Private equity is a broad term that refers to any type of equity investment in an asset in which the equity is not freely tradable on a public stock market. (wikipedia)
One of the trends around the world at the moment is for private equity firms (commonly called “PE Firms”) to acquire publicly-listed companies, so they can make them more efficient and then re-list them at a profit a few years hence. In practice, this process often involves stripping the companies of their assets, sacking a bunch of staff, before re-listing the companies which will often have to go back and buy those same assets back again at an inflated price. It’s one of the cycles we see come around every decade or so. The last time we saw it become trendy was in the 80s, when famous junk bond firms like Michael Milken’s company “Drexel Burnham Lambert” was providing cheap cash to Alan Bond, Rupert Murdoch and Ivan Boesky.
Is it time for Oliver Stone to make a sequel to WALL STREET?
On tonight’s show (recorded early last week), I chat with Melbourne-based journalist and editor Andrew Pegler about the re-rise of the PE Firm.
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