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Unread 28 Feb 2007, 15:55   #1
milo
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Private Equity and the new corporate raiders

Theres mutterings in the city about a fundamental change in the way britain (and america) does business. Basically its a rejection of public companies in favour of private equity ie instead of raising capital via shareholders you go to banks/private institutions. Blair himself has urged Labour not to criticise this trend too much, which just goes to show how far New Labour has moved from its roots espcially given the critcism from unions. This is basically becoming an increasingly important issue as more companies turn to the so called 'dark side' of PE and start aping corporate raiders of the 80s. Its just a heads up on something that will probably come into the wider public sphere at some point. Robert Peston has an excellent blog at the bbc thats actually very respected, and hes commented quite a lot of entries in recent months on the trend (impact on employees/unions/corporate practises/does it actually create wealth etc). One of the problems that may arise is an 80s style increase in corporate raiders. I'm not making an argument in this thread as such, just pointing out an area that will potentially be of interest.
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Unread 28 Feb 2007, 16:38   #2
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Re: Private Equity and the new corporate raiders

its silly to deny the benefits of bank loans.

And in order to rely financially on shareholders your company has to be a) public b) no longer a "small business". Unless your thread is aimed more to huge corporations (who still use shares as main source of financing, afaik) then its a positive move towards support of small business. Ofcourse, that is giving even more power to banks and increasing their already iron grip on the market. But thats what its all about, innit... theyre just foing their job.

If we are talking small business, that means private shareholders, who have limited financial capabilities... Why owuld I want to limitmy business by what i can afford, rather then use what i can have in order to progress better ?
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Unread 28 Feb 2007, 16:45   #3
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Re: Private Equity and the new corporate raiders

You're at least 5 years out of date
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Unread 28 Feb 2007, 17:26   #4
milo
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by Yahwe
You're at least 5 years out of date
As are GMB and other unions, the BBC, the city and the parties. Because suddenly and for no reason everyone remembered alchemy and rover, and the prevalence of PE in recent times has nothing to do with market conditions now. Perhaps you should start your own blog for the BBC? You seem to be five years ahead of everyone else.
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Unread 28 Feb 2007, 17:38   #5
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Re: Private Equity and the new corporate raiders

I don't see how corporate raiding can be much of a problem except in particular circumstances. "Asset stripping" obviously only works when your net asset value is somehow below your market capitalisation, and given the ludicrously high share values of recent (and high levels of corporate debt) I'm not sure how common that's going to be. Sure if your main market has somehow disappeared overnight unexpectedly but you've got your plant assets, etc left - but does that happen often?

Of course, there's going to be companies which are split up to keep the profitable bits, but then that's been happening for years (as Yahwe already said). The M&A activity of the last few years is what's funding half the market boom as far as I can tell. Is there any evidence that being taken over by a private-equity fund is that much worse than another PLC?

There probably is more short-termism but again, public companies have been drifting that way for years.

And to be honest, are company breakups inherently evil? If you've got a company which is awkwardly composed (for historical reasons) and it could be better managed in different bits then why not? If this sort of thing is "hostile" then it probably means the existing leaders of the company weren't managing things properly (probably for some time).

Obviously there's an impact on workers in any acquisition activity (and any change in business practices generally), but if people were somehow thinking that shareholders were looking out for the working man then all I can really say is lolly roffle.

In terms of private equity firms running companies in the long term it's not a given they can do so universally anyway. Most of the people organising these sorts of deals probably have some kind of ADHD anyway (partially because there are huge sums to be made straight away, but more modest amounts in the longer term) so their attention may drift over time.

I think a lot of the concern has been raised by people who bought into the shareholding democracy fantasy a little too readily. Except in a minority of cases, institutional shareholders (or very wealthy family/individual shareholders) tend to have the weight in public companies (even if they don't exercise it) so what's the difference? Again, perhaps this is just more a question of pace.

The move away from more public accounting processes is obviously a bit concerning, although presumably the changes aren't that dramatic (I'm not really sure what the regs are tbh). If there is some gigantic cock-up there'll probably be some kind of Sarbanes-Oxley-esque legislation anyway.

Yes : The workers are being shit on in a lot of cases. That was already happening and will continue to happen. The answer is not to wish you had a different, kinder master.
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Unread 28 Feb 2007, 18:02   #6
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by milo
As are GMB and other unions, the BBC, the city and the parties. Because suddenly and for no reason everyone remembered alchemy and rover, and the prevalence of PE in recent times has nothing to do with market conditions now. Perhaps you should start your own blog for the BBC? You seem to be five years ahead of everyone else.
I don't think you should be bitter about it.
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Unread 28 Feb 2007, 20:22   #7
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Re: Private Equity and the new corporate raiders

Wait, this isn't a thread about the new Indiana Jones movie?
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Unread 28 Feb 2007, 20:54   #8
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by Dante Hicks
I don't see how corporate raiding can be much of a problem except in particular circumstances.
You're thinking of it in purely 80s terms when the assets were in the hands of the government and undervalued. The compaines in this case have a fair market value but the market is rising, and even if it isn't they may start doing the equivalent of selling short.

Quote:
The M&A activity of the last few years is what's funding half the market boom as far as I can tell. Is there any evidence that being taken over by a private-equity fund is that much worse than another PLC?
M&A doesn't cause a boom in itself, most consumer spending (which drives the market) in the last few years is really a result of mortgage equity withdrawal (especially in the US). Consolidation, mergers and taking something private happens when you run out of ideas. If there was room for organic growth they wouldn't be doing this. There are problems with an entirely private market, it was how things were run in the 19th century and amongst other things it leads to an increasing gap between rich and poor (the income generated is needed for repayments it can't be wasted on workers), the 'public institutions' also created a feeding frenzy around shares that although volatile meant wealth distribution - the entire point of shares is to be a share holder. All that on a meta-level means its unclear whether PE generates any new wealth for a nation. The absolute number of workers under a PLC system isn't as important as the opportunity it gives for an economic engine to start pumping - in a day trading cycle wealth is moved around which is very important. Those who do work in a company taken over by PE theres likely to be job cuts (obviously) increased work levels with very little or no compensation.

Quote:
And to be honest, are company breakups inherently evil? If you've got a company which is awkwardly composed (for historical reasons) and it could be better managed in different bits then why not? If this sort of thing is "hostile" then it probably means the existing leaders of the company weren't managing things properly (probably for some time).
As above you're misunderstanding that its isn't entirely like the 80s. To give you a very rough idea (and please take note of rough) in ye olde commie terms. Imagine the household you live in owns some of the house, and various other people own some of the house. The ability for people to speculate (via share trading etc) on how much work dante will do or how often he has sex means that either through the promise of dividends or through little more than glorified bets on share value (which is what day trading is) tnf, sbolly, and snurx are able to make a living. They have nothing to do with your house but your house if wealth generating. Then one day Nodrog turns up and says 'its mae hoose' he gets rid of deffeh from the house to save money the money generated is his, and theres no lairy speculation on your sex life. The distribution of wealth is much less. Tnf, Sboolly and snurx don't make money like they used to and that filters down. More than that Nodrog now becomes far more influential relative to anyone else and he may or may not support purely meritocratic lines to his money/ideas (after all like murdoch he might be out to create a dynasty).

Quote:
In terms of private equity firms running companies in the long term it's not a given they can do so universally anyway. Most of the people organising these sorts of deals probably have some kind of ADHD anyway (partially because there are huge sums to be made straight away, but more modest amounts in the longer term) so their attention may drift over time.
Actually the reason they're doing it is for the medium/long term.

Quote:
I think a lot of the concern has been raised by people who bought into the shareholding democracy fantasy a little too readily. Except in a minority of cases, institutional shareholders (or very wealthy family/individual shareholders) tend to have the weight in public companies (even if they don't exercise it) so what's the difference? Again, perhaps this is just more a question of pace.
You're thinking in absolute terms, theres a reason why public shareholding and the institutions its supported for the last century were thought of as being more progressive than earlier practises.

Quote:
Yes : The workers are being shit on in a lot of cases. That was already happening and will continue to happen. The answer is not to wish you had a different, kinder master.
I'm unsure what this means.
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Unread 28 Feb 2007, 23:12   #9
Dante Hicks
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by milo
You're thinking of it in purely 80s terms when the assets were in the hands of the government and undervalued.
You're doing that psychic thing again of knowing more about what the person said than them.

I must confess, I did think of the TV mini-series / novel 'Stark' by Ben Elton, where one of the characters was a corporate raider. And that was published in 1989, but beyond that I didn't think for an instant about privatisations although you're right it could apply there too. I was mainly thinking about how consistently high share indices have been (yes, even including "adjustments" like the one yesterday) and how there cannot be too many firms with asset valies above their market caps.

If you bought Google for instance, their physical assets (including cash) are probably worth what - 1/100th of their market capitalisation (although admittedly they are a pretty unique case)? Sure, their brand is worth something, but that's harder to quantify.

Now, I agree - asset stripping is not what this is about mostly (apologies if I did not make this clear, I wrote the post while at work).

You're right on the selling short point though, although I find this a little scary because you start to get the scenario where the market is disproportionately powered by "non-real" activity and as such get's further and further from fundamentals (such as they are). I suppose we're well past the point of worrying about that though.

Quote:
M&A doesn't cause a boom in itself, most consumer spending (which drives the market) in the last few years is really a result of mortgage equity withdrawal (especially in the US).
Sorry, I was unclear again. I meant a boom in trading activity or activity among the merchant banks, etc - not necessarily "real" economic growth. The point is the scale of M&A is already pretty mind-boggling and I don't see private equity changing that particularly.

Quote:
Consolidation, mergers and taking something private happens when you run out of ideas.
This is a bit of a simplification, but I agree. It can happen for political-esque reasons - it's been noted that one of the reasons there's been quite a bit of merging in the European utility markets is the desire for various players to have some sort of influence on the next ten to twenty years of European regulations (which depending on things like carbon tarriffs could be enormously important). I work for a non-profit but even we've merged a couple of times since I joined and one of the stated reasons is that if we're the 4th or 5th largest provider of housing in Britain (instead of the 30th) then we're more likely to be able to influence government policy. Mainly though it seems to be about corporate vanity and executive renumeration...

Indeed, even in our merger (which is in a sector so heavily regulated that to pay our staff a £100 bonus we had to receive permission from the Housing Corporation) people got screwed over to a certain extent. The level of screwing depends a lot on the personalities involved. Some of the US stories about what happened after certain mergers sound horrific, but some of that is the regulatory framework and other bits are cultural/political perspectives.

Quote:
Those who do work in a company taken over by PE theres likely to be job cuts (obviously) increased work levels with very little or no compensation.
Again, I'm not sure if this is significantly different from if you were taken over by another PLC. Why should it fundamentally be any different? A quote from today's FT sort of covers what I mean (although is incredibly stupid) : "large German groups had laid of 100,000 people in the last two years [in Germany] compared to 7,000 by those owned private equity". Obviously without a sense of proportion this is toss, but the fundamental point that all profit-making enterprises fire people is a fairly basic one.

As an aside, to give some scale : Apparently the combined purchasing power of private equity including leverage is $1.2trn - which is less than the combined level of just five public companies (out of hundreds).

Quote:
They have nothing to do with your house but your house if wealth generating. Then one day Nodrog turns up and says 'its mae hoose' he gets rid of deffeh from the house to save money the money generated is his, and theres no lairy speculation on your sex life.
I think this is a misrepresentation of what share trading actually does though. Sure, if you're making some kind of spread-bet then it's merely speculating, but what share-issuing is supposed to do (as you say, shareholding) is raise equity for a firm based (in theory) on it's long term profitability. Risk for a particular venture is divided up between the owners, etc, etc. In a private equity scenario, yes - the risk/reward is concentrated in "one point" but in practical terms it's not one person, it's an institution (representing their own owners) or collection of institutions and weathy backers. The way reward "trickles down" (lol) may have changed, but ultimately the fundamentals are the same. Previously, your pension fund probably owned 1% of Acme Industries, but then AI are taken over by a private equity firm. This equity still comes from somewhere - often funded by loans from bank accounts that savers fund (admittedly more likely Japanese savers than American savers, but still). Yeah, the arrangement of risk / compensation / guarantee has changed, but with large pension groups they're hopefully hedging things well enough that risk is not significantly different from certain types of debt bonds anyway.

Quote:
The distribution of wealth is much less. Tnf, Sboolly and snurx don't make money like they used to and that filters down.
If they were day-traders then sure, this is true, but I'm not really sure day traders are particularly positive contributors to society anyway. Otherwise, as "normal" investors, I don't see there's that much of a difference fundamentally (the actual deal they get is down to them and their financial advisor/bank/broker obviously). They invest their money with someone (e.g. a bank) who invest it with someone else, who invests with someone else...etc.

The distribution of wealth to workers or others along the supply chain is much more of a concern, but as I say - I don't see how that's fundamentally different from any other private concern.
Quote:
More than that Nodrog now becomes far more influential relative to anyone else and he may or may not support purely meritocratic lines to his money/ideas (after all like murdoch he might be out to create a dynasty).
In this case, private means one person. Usually PE is representing tens of thousands of investors (who probably don't even know where their money is anyway). No, it doesn't represent them in the same formal way shareholding used to, but as I say, most public companies aren't owned by lots of little shareholders anyway, they're owned by funds which behave not unlike the PE firms.

I don't really get your point about a dynasty either - if the firm is owned by literally one person then sure, but then you could have a PLC where the shares are mainly owned by one person / family. And indeed you do of course.

Of course, if you're talking about large corporations being completely owned by four or five very wealthy people then of course, yes this is wrong (even more wrong than usual I mean). But then my question is how did they get to be so rich in the first place? If it's some scam they've managed to pull off by convincing (originally) a bank to lend them a few hundred million on dubious grounds then I guess someone should look at our banks (but they, as public companies I'm sure they're well managed anyway )
Quote:
You're thinking in absolute terms, theres a reason why public shareholding and the institutions its supported for the last century were thought of as being more progressive than earlier practises.
I always think in absolute terms, I'm a dirty commie. But I do see what you're saying, but I think some of the benefits you're describing (of 20th Century public firms vs 19th century private firms) were much more down to more equitable distributions of wealth on a "primary" level (e.g. higher rates of pay to workers, more money paid to the poor indirectly and directly through social programs, etc). The things which supported better gini co-efficients were basically labour unions (/labour "issues" generally), the welfare state and political will. All three of those things are weakened (and weakening further) which means on every scale, things are starting to slip towards a more unequal state of affairs. Slightly OT but a recent report on housing commissioned by the government published this week notes that in London at least, there will be an increasing divide between those whose parents are owner occupiers (and thus, on average can help their kids with a deposit) and those whose parents are not (who can't).

So basically if "shareholder democracy/wealth generation" is declining then it's a symptom of these much larger issues (I'd argue, anyway). Joe Bloggs from Tumbridge Wells may now lack the ability to buy individual shares like he used to (although, there's numerous other ways he can invest his dosh) but a much larger issue is probably is that his companies pension fund has some sort of crisis, he's got to pay for his daughter's uni education and his son needs help with a deposit.

if he's unaffected by these sorts of issues (e.g. he's got no kids, his mortgage is paid off, good pension, etc) then he's one of the lucky ones. And he can day-trade on the bond markets instead. I won't cry for him too much.
Quote:
I'm unsure what this means.
Well, it's two points. One if the ra-ra-revolution point that I'm not overly interested in which bunch of capitalists run the world and if I 'm going to fight for a better world it's not so that the current shareholding regime is protected. "Hey, we're not as bad as the 19th century" is not a very powerful battle cry.

Secondly though, there's a much simpler point. The number one way of improving distribution of wealth in this country is not by legal restrictions on private equity funds, it's not by putting some sort of weird tax on city bonuses or windfall taxes on "excessive" profits or even adjustments in the benefits system. It's for working people to be paid more money. The responsibility for that demand obviously rests with "us" (the workers) and that's where political activity should be rather than worrying about regulatory frameworks and the like.

p.s. Is anyone else consistently misreading PE as Price to Earnings?
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Unread 1 Mar 2007, 02:08   #10
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Re: Private Equity and the new corporate raiders

Quote:
You're right on the selling short point though, although I find this a little scary because you start to get the scenario where the market is disproportionately powered by "non-real" activity and as such get's further and further from fundamentals (such as they are). I suppose we're well past the point of worrying about that though.
This is why i personally believe public trading is much preferable and should be encouraged with a decreased regulation burden (i wasn't suggesting bringing in legislation against PE btw), statistical arbitrage particularly through the likes of Ken Griffin has reached a level where hes admitted holding trades for only 30secs, they're going to get up to this anyway, much better to let them do it without massively distrupting the balance of day-to-day activity in the company.


Quote:
Obviously without a sense of proportion this is toss, but the fundamental point that all profit-making enterprises fire people is a fairly basic one.
I never disputed that, my central argument is a potential neutering of what has been the engine for growth particularly in the late 20th century and a big question mark over wealth creation for the country as a whole.

Quote:
As an aside, to give some scale : Apparently the combined purchasing power of private equity including leverage is $1.2trn - which is less than the combined level of just five public companies (out of hundreds).
I'm unsure what you mean by purchasing power in this context, but the value of deals struck last year in the US alone was about that number, in britain its already 30% of deal activity and the massive heavyweights of the likes of BP/Shell aside those involved are confident that they're increasingly able to take on ftse 100 companies

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I think this is a misrepresentation of what share trading actually does though. Sure, if you're making some kind of spread-bet then it's merely speculating, but what share-issuing is supposed to do (as you say, shareholding) is raise equity for a firm based (in theory) on it's long term profitability. Risk for a particular venture is divided up between the owners, etc, etc. In a private equity scenario, yes - the risk/reward is concentrated in "one point" but in practical terms it's not one person, it's an institution (representing their own owners) or collection of institutions and weathy backers. The way reward "trickles down" (lol) may have changed, but ultimately the fundamentals are the same. Previously, your pension fund probably owned 1% of Acme Industries, but then AI are taken over by a private equity firm. This equity still comes from somewhere - often funded by loans from bank accounts that savers fund (admittedly more likely Japanese savers than American savers, but still). Yeah, the arrangement of risk / compensation / guarantee has changed, but with large pension groups they're hopefully hedging things well enough that risk is not significantly different from certain types of debt bonds anyway.
Ill have to agree to disagree on the impact it'll have.


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If they were day-traders then sure, this is true, but I'm not really sure day traders are particularly positive contributors to society anyway.
They don't cure cancer, but they obviously contribute positively in any meanginful sense within the topic.

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The distribution of wealth to workers or others along the supply chain is much more of a concern, but as I say - I don't see how that's fundamentally different from any other private concern.
In this case, private means one person. Usually PE is representing tens of thousands of investors (who probably don't even know where their money is anyway). No, it doesn't represent them in the same formal way shareholding used to, but as I say, most public companies aren't owned by lots of little shareholders anyway, they're owned by funds which behave not unlike the PE firms.
Yeah but the point is the very nature of private concerns makes the wealth concentrate in fewer areas than publicly listed companies which by their very nature encourage 'more' distribution. Again we'll just have to agree to disagree on a pretty fundamental premise



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Secondly though, there's a much simpler point. The number one way of improving distribution of wealth in this country is not by legal restrictions on private equity funds, it's not by putting some sort of weird tax on city bonuses or windfall taxes on "excessive" profits or even adjustments in the benefits system. It's for working people to be paid more money. The responsibility for that demand obviously rests with "us" (the workers) and that's where political activity should be rather than worrying about regulatory frameworks and the like.
Oh i agree no more laws, but until you start the revolution across the entire planet...at the same time everyone with the money will just relocate
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Unread 1 Mar 2007, 06:41   #11
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Re: Private Equity and the new corporate raiders

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Originally Posted by milo
I never disputed that, my central argument is a potential neutering of what has been the engine for growth particularly in the late 20th century and a big question mark over wealth creation for the country as a whole.
I don't think you've properly explained why it is a potential neutering of anything though, aside from the fact day traders can't speculate on companies success (which they still could, in other ways of course). Financial firms are hugely expanding the ways people can interact with all sorts of markets (the increase in commodity market speculation, especially by corporations hedging material prices for instance). Given increased IT, reduced transaction costs, and larger appetite for gambling I'd imagine a lot more people in the UK will be speculating on markets in one war or another even if not formally owning shares.
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I'm unsure what you mean by purchasing power in this context
Well I was quoting someone else's figures there but the article seemed to be talking about available funds. PE is currently apparently 1.2trn, the equities market generally is 70trn or something like that.
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They don't cure cancer, but they obviously contribute positively in any meanginful sense within the topic.
I'd argue they only do this marginally although it depends on how they trade. In an extreme case, if they're just speculating on an hour by hour basis and always ending the day with cash then they're not doing much else than just having a bet with someone on whether the Dow will be up or down tomorrow. Arguably there's some very weak signals sent on what segments of industry "deserve" to be funded, but as it's so market/short-term based then I fail to see how they're helping much (beyond shouldering risk for very small periods of time).
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Yeah but the point is the very nature of private concerns makes the wealth concentrate in fewer areas than publicly listed companies which by their very nature encourage 'more' distribution. Again we'll just have to agree to disagree on a pretty fundamental premise
The terms "private" and "public" are two of the English words with the widest uses. 'Public houses' are almost always privately owned. A private home can be a council house and thus publicly owned. 'Public schools' are basically private. Private land can have public rights of way. Tescos is a privately owned company, even if it's publicly listed and so on. So I'm not sure you can just say "the very nature of private concerns" without explaining what it is specifically about them that you think will cause this new imbalance. If you have a public company which is owned by 4 large shareholders, how will that automatically distribute wealth more than a firm owned by an equity firm which is in turn owned by four or five banks with millions of customers?

On the private/public thing more generally : Are the Nationwide Building Society, the Co-Op Society and most charities inherently worse as employers (or social actors) because they're non-listed? (I realise you can become members of the former two, but you get the idea). I've heard people complain over on Slashdot that as employees the worst thing that happened to them was their firms going public because now everything is geared towards the whim of the market, rather than actually developing products or longer term concerns. Or if you look at the Body Shop, when privately owned they arguably had a larger degree of freedom to pursue perhaps less profitable but more ethical business practices (I'm not saying they did btw). Once public they're obligated to follow profit maximisation and now as I understand it they're owned by L'Oreal anyway (who test on animals) and who are in turn partially owned by Nestlé (who in turn are involved with marketing practices which are said to encourage practices which contribute to the deaths of 1.5m children a year). I'm not trying to defend non-listed firms here particularly they're all capitalist scumbags as far as I'm concerned, but, I've just not heard you list any meaty arguments as to what the new beef is (pun unintentional).

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Oh i agree no more laws, but until you start the revolution across the entire planet...at the same time everyone with the money will just relocate
The movement of skilled people is a significant problem for many parts of the world (so called "brain drain")*, and if you had social upheaval it's true it could happen and that would certainly be something to consider. However, as I've said before I'm not overly concerned with money - in this context we're just talking about numbers in databases or small pieces of paper.

Now, control over resources & infrastructure and the afforementioned skilled population. That's something worth talking about.

* = As an aside, there will of course people whose skills are in demand, but in the longer term I would imagine you would get a much more widely distributed set of skilled persons. Programming is an obvious example, but I would imagine before 1990 (say) 95% of the skilled programmers were in the US or Western Europe. I've no idea what it is now, but given the expansion in India and China (and eventually elsewhere) I'd guess this figure must be dropping rapidly.
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Unread 1 Mar 2007, 08:45   #12
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by milo
Yeah but the point is the very nature of private concerns makes the wealth concentrate in fewer areas than publicly listed companies which by their very nature encourage 'more' distribution. Again we'll just have to agree to disagree on a pretty fundamental premise
How can you keep ignoring the (very valid) point Dante maid.

Plenty of investors invest through public funds, investment funds from their banks, or if they have enough money private equity funds that play around with their money for them. Now, these private equity funds often represent a whole lot of people with a whole lot of money, same for the private funds banks have.

Let's keep this simple.

Sticking your money en-masse into a private fund does not necesarilly concentrate the wealth in fewer areas. It simply redistributes wealth in a different way. I am sure you realise these funds manage to survive by spreading their risk (Except Mr. Buffet, who can't move his equity anywhere). and therefore redistributing the wealth people have put into them. I really don't see how you can argue this distribution is less than when people invest themselves, since a) this would (in my opinion) would be no more than a 'gut feeling, which I b) disagree upon because my gut feeling tells me there are more investors with little to no knowledge about the market that 'invest' my pouring their money in some fund their bank has, than investors that actually trade on the market itself (you'd also require a bit more money to make this worthwhile).

We'll probably have to agree to disagree here, but I don't see how PE (or putting your money on a savings account) leads to less money distribution.
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Unread 1 Mar 2007, 10:11   #13
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Re: Private Equity and the new corporate raiders

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Originally Posted by hook
How can you keep ignoring the (very valid) point Dante maid.

I'm not i just disagree with it, hes not going to change his opinion and neither am i.

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Originally Posted by Dante Hicks
So I'm not sure you can just say "the very nature of private concerns" without explaining what it is specifically about them that you think will cause this new imbalance.
Theres only so many ways i can put it, but a lack of ability for the wealth to be 'shared' and ultimately 'traded' and speculated upon. I'm well aware of the insitutional links of which you speak, i know that at the moment pension funds provide the single biggest form of investment (though this will change) im well aware that people don't know/don't care about where their money is or that risk is shared between institutions.

The principle of private ownership ==> public(specifically)/employee/etc shareholding is about (again im just repeating)

'sharing the wealth of the company and the speculation it allows is wealth creating especially to people not connected to the company and therefore "more distributative" '

All those examples you give are to me literally besides the point since im only interested in the fundamental framework. I understand the point you're making that they'll be an institution willing to accept my money, but again a fundamental difference in how we view history means we look at the impact shareholding had on top of that in opposing ways.

The best way i can sum it up is by saying you look at history differently to me, to you we could still arrive at the same place today, because the '20th century vs 19th century' business practises debate was 'largely' (?) isolated from what we're talking about. To me had those transformations not occured and had everything remained private we would have been poorer today and the wealth would have been more unevenly distributed.

Although i don't think it'll go to anything like this extreme, what we're ultimately talking about is a regression of history and would it have a significant affect. We disagree on the causality and hence can only agree to disagree.
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Unread 1 Mar 2007, 14:50   #14
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Re: Private Equity and the new corporate raiders

Quote:
Originally Posted by milo
I'm not i just disagree with it, hes not going to change his opinion and neither am i.
I wouldn't be that fatalistic dude, I'm more interested in hearing the arguments. I oppose private ownership of property as a general rule, but as to whether Capitalism V1 is better than Capitalism V2 I'm pretty agnostic so convince me.

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Theres only so many ways i can put it, but a lack of ability for the wealth to be 'shared' and ultimately 'traded' and speculated upon.
There is no lack of ability to share wealth in any enterprise. Don't be silly by suggesting that there isn't.

As for the trading/speculating - well that is a difference, but as I say, there are many other methods of speculation available (and will be so many more). I speculated on the Dow Jones the other day, but of course I owned not a jot of it.

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To me had those transformations not occured and had everything remained private we would have been poorer today and the wealth would have been more unevenly distributed.
Well given that large swathes of the economy were nationalised I don't think it's sensible to say "if everything had remained private" since we're in a completely different parallel universe then. But I'm not sure that's relevent.

Saying "regressing fifty years" (or whatever) is a useful rhetorical device, but isn't really straight forward. If we reintroduced chattel slavery we wouldn't be travelling 170 years back in time, we would have an entirely different scenario which would be appalling but would not mean Britain (or anywhere) suddenly became like the 1850's.
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