Thursday, September 9, 2010

Starved For Capital

More from the Barron's interview with Michael Lewitt.

For Chastened Investors, Capital Ideas

"What got us into this mess was raw speculation and its offspring, a sustained misallocation of capital."

In the interview, Lewitt notes there are examples of private-equity improving companies. Yet, he says that in the last cycle substitution of too much debt for equity at times ruined the balance sheet of the target. The result being they now can't compete and are starved for capital and R&D.

According to him, private-equity chose generating fees over building and improving businesses.

Private-equity can be a useful force in business but too often these days it's about financial engineering and fee generation. Check out the full interview.


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