Filed under: Ripoffs and Scams, Technology

You’re getting sleepy. Just rest. Now tell me the first thing that you think of when you hear the word WalletPop. If you thought ’skeptics’, you’re right on the money for this story.

According to BrandWeek, Euro RSCG, a company hired by Volvo to determine the market identification of its brand, used an uncommon device to penetrate the shield of groupthink; hypnosis. Members of the group were first asked to summarize the brand in one word, and the word they came up with, not surprisingly, was safety. However, after a test-drive, the same members were hypnotized, and while under, were asked the same question. The response that came disappointingly often was ‘middle-aged’.

This wasn’t the first application of this technique in the field, though. It has been in use for a long time, but few clients apparently are willing to pay to drink this Kool-Aid. The problems I see are two-fold. First is the question, can hypnosis access thoughts and views of which the subject is not aware, or coerce subjects into articulating opinions they might otherwise conceal? Second, does it reveal information that cannot be derived in other, less expensive ways?

For example, if they wanted to learn that the Volvo brand evokes an image of a mature driver, they could have given me a call. Even without the pendulating watch, I could have told them that.

Having been in the marketing world, I know that there’s no limit to the expansiveness of market research. No limit, that is, except the willingness of fools companies to fund it.

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Filed under: Financials and analyticals, Raising money, Private equity industry, Investments

There has been much speak about how the credit squeeze and slowing economy has affected the public markets, but how has it affected private-equity firms? An article in the Hartford Business discusses how private equity firms are feeling the pain, especially as many private-equity owned companies have very high risk ratings and default risks. This appears to be more concerns of the past coming to fruition over leverage and credit quality more than breaking news, but it might come front and center before long.

Additionally, private equity-backed companies have big debt loads and when combined with decreased consumer spending, companies have less cash to service those loans. Leverage has enhanced returns, but it also augments the losses and decreases the returns to the private-equity firms that own the companies. This states that 25 of the 42 companies that ratings bureau Standard & Poor’s states have the lowest credit ratings are owned or controlled by private-equity firms, which gives them the highest chances for default.

It also appears that many private-equity firms overestimated the potential value and performance of the companies they bought, or at least that conditions exists now that credit is tight and the economy slower. If many industries and sectors are struggling in today’s economy, it should come of no surprise that private-equity firms that bought them with leverage are feeling the burn as well. A less-leveraged economy isn’t leaving the billionaires entirely immune.

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