"Without censorship, things can get terribly confused in the public mind." -General Westmoreland during Vietnam War. (No text.)greenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
The more things change, the more they stay the same.
-- Puddintame (email@example.com), April 26, 1999
Chilling, isn't it.
(and the pollys wonder why we regularly question government news releases.)
-- Lobo (firstname.lastname@example.org), April 27, 1999.
Check this out. And I really wondered what ethnic cleansing had to do with it.
Paris, Monday, April 26, 1999 U.S. Buyout Firms Swarm Into Europe Brash Raiders Till Fertile Takeover Terrain but Meet Genteel Resistance
---------------------------------------------------------------------- ---------- By Laura M. Holson New York Times Service ---------------------------------------------------------------------- ---------- NEW YORK - The spirit of Michael Milken, the junk-bond king, clearly was present when representatives from several of Wall Street's most influential leveraged-buyout firms gathered with European executives in London last November for two days of schmoozing. The group, feted as the architects of ''the new Europe,'' had been invited by Chase Manhattan Bank to discuss investments in Europe as large corporations restructure there.
But despite a veneer of British gentility - tea at the opulent Claridge's hotel, for example - the gathering had all the subtlety of Mr. Milken's now-famous Predators' Balls, the glitzy soirees where vulture investors prowled for takeover prey during the last merger craze.
''The feeling in Europe is these people are the 'Barbarians at the Gate,''' said James Bainbridge Lee, the Chase executive who organized the meeting, echoing the title of the book that chronicled the 1988 takeover battle for RJR Nabisco.
''That was one of the big myths I wanted to pop,'' said Mr. Lee, who is group head of Chase's global investment banking department. ''Europeans think they are corporate raiders. They were surprised to find out that some of them were nice.''
American buyout firms have been flocking to Europe in recent months, chasing the wave of corporate divestitures swelling as bloated companies began to streamline.
Already, several of the best-known buyout firms - so called because they buy troubled companies with the hope of selling them later for a profit - have opened their doors: Clayton, Dubilier & Rice is planning an office in Germany; both Kohlberg, Kravis, Roberts & Co. and Hicks, Muse, Tate & Furst have set up shop in London.
With American firms having more than $90 billion in their coffers - 25 percent of that intended for Europe alone - more are sure to follow.
But it will take more than tea at Claridge's to soften their aggressive image. For all the talk of globalization, executives at buyout firms are learning just how ''foreign'' foreign countries can be. And if recent experiences are any indication, buyout firms are in for some tumultuous times.
Some American firms have offended potential partners by backing out of deals. Simple misunderstandings are turning into deal-killers. And even when a buyout firm does find a company to take over, business practices taken for granted in the United States - such as dismissing employees or otherwise cutting costs sharply - are frowned upon or illegal in Europe.
''The reality is the degree of brashness coming from the United States is not appreciated,'' said Michael Stevens, head of leveraged- buyout services in Britain for KPMG Corporate Finance, a division of the accounting firm.
Franci Blassberg, a lawyer at Debevoise & Plimpton in New York, recently told a group of lawyers and academics about one incident in which a client was accused of pirating information after lawyers and accountants conducted a routine examination of a German business.
''The German seller misunderstood the process and concluded that our client's real motive was to obtain competitively sensitive information,'' Ms. Blassberg said. As a result, the seller terminated negotiations.
Europe is still lacking in some of the deal-making tools necessary for complex transactions. Junk bonds are an accepted American form of financing, but in Europe, demand for them is relatively small. Stock option programs were illegal in Germany until 1998 and are still rare. And the market for initial public offerings in Europe is immature.
''We all know the big names have made a lot of fuss about setting up their operations,'' said Raymond Svider, a partner at BC Partners, a buyout firm with offices in London, Paris, Hamburg and Milan that is expected to compete with the newer entrants. ''But their experience is limited. And only time will tell if they will be successful.''
A leveraged-buyout fund is a pool of money run by a buyout firm with assets culled from insurance companies, banks, pension plans and other institutional investors. The funds range in size from $100 million to $6 billion and are used to buy stakes in private and publicly traded companies. A fund's executives use its capital and borrow money - hence the term ''leverage'' - to buy two or three companies a year.
The goal is to cut costs, increase profits and then sell out. In the United States, that was easier in the 1980s, when corporations weren't yet so attentive to shareholder value.
Companies such as RJR Nabisco Holdings, Trans World Airlines and Safeway were taken over in this manner during the 1980s. Thousands of people lost jobs even as companies gained new strength, and corporate raiders and financiers such as Mr. Milken, Henry Kravis and T. Boone Pickens became famous - or, critics would say, infamous.
But years of corporate downsizing and other measures have made it harder today to squeeze new savings out of already lean American companies. That is one of the main reasons that buyout firms are turning their attention across the Atlantic: European companies resemble the fat American conglomerates of the early 1980s.
As a result, they are expected to sell assets over the next few years to focus on core businesses. And family-owned concerns with no successors are likely to put their businesses on the block.
''Europe is an important marketplace,'' said John Muse, chief operating officer of Dallas-based Hicks, Muse, who recently moved to London to pursue deal-making. ''From our point of view, you can create pan-European strategies in sectors with more ease. I personally think the pie is going to get so big there is going to be a lot for everyone.''
But Europe isn't anything like the open field the United States was a decade ago. British firms such as Doughty Hanson & Co., Cinven Ltd. and Electra Investment Trust already have long-standing corporate friendships. And they are better versed in Continental ways.
''It's a softer style,'' Mr. Muse acknowledged. ''People want to get to know you better.''
American buyout firms are likely to find allies in the next generation of Europeans headed for corporate suites - executives who were educated in the United States.
But in the meantime, cultural differences can make the going rough.
As an example, strict performance requirements are unfamiliar terrain for many European managers. Most corporations have their roots in strong family ownership, and corporate executives often view themselves as stewards of their communities.
Executives ''kind of know the factory has too many people, but you don't want to lay people off because you will be the most unpopular guy in town,'' said one financial investor with experience buying companies in Germany. ''You still have to go to restaurants and see people's kids at school. You will be ostracized socially, with no upside.''
In the American Rust Belt of the 1980s, buyout firms were often able to bulldoze resistance to layoffs. But in Europe today, political realities and social customs require firms to be more sensitive to public perceptions - or risk being snubbed.
''You basically have to change from being transaction-oriented to being relationship-oriented,'' said Muneer Satter, a Goldman Sachs partner who was co-head of private investing in Germany for six years.
"But in the meantime, cultural differences can make the going rough."
your right Puddin, the more things change....
-- R. Wright (email@example.com), April 27, 1999.