Blackstone Bursts Workers’ Bubbles

In my earlier post today, I described Blackstone’s success in flipping property from its buyout of Equity Office Properties. This article describes how Blackstone’s takeovers also weigh on workers after the company gets saddled with debt. Credit markets may be putting an end to this sort of extractive takeovers, but the country should not have had to waited for the credit markets to act.  Here is the article:

Dugan, Anthe Jeanne. 2007. “How a Blackstone Deal Shook Up a Work Force.” Wall Street Journal (27 July): p. A 1.

Blackstone Group bought Travelport Ltd. last August. “Two months after the deal closed, scores of employees were lugging boxes of personal belongings to their cars, having lost their jobs. Under Blackstone’s ownership, the travel-reservations conglomerate has laid off 841 people, about 10% of its work force.”

“Private-equity firms, which say they bring sorely needed financial discipline to poorly run companies, have been slashing costs and extracting profits at warp speed. As the cycle of buying and selling companies has intensified, life in the trenches can be unstable and traumatic.”

“In addition to the 841 layoffs, 1,500 Travelport workers have left voluntarily since the buyout.”

“To complete their $4.3 billion Travelport purchase, Blackstone and Technology Crossover Ventures, a Palo Alto, Calif., venture-capital firm that now owns 11%, invested $1 billion and borrowed the rest. That debt landed on Travelport’s balance sheet. In March, Travelport borrowed an additional $1.1 billion and paid it out as a dividend to the two firms, returning all their money in just seven months.”

“Over the past five years, private-equity firms have bought more than 10,000 companies. This year, through June, 1,399 deals worth $582 billion have been announced, according to data provider Dealogic.”

“They’ve also been taking big cash payments out of the companies they buy, as Blackstone did with Travelport. These payments, known as “dividend recapitalizations,” reached a record $25 billion in 2006, and are on pace to exceed that amount this year, according to Standard & Poor’s Corp. In 2001, they amounted to just $1 billion. The payments increase pressure to cut costs.”

1 comment so far

  1. xztheericzx on

    i’m eric. joining a couple boards and looking
    forward to participating. hehe unless i get
    too distracted!

    eric


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