's burden. He affirms that the idea that PE firms put cash into companies is a widely held misconception. That PE firms almost always saddle them with the bill and subsequently larger debt. Private equity firms buy businesses through leveraged buyouts, which simply means loading the company down with HUGE debt. The PE firms put the companies they aquire under intense pressure, more than they would ever feel in public markets. PE firms hurt the companies they own, their customers, & their employees. But, boy do the central bankers love them, next to the derivatives, and subprime loans of course. The simple plan was to make the companies pay for their own aquisitions by having them take out loans equal to approxiamately 90% of their own purchase. The real economy and democracy suffered. They would have its debt as an operating expense deducted from the profits(simply transferring those profits in the form of interest to the central bank where nothing is produced) through the depreciation tax schedules(transferring tax burden off the FIRE sector onto labor), thereby greatly reducing taxes. The final step in the plan was to sell these companies before the DOA event. The victim businesses would be targetted for potential tax loopholes, cuts to staff & workers, selling off pieces of the business in an efficient cannibal model. Great detail, great examples and anaylsis of the coming crash. Highly Recommended !!!!!!! P.S. Google Catherine Austin Fitt's Tapeworm

Smash and grab, the america you live in.

hello,I just wanted to ck and see if the style has changed since the eighties...this book displays the perfected art of smash and grab and how it is progressing...It'll kill this country but hey,it's only a country isn't it?!

A redefinition of "equitable"

In the Introduction, Josh Kosman offers what he calls a "little primer" on how private equity firms operate, explaining that they "buy businesses the way that homebuyers acquire houses. They make a down payment and finance the rest. The financings are structured like balloon mortgages, with big payments due at some point in the future. The critical difference, however, is that while homeowners pay the mortgages on their houses, PE firms have the businesses they buy take out the loans, making THEM responsible for repayment. They typically try to resell the company or take it public before the loans come due." It soon gets even more interesting. "As long as the PE firms could refinance, or turn around and sell off their holdings before the biggest loan payments came due, spectacular flameout bankruptcies could be avoided...PE firms would like to have us all think the reason they try so hard to raise earnings in their businesses [by `starving companies of operating and human capital'] is so that companies can use these profits to pay down the money they borrowed to finance their own acquisitions. But the records show that during the 2003-7 buyout rush, that wasn't generally the case. Instead, they used the profits s a basis to borrow more money. The new loans, which were piled in top of the original debt taken on to finance the LBO, were used to issue dividends" to the (you guessed it) PE firms. What if all, most, or even only some of the companies collapse? No problem. The PE firms have incurred no debt while receiving dividends as well as substantial management fees. "Despite the credit crisis in 2009," Kosman notes, "PE firms are sitting on roughly $450 billion in unspent capital and itching for more deals." Of course they are. Given their circumstances, would wouldn't? Kosman explains how and why PE firms "put their companies into crippling debt and, unlike entrepreneurs, who manage their businesses to succeed in the marketplace and grow, they manage their companies largely for short-term gains." PE firms hurt their businesses competitively by limiting their growth, cutting jobs without reinvesting the savings, do not even generate good returns for their own investors. According to Kosman, they are "about to cause the Next Great Credit Crisis," one that could leave about two million of the 7.5 million Americans who work at PE-owned companies unemployed, and more than one thousand businesses bankrupt. "Leadership is needed to rally opposition to close the tax loopholes that make this very damaging activity possible." In a book certain to generate controversy, Kosman provides a wealth of information (financial data and statistics as well as real-world situations) to support his observations, recommendations, and especially his accusations. After reading the book and then re-reading several key passages that I highlighted, I wish Kosman had included other perspectives on the issues he raises. For example, the thoughts of those who head the most