I was considering the recent surge in Leveraged Buyouts and began to wonder why they occur, especially some of the recent ones where the firm goes private and then public again within a short time period, often after 1 to 2 years.
It is obvious to everyone who reads the business news that the private equity groups taking public companies private are making enormous profits. Based on this factor alone the current shareholders of a company for which an offer is made shouldn't be interested in selling as they are clearly leaving a significant amount of value on the table.
This leads to the question of why is there value left on the table? It would seem that the private equity firm has a different operating model in mind for the firm. Assuming the firm is run to maximize shareholder value (there are other considerations but I am not going there for simplicity and the private equity firms aren't going there either) then the current management team should be doing what the private equity firm wants to do. Given the number of transactions over the past few years it should be obvious to management what the new owners will do and they should do it immediately.
If Management is involved in the leveraged buyout the board of directors should immediately fire the entire team and initiate lawsuits seeking damages as the management team clearly has steps in mind to increase the value of the firm that they aren't initiating until they are the owners. They have stopped working in the shareholders interests.
Lawyers are quick to sue a firm whose stock price drops for that fact alone which costs the firm further reducing its value making the entire process suspect but when the shareholders are clearly being harmed why does no one sue?
Are investors so niave that they really believe a bid slightly over market is such a good deal? Clearly the buyers think it is a bargain or they wouldn't have made the bid.
One last observation, this would not apply to mergers between firms. When two firms merge, especially in the same industry, there are other economies of scale that can't be achieved by either firm independently such as combining back office operations and firing one of the home office staffs.
Thursday, October 05, 2006
Wednesday, October 04, 2006
Saving the Turtle Farmers in LA
Today's Wall Street Journal has a front page article on the actions of Turtle Farmers in LA to have the FDA overturn it's ban on the selling of turtles with shells under 4 inches long. It just so happens that I have had an inexplicable lifelong attachment to turtles and tortoises. I currently have 9 of them as pets and when moving they warrant as much consideration as my child in regards to making sure we have room and what not for them to live adequately.
The history of the ban is that baby red eared sliders (size of a quarter) used to be sold or given away very cheaply at stores across the nation. It was once common practice to sell a small water bowl with a plastic palm tree on it with a free turtle. Ignoring the issues with this setup which would be illegal even if small turtles could be sold, the size of the turtles led to children putting them in their mouths. Since turtles can carry salmonella in their intestinal tracts children got salmonella poisoning. I believe there was one outbreak in particular where several children got sick that sparked the ban.
The turtle farmers want the ban lifted. The primary reason is financial. The price of turtles has collapsed over the past few years as China, a key buyer(they eat them), has developed it's own in country breeding programs and no longer needs US turtles. In support of their argument to remove the ban they claim with a few studies to back them that the salmonella risk is minimal if existent at all.
I don't know if they are correct in their claims. I have never gotten sick although I don't have any red eared sliders either.
I do believe that a ban should be maintained. Red Eared Sliders have been referred to as the Opuntia Cactus of the animal world. Opuntia Cactus was a local plant that when transported to other regions of the world readily adapted and can be seen in virtually all desert regions now. Red Eared Sliders are very sturdy and can survive wide climate variations as long as they have water. They have been found in waterways all over Europe and Asia where they are not naturally occurring. Within the US they have spread to every corner of the country and are standard in most ponds. All of this a result of owners getting tired of caring for them and dumping them in the nearest pond.
4 inch Red eared sliders are readily available at any pet store selling turtles and are the bane of turtle rescue groups. Visit Turtle Homes and they generally have 10's of Red Eared Sliders available and are alway looking for locations to send them. Making baby turtles legal and readily available will only aggravate both the release and the rescue issues.
A 4 inch turtle by it's size requires a certain setup to live including tanks and filters which easily cost a couple hundred dollars on the cheap side thus making folks think twice about buying a pet. A quarter sized turtle can suddenly fit in a fish bowl that you dump out once in a while and refill. Suddenly that quarter is a half dollar and then 4 inches. What do the owners do then? Dump it in a pond, call a rescue group or buy a big new setup?
The real world is brutal and the turtle farmers should have to find a different solution to their problem besides promising that thousands of turtles will be mistreated and otherwise abused.
The history of the ban is that baby red eared sliders (size of a quarter) used to be sold or given away very cheaply at stores across the nation. It was once common practice to sell a small water bowl with a plastic palm tree on it with a free turtle. Ignoring the issues with this setup which would be illegal even if small turtles could be sold, the size of the turtles led to children putting them in their mouths. Since turtles can carry salmonella in their intestinal tracts children got salmonella poisoning. I believe there was one outbreak in particular where several children got sick that sparked the ban.
The turtle farmers want the ban lifted. The primary reason is financial. The price of turtles has collapsed over the past few years as China, a key buyer(they eat them), has developed it's own in country breeding programs and no longer needs US turtles. In support of their argument to remove the ban they claim with a few studies to back them that the salmonella risk is minimal if existent at all.
I don't know if they are correct in their claims. I have never gotten sick although I don't have any red eared sliders either.
I do believe that a ban should be maintained. Red Eared Sliders have been referred to as the Opuntia Cactus of the animal world. Opuntia Cactus was a local plant that when transported to other regions of the world readily adapted and can be seen in virtually all desert regions now. Red Eared Sliders are very sturdy and can survive wide climate variations as long as they have water. They have been found in waterways all over Europe and Asia where they are not naturally occurring. Within the US they have spread to every corner of the country and are standard in most ponds. All of this a result of owners getting tired of caring for them and dumping them in the nearest pond.
4 inch Red eared sliders are readily available at any pet store selling turtles and are the bane of turtle rescue groups. Visit Turtle Homes and they generally have 10's of Red Eared Sliders available and are alway looking for locations to send them. Making baby turtles legal and readily available will only aggravate both the release and the rescue issues.
A 4 inch turtle by it's size requires a certain setup to live including tanks and filters which easily cost a couple hundred dollars on the cheap side thus making folks think twice about buying a pet. A quarter sized turtle can suddenly fit in a fish bowl that you dump out once in a while and refill. Suddenly that quarter is a half dollar and then 4 inches. What do the owners do then? Dump it in a pond, call a rescue group or buy a big new setup?
The real world is brutal and the turtle farmers should have to find a different solution to their problem besides promising that thousands of turtles will be mistreated and otherwise abused.
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