ConLroversles

W rlvaLe equlLy lnvesLors

1CfLen assoclaLed wlLh [ob losses when Lhey Lake over companles
2 Large amounLs of debL used Lo flnance Lhese deals
3 lncenLlves provlded by Lhe 1ax code ln uS because of large lnLeresL paymenLs Lax llablllLy reduces
4Puge losses Lo 8ondholders of Lhe company as someLlme Lhe bonds would be degraded Lo !unk sLaLus
3 8educLlon ln 8 u spendlng
6 rlvaLe equlLy flrms comlng LogeLher and formlng clubs and anLl compeLlLlve pracLlces llke
you don'L bld on my deal l won'L bld on yours" hence buylng ouL cheaply
Also Lhe new prlvaLe equlLy lnvesLors are demandlng Lhelr money be pald back ln much shorLer perlods
of Llme
Shareholders are now looklng for more M8C (ManagemenL led 8uy CuL) raLher Lhan L8C
W 8 buy ouL of 8!8 nablscolnc ln 1989 lL
lncreased Lhe debL from $3bn Lo $201bn
W Cerberus buy ouL of Chrysler AuLomoLlve
Chrysler flled for bankrupLcy
W 8lacksLoneCarlyle buy ouL of lreescale
SemlconduLor came up wlLh a new lC Lhls
year and half lLs orlglnal prlce before L8C
W Coldman Sachs 8 and 1C buy ouL of 1xu
for $44bn has run lnLo huge losses