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Type Category Advanced. Compare Cold Work Tool Steels. But after that, there was no difference. Private equity firms tend to hold on to their companies longer than originally thought. Almost 60 percent kept them for five years, and that duration has increased over the last few years.
Finally, the bankruptcy rate of firms bought out by private equity firms tends to be slightly less than firms as a whole. But such aggregate statistics could be misleading, as the numbers from larger leveraged buyouts could tend to swamp what is happening with smaller buyouts, such as those in New Hampshire.
On the other hand, anecdotes, like the ones you will read below, also can be misleading. Those buyouts that make the newspapers are usually more likely to be troubled, whereas those alluded to by those in the industry will tend to be success stories.
There also are many different types of private buyouts. Firms that are troubled in the first place are more likely to end up in trouble, while those that are healthy in the first place tend to continue to grow.
Rivco was definitely troubled in the first place. Rivco, which was founded 45 years ago, had already been sold off by its original founders some two decades ago. In , a management company sold Rivco to a group of employees, which in turn, sold it to JMC. The company kept on running out of inventory, and was shifting into distribution of other products rather than producing its own.
Managers were laid off and replaced with people from JMC, Smith said. Private equity firms also can have success with troubled firms. The outside firm wound up adding workers during the first months after its acquisition, and it has since developed a germ-resistant fabric for the medical market. Before that, Foss had primarily been marketing to the troubled automobile industry.
When Joe Landers and his partner sold Customized Structures to Watermill Ventures in for an undisclosed sum, the modular home business was booming. Landers, who co-founded the company, knew that the industry was cyclical and knew it was a good time to get out. But, he said, he never really got that across to the new owners, even while he continued on as president for the next two years.
While both shared a vision for growth, neither he nor his partner were willing to invest additional capital. The company expanded and bought a facility three times its then-current size and then sold it at a quick profit, Landers said, locking itself into a costly lease-back arrangement. I just advocated caution. Landers stepped down, staying on longer than he intended.
The inevitable downturn in the housing market came with unexpected fury. Watermill, said Landers, knew the company was in trouble, but was hoping to unload it, and kept the situation from its workers. Patrick Dulany, former chief operating officer and founding partner of Infusion Solutions. Dulany and his partners had built up a successful home medical model and grew it to a staff of 50 employees. As hospital and medical costs grew, so did the company.
Ironically, that was one of the reasons the Dulany and his partners decided to sell the company. It was getting too expensive for a small company to offer health coverage to their workers. Robert Cucuel was leading a private equity group that was cobbling together numerous similar firms that have been springing up around the country. Cucuel, betting on the national move to more expanded coverage, is now taking public a home health services firm that covers the entire eastern part of the nation.
We are pleased. But it has been wonderful for everybody. Using private equity to consolidate existing business is one result of a private equity buyout.
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