Buyout Industry Woes

In an August 8th article in Human Resource Executive entitled “Union: Workers Fading under Bright Lights of Times Square,” by Michael Felton-O'Brien, he writes about risks and consequences in private equity investing. Many times, private equity firms will purchase a company and there are consequences such as employee layoffs. Harlan Platt, professor of finance at Northeastern University's College of Business Administration, believes this especially when that company is purchased above market price. Because companies often pay "a premium of 15 to 60 percent above the equity market's previous price," they end up increasing the company's debt ratio from about 30 percent to about 80 percent, he says. "Obviously, [income inequality] is a concern, but it's only the tip of the iceberg," states Professor Platt. "The bulk of the concern is that a catastrophic failure, such as a company's inability to service its debt, will force those companies will have to file for bankruptcy and jobs get lost."

To read the full article, go here:
http://www.paradigmshiftpr.com/unionworkers.htm