Filed under: Private equity industry

By most accounts, the first part of 2006 was a private equity bubble — or, more euphemistically, a “golden age” in the words of Henry Kravis.

But with the credit market dryer than it’s been in years as Wall Street digests the record wave of buyouts, there’s one question that lots of people are wondering about: which companies will be the massive private equity failures? What firms paid to high a price for businesses in decline and, even with cost cuts and layoffs, will have trouble making interest payments?

The Wall Street Journal has a few ideas [subscription]: Apollo’s buyout of Realogy, Blackstone’s Freescale Semiconductor and, more recently, Cerberus‘ Robert Nardelli-run Chrysler.

Realogy, which owns real estate brokers like Century 21 and Coldwell Banker, has already run into problems with its lenders and the housing slowdown probably won’t make things easier.

As we watch private equity buyouts end in disaster — and make no mistake, some of them will — I think a pattern will emerge. The failures will occur where private equity firms purchased complicated businesses that weren’t easy to comprehend, paid a high cash flow multiple for them, and bought hot companies in hot industries.

When these firms stick to their bread and butter — boring but consistent performers in un-sexy industries — they’ll probably continue to do quite well.

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Filed under: Private equity industry

By most accounts, the first part of 2006 was a private equity bubble — or, more euphemistically, a “golden age” in the words of Henry Kravis.

But with the credit market dryer than it’s been in years as Wall Street digests the record wave of buyouts, there’s one question that lots of people are wondering about: which companies will be the massive private equity failures? What firms paid to high a price for businesses in decline and, even with cost cuts and layoffs, will have trouble making interest payments?

The Wall Street Journal has a few ideas [subscription]: Apollo’s buyout of Realogy, Blackstone’s Freescale Semiconductor and, more recently, Cerberus‘ Robert Nardelli-run Chrysler.

Realogy, which owns real estate brokers like Century 21 and Coldwell Banker, has already run into problems with its lenders and the housing slowdown probably won’t make things easier.

As we watch private equity buyouts end in disaster — and make no mistake, some of them will — I think a pattern will emerge. The failures will occur where private equity firms bought complicated businesses that weren’t easy to understand, paid a high cash flow multiple for them, and bought hot companies in hot industries.

When these firms stick to their bread and butter — boring but consistent performers in un-sexy industries — they’ll probably continue to do quite well.

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Filed under: Raising money, Private equity industry

I love when experts declare the obvious. Talking about the glut of private equity debt that investment banks are now looking to push onto investors, John Eydenberg, head of leveraged finance for the Americas at Deutsche Bank AG in New York, told Bloomberg that “the market can absorb all these deals. It is a question of time and price”.

Well, duh. But isn’t that kind of like saying that a store will be able to unload all those unsightly, out of style clothes — it’s just a matter of time and price? Given an infinite amount of time and a willingness to sell at any price, pretty much anything can be sold!

And that’s the situation with private equity right now. Investment banks which must place billions of bonds to finance buyouts are having trouble finding buyers in the midst of the credit crunch. Banks are frequently offering investors bonds at a 5-10% discount to face value.

The difficulty banks are having in placing debt — and the extra yield investors are demanding — should prolong the slowdown in buyouts. And if investors aren’t eager to buy the bonds, investment banks won’t be eager to finance buyouts.

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Filed under: Ripoffs and Scams, Fraud

Experts say that there were a record number of data security breaches in 2007, and the problem is only expected to get worse in the coming year. It’s estimated that between 79 million and 162 million consumer records were compromised during 2007. Professional hackers and teenagers with too much time on their hands have easily stayed ahead of the game… cracking security measures faster than they can be created and implemented by security experts.

This means consumers are more at-risk than ever of having their personal data stolen. You can be as careful as you want with your Social Security number and your credit card numbers, but lax security at a business can still compromise you. Envision if a hacker broke into your file at your credit card company. He has immediate access to all sorts of private data, including your mother’s maiden name, your credit card number, your pin number, and much more.

Security experts state part of the problem is that companies are being too reactive in their security measures. Instead of staying a few steps ahead of the criminals who are trying to break into personal systems, companies are busy putting out fires and reacting to security problems.
You can’t do much about the data security at companies. But if you hear about a company with poor security or a data compromise, you should think twice about doing business with them. And keep close tabs on your credit card statements and credit history. Any unauthorized changes or charges should be disputed immediately. Diligence regarding your credit records will be one of the ideal ways to protect yourself in the coming year.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Record-keeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams, Fraud

Experts state that there were a record number of data security breaches in 2007, and the problem is only expected to get worse in the coming year. It’s estimated that between 79 million and 162 million consumer records were compromised during 2007. Professional hackers and teenagers with too much time on their hands have easily stayed ahead of the game… cracking security measures faster than they can be created and implemented by security experts.

This means consumers are more at-risk than ever of having their personal data stolen. You can be as careful as you want with your Social Security number and your credit card numbers, but lax security at a business can still compromise you. Imagine if a hacker broke into your file at your credit card company. He has immediate access to all sorts of private data, including your mother’s maiden name, your credit card number, your pin number, and much more.

Security experts say part of the problem is that companies are being too reactive in their security measures. Instead of staying a few steps ahead of the criminals who are trying to break into personal systems, companies are busy putting out fires and reacting to security problems.
You can’t do much about the data security at companies. But if you hear about a company with poor security or a data compromise, you should think twice about doing business with them. And keep close tabs on your credit card statements and credit history. Any unauthorized changes or charges should be disputed immediately. Diligence regarding your credit records will be one of the best ways to protect yourself in the coming year.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams

47-year old McDonald’s worker and food stamp recipient Reggie Damone found an envelope on the sidewalk containing a check for $185 thousand.

Being a good Samaritan, he took a bus to a bank and returned the check to the niece of the landlord to whom the check was written. The niece rewarded him with a $50 bill — .027% of the value of the check.

Here’s my money ethics question for WalletPop readers: How much would you’ve given the low-income worker who found the check and then took a bus to return it? I know I sure as heck would have given him a lot more than $50. And if you receive $185 thousand checks, you can afford to be more generous — especially with those who save you from your own sloppy stewardship of your possessions.

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Filed under: Ripoffs and Scams, Fraud

Experts state that there were a record number of data security breaches in 2007, and the problem is only expected to get worse in the coming year. It’s estimated that between 79 million and 162 million consumer records were compromised during 2007. Professional hackers and teenagers with too much time on their hands have easily stayed ahead of the game… cracking security measures faster than they can be created and implemented by security experts.

This means consumers are more at-risk than ever of having their personal data stolen. You can be as careful as you want with your Social Security number and your credit card numbers, but lax security at a business can still compromise you. Imagine if a hacker broke into your file at your credit card company. He has immediate access to all sorts of private data, including your mother’s maiden name, your credit card number, your pin number, and much more.

Security experts say part of the problem is that companies are being too reactive in their security measures. Instead of staying a few steps ahead of the criminals who are trying to break into personal systems, companies are busy putting out fires and reacting to security problems.
You can’t do much about the data security at companies. But if you hear about a company with poor security or a data compromise, you should think twice about doing business with them. And keep close tabs on your credit card statements and credit history. Any unauthorized changes or charges should be disputed immediately. Diligence regarding your credit records will be one of the ideal ways to protect yourself in the coming year.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Record-keeping, and is the author of Essentials of Corporate Fraud.

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Filed under: Ripoffs and Scams

47-year old McDonald’s worker and food stamp recipient Reggie Damone found an envelope on the sidewalk containing a check for $185 thousand.

Being a good Samaritan, he took a bus to a bank and returned the check to the niece of the landlord to whom the check was written. The niece rewarded him with a $50 bill — .027% of the value of the check.

Here’s my money ethics question for WalletPop readers: How much would you’ve given the low-income worker who found the check and then took a bus to return it? I know I sure as heck would have given him a lot more than $50. And if you receive $185 thousand checks, you can afford to be more generous — especially with those who save you from your own sloppy stewardship of your possessions.

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Filed under: Borrowing, Cards, Debt, Ripoffs and Scams

Unless you pay off your credit card in full each month, you likely have no idea exactly how much your credit card debt is costing you. While some consumers may know that they have a special introductory rate of 0% or 3.99%, most don’t know the terms on the regular cards that they use each day.

And it’s not enough to just know the interest rate on your card. You also need to know how that’s calculated, what happens to the rate if you pay late, what other actions may cause you to default on your card, what types of fees or surcharges you could incur, whether you’ve some sort of annual fee, and tons of other details.

Credit card agreements have become so complex that they’re not even understandable by the average consumer anymore. I challenge anyone who’s been carrying a balance on their card for the last year to calculate for me exactly what their interest charges will be next month. Chances, are, they’ve no idea. If you have no idea how much you’re going to pay for your credit, how can you make an informed decision about whether or not to incur the debt?

The solution to this problem: Don’t use credit cards unless you completely have to. Pay off your balance in full each month, prior to the due date. Don’t get sucked into a credit card trap you can’t possibly understand.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Bookkeeping, and is the author of Essentials of Corporate Fraud.

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