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View Full Version : The Bain playbook made clear by the Glaziers



Qtec
08-12-2012, 04:24 AM
This is exactly the MO of Willard and Bain.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">
Manchester United: The Glazer Family’s Bad Play
Aug 6, 2012 1:30 PM EDT
The Glazer family took a storied soccer team private, and changed the corporate agenda. Team fan Michael Moritz on why he thinks they’ve ruined the business as an IPO looms.


Long before some silvery-tongued devil rebranded corporate raiders as private equity players, they were called asset-strippers. The dubious tactics of what were once also known as leveraged buyouts (LBOs) are usually hidden from view. But the pending IPO of the Manchester United soccer club lays bare the consequences. Manchester United’s seamy tale is a small, but colorful example of what happens when a healthy business falls into the clutches of people who seize control of it by using enormous amounts of debt. The story of the depredation of Manchester United, <u>one of the world’s best known soccer teams</u>, closely parallels the manner in which a long list of other businesses including Federated Department Stores, Readers Digest, The Chicago Tribune, Masonite, Mervyns, Simmons Bedding, Station Casinos, and Six Flags were taken over by LBO firms, stuffed to the gills with debt and subsequently ruined.

First, a little history. In 2005, when the Glazer family of Miami, landed in the North of England, Manchester United was a publicly traded company, which was thriving both on and off the field. The club had healthy profits and was generating a good amount of cash—one of the surest measures of a well-managed business. Best of all Manchester United had enough cash on hand to eliminate almost all its borrowings. In other words, the management was in control of the destiny of the business.

<u>All this changed</u> after the Glazers, veteran corporate raiders who also owned the NFL’s Tampa Bay Buccaneers, <u>took the business private and loaded it with debt.</u> The corporate agenda suddenly changed, as it does with all leveraged buyouts. Instead of operating the business for the benefit of all its constituents—customers, employees, management and shareholders—two new groups had to be satisfied: the new controlling shareholders (in this case the Glazers) and the banks.

While the Glazers are the down-market, bucket-shop version of leveraged buyout practitioners, they followed the conventional playbook. <span style='font-size: 14pt'>They used very little cash to grab Manchester United. So while the Glazers like to portray themselves as “owners” of Manchester United, they are no such thing. Real owners buy and operate businesses with cash. People like the Glazers are little more than placement agents for lenders. Manchester United’s real owners—the entities that have title to the assets of the business—are now the banks.</span>

All this is made depressingly clear in the documents accompanying the proposed IPO. While Manchester United, thanks to the shrewdness of its longtime Manager Sir Alex Ferguson, has continued its winning ways on the field, <span style='font-size: 17pt'>the underlying business has been ruined because of the mountain of debt shoveled onto the company. The debt load is so vast that every asset of the club—including its training ground—has been mortgaged.</span> (The Glazers have generally declined to comment on criticism of their stewardship of Man U, talking instead about their continuing investment in the team. They have now entered the “quiet period” before the IPO and are not allowed to discuss the subject publicly) </div></div>

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Manchester United lowers stock float value </div></div> link (http://www.bbc.co.uk/news/business-19201427)

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">Glazers’ Disgraceful IPO U-Turn
July 31, 2012 262 Comments

The Glazers have revealed a massive u-turn in their IPO proposals in a revised filing of the IPO last night. In the original filing it was made absolutely clear that ALL of the proceeds of the IPO would go to paying down debt the Glazers have loaded onto Manchester United. The revised filing reveals they <span style='font-size: 14pt'>now plan to take half the IPO proceeds for themselves!</span> This can be seen in the red section in white text. The Glazers are selling the same number of shares as MU Ltd but costs are being loaded onto MU Ltd <span style='font-size: 14pt'>so Glazers will take more then 50% of net proceeds for themselves.</span> </div></div>



Nut said this.

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> "When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."</div></div>

How apt!

Now you know why Mitt doesn't want to talk any more about what Bain actually does.

Q

LWW
08-12-2012, 04:54 AM
In your own words ... explain what any of that means.

Gayle in MD
08-12-2012, 05:07 AM
My fellow progressives are on a roll!



<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">On the first 4th of July after our victory, we will dig up Ayn Rand's rotten, toxic, carcass, load it on an Atlas rocket and send it right into the sun.

</div></div>

My brilliant friend, Diablo!



<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body"> Now you know why Mitt doesn't want to talk any more about what Bain actually does.

Q
</div></div>

My brilliant friend, Q.


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Romney was as much a crook in public service as he was in the private sector. Had to buy and destroy all of the computers when his term as governor ended. What could prove his corrupt nature, more than that!

G.

Qtec
08-12-2012, 05:36 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">In your own words ... explain what any of that means. </div></div>

Too complicated for you?

Gayle gets it!

Q

Soflasnapper
08-12-2012, 04:45 PM
It's very simple.

These privatizers, or LBO specialists, put up little of their own money, borrow or get outside investors to buy into an IPO (initial placement offer for a new corporation's shares sales), load up a viable company with huge debt not for something of use to the company (a new stadium, e.g.), but to extract a large amount of money to the LBO specialists and huge legal and transaction fees to the broker(s) handling this financial rape of the business.

Net result is the prior ownership is somewhat happy, having gotten their price, the new owners are very happy, having reaped many 100s or 1000s of percent on their tiny equity investment, the underwriting brokerages are ecstatic, wrongfully gaining millions in unearned fees for creating boilerplate documents, and the new shareholders think they are happy, but misunderstand how the great burden of the debt service on all the debt laid on to extract capital from the business, not putting it in for the business' benefit, will make their shares unlikely to rise in value.

The company as an entity has been hosed, taken from being very valuable to being very underwater with the debt load, and without adding anything of value to the company.

Perversely, it is exactly the companies with large cash reserves that are considered to be underperforming for their shareholders, and get targeted exactly to extract that large cash reserve out, leaving the company highly leveraged and subject to bankruptcy if things don't continue at compoundingly higher record levels of earnings.

LWW
08-12-2012, 04:48 PM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">In your own words ... explain what any of that means. </div></div>

Too complicated for you?

Gayle gets it!

Q </div></div>

Nobody thought you understoof it.

LWW
08-12-2012, 05:39 PM
At least you have a grasp of the basics.

FTR this debt is known by buyers of the IPO and they made an informed decision.

Qtec
08-13-2012, 03:28 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">At least you have a grasp of the basics.

FTR this debt is known by buyers of the IPO and they made an informed decision.
</div></div>

What BS.

Right now, Man United the club is paying for the Glaziers debt!

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The accounts of Red Football Joint Venture also showed that more than £69m was paid out in interest alone over the year. </div></div>



Q

LWW
08-13-2012, 03:35 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">At least you have a grasp of the basics.

FTR this debt is known by buyers of the IPO and they made an informed decision.
</div></div>

What BS.

Q </div></div>

So are you saying sofla has no grasp ... or that te debt was hiddem?

Being that you know about the debt ... you mst be speaking of sofla.

LWW
08-13-2012, 03:36 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Qtec</div><div class="ubbcode-body">Right now, Man United the club is paying for the Glaziers debt!

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The accounts of Red Football Joint Venture also showed that more than £69m was paid out in interest alone over the year. </div></div>



Q </div></div>

And?

Qtec
08-13-2012, 03:38 AM
What we have here is a case of legalised theft.

I don't understand how you can buy a club for $600 M and then pay yourself back that money and more by transferring this purchase price back on to the business!

In effect, they bought the club and the club paid for it!

Q

Soflasnapper
08-13-2012, 12:06 PM
Not unlike the former Dodgers owner.

Paid himself so much that the club ran into negative cash flow (lost money, not on operations, but on the huge salaries he paid himself and other family members), recouped only upon the sale.

Legal, but a lousy practice.

llotter
08-13-2012, 04:18 PM
It is usually the case that bad management is properly punished in the private sector, in the public sector, bad management is met with rewards and promotions. Long standing failure just keeps growing and going.

Qtec
08-13-2012, 05:43 PM
<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">It is usually the case that bad management is properly punished in the private sector, </div></div>

Yeah...rrrrright!

Tell me how the bad management in the banks were punished.

Q

<div class="ubbcode-block"><div class="ubbcode-header">Quote:</div><div class="ubbcode-body">The ousting of its third straight CEO marks yet another dramatic crisis in a decade of turmoil for one of Silicon Valley's original pioneers. A year earlier, Mark Hurd was fired as HP's CEO after submitting false expense reports in what appeared to be an effort to conceal a relationship with a former employee.

In 2006, HP's chairwoman Pattie Dunn was shown the door after it was revealed that she had spearheaded a secret probe to spy on fellow board members and journalists, in an attempt to find the source of board-level media leaks.

A year before that, in 2005, then-CEO Carly Fiorina <span style="color: #3333FF">Carly may get $42 million</span>was booted out (she technically resigned, but, the move wasn't especially voluntary) after spearheading HP's the failed merger with Compaq. The company's stock price was cut in half during her tenure.

The CEO revolving door has cost the company more than $83 million in severance pay, including <span style='font-size: 14pt'>more than $25 million that will be owed to Apotheker.</span>

Fending off criticism from analysts that the board is dysfunctional, Lane argued that the board is very different than the ones of the past, comprised of 8 new directors since the company ousted Hurd.

"I tell you this right from my heart," he said. "That's not this board. They work really well together." </div></div>

Qtec
08-14-2012, 02:58 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">Not unlike the former Dodgers owner.

Paid himself so much that the club ran into negative cash flow (lost money, not on operations, but on the huge salaries he paid himself and other family members), recouped only upon the sale.

Legal, but a lousy practice. </div></div>

A large part of the Man U income comes from playing in the Champions league. If they don't have a good run in this comp every year, they will be in trouble. Not qualifying is a disaster.[ they have to finish in the top 3 in the Premiership.]
The coach, Sir Alex Ferguson has been coach for 26 years. Something unheard of in the top flight of soccer. He is now 72 and can't go on much longer.
If the next coach can't maintain this level of excellence, the club could fold under this enormous debt that the Glaziers have burdened them with.

Q

LWW
08-14-2012, 06:43 AM
Why did the prior owners sell the team?

Soflasnapper
08-14-2012, 09:24 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: llotter</div><div class="ubbcode-body">It is usually the case that bad management is properly punished in the private sector, in the public sector, bad management is met with rewards and promotions. Long standing failure just keeps growing and going. </div></div>

Geeze, llotter. As you know, at the big private corporations, failure is REWARDED with multi-million dollar golden parachute severance packages. Sometimes, over $100 million paid for failure, as when Michael Ovitz lasted barely a year before being fired at Disney by Eisner.

Similarly, when looking at CEO compensation, often the more highly paid have the more poor company performances. The compensation does not track company performance, contrary to what one might suppose.

Soflasnapper
08-14-2012, 09:29 AM
<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: LWW</div><div class="ubbcode-body">At least you have a grasp of the basics.

FTR this debt is known by buyers of the IPO and they made an informed decision.
</div></div>

This is why the underwriting brokerage get paid an excessive fee-- prettying up the shitty deals, and misleading the investors, by dint of impossible to follow prospectus language, and the sheer dignifying effect of having a prestigious brokerage handling it. Hey, after all, Goldman Sachs (or whatever big firm) wouldn't sell a pig in a poke, would they? Sign me up! Unfortunately, we know they do exactly that.

We had extensive testimony in Congress on this, as you may recall Sen. Levin (D-MI) repeating this internal e-mail characterization of the deal they were selling investors (albeit in a different matter, same concept though).