Friday, 12 February 2010

“We’ve kind of woken up” - Gosh

From February 12, 2010

Private equity hit as Blackstone shelves Merlin IPO

Helen Power, Dominic Walsh and Marcus Leroux


“However, the shelving of the IPO plans will reinforce how hard it will be for private equity firms to convince sceptical institutional investors to subscribe to their issues.

Andy Brough, the manager of Schroders’ FTSE 250 fund, said: “Personally, I just wouldn’t buy anything off private equity — they’ve had their chance.”

Several other leading fund managers have said privately that they would not back private equity issues because of the “Debenhams effect”, a reference to the retailer that was taken private on the cheap by TPG and CVC, then refloated laden with debt.

Mr Brough said: “What does private equity do? They arbitrage the ignorance of fund managers. Well, we’ve kind of woken up.””

Gosh, “we’ve kind of woken up.”

Well, it’s all a little bit late, mate. Here you all are, very highly paid “expert fund managers”, in whose hands lie our pensions, savings and insurance funds, and you have “kind of woken up”. Our pensions, savings and insurance funds have all shrivelled under your expert care for which you continue to charge “management fees” even though, to judge from the results, there seems to have been precious little effective management going on. And now, you have woken up – and yet there is no evidence that you have understood the foolishness in which you have been such active participants. The only learning appears to be at the school playground level – “I shan’t trust little Jimmy any more”. Oh dear.

We told you so in this blog – nearly a year ago -


M&A thinking may still be common, but does it make sense?

So we will say it again -

The only way out from this shallow unthinking herd behaviour is to return to a solid focus on tangible wealth creation – to get back to Common Sense. The only reliable indicator of tangible wealth is deep underlying sustained long term profitability – the investment criteria upon which Warren Buffet patiently, steadily and lengthily, built his own and many other’s fortunes.

The most reliable determinant of massive financial strength, potentially solid wealth, is Excellence. Robust academic research has proved beyond reasonable doubt that the very best businesses in the world can deliver financial returns that are 50% to 100% better than the average.

All of this in the week in which, yet again, a massively debt laden corporation takes on even more debt, which will become secured against the assets of its target, to seize control of a healthy well run company. The same old “Big is Better” nonsense has been trotted out. The same old greedy “experts” have grabbed their millions. The same old workers face uncertainty and fear. There will be tears in the next few years. Great, and for what? Who is going to "have woken up" and when. this time?

Too many in the Financial World cannot tell the difference between Big and Excellent - and this is destroying capitalism.

If something does not change, then nothing will change.

If you want to know more about all this alternative point of view, how you can spot the tangible wealth creators in advance and why Common Sense pays off handsomely, please have a look at our website where you will find out about - Competitive Strength, what this is and why it is crucial to financial performance – and about Changeability, the essential attribute for Excellence.

Capitalism or .... Common Sense is brought to you by Steve Goodman and Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. Each blog has a new article each month using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at “Exceeding Expectations", "You're having a laugh ... Seriously?", "Business Bloop of the Month Award".

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