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  #161  
Old 04-24-2012, 08:02 PM
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Originally Posted by Atlas Shrugged View Post
Again, this is all throught the tax code.
"DIRECT SPENDING" (aka MANDATORY) is part of BUDGET -- NOT tax-code incentives.

Maybe the rich onion farmers don't meet the requirements for such hand-outs.
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  #162  
Old 04-24-2012, 08:34 PM
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Onions are used as a benchmark because there is no futures market for it. People claim speculators lead to wild price swings, and I do not claim that that has never happened, but over all, the price changes in liquid markets with lots of speculators are quite smaller than ones without them. I understand oil is in a totally different market than onions, so I included the corn comparison. Interestingly enough there were basically identical results.
And corn is in a totally different market than onions.
Corn is the MOST heavily subsidized ag product in the US, and has been for years. Even if both items had no futures markets, their prices and activity would still be worlds apart.

Not only that, but corn is definitely NOT considered a food stuff in the market place. Maybe 20% of all corn grown is destined for a human mouth. The other 80% goes to animal feed and biofuel. The onion industry's goal and end product is solely human food.

You posts might carry credence if you were comparing a futures product which does NOT receive billions in government money and which IS actually produced for human edibility.

Or do you not have a government formulated chart for something like that?
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  #163  
Old 06-20-2012, 11:59 PM
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Sorry for resurrecting the thread, but over the past few weeks I think I have gained a better perspective.

Before I dive into it, remember, there are many very different sectors of the financial industry, some more traditional than others (M&A vs trading).

So, Ive started doing sell side M&A work for middle market companies of all sorts, I am a generalist not bound to a specific industry. Although I am still new to it, it has opened my eyes to a few things. We all know we collect fees, but the question is are the fees worth it, do they create value for our clients and the buyers? I believe the answer is certainly yes.

Let me preface this by saying dealing with middle market companies is a very different game than large cap or even publicly traded companies. While publicly traded companies are valued and judged by the market every second of every day by thousands of people across the globe, private and especially private middle market companies rarely are valued. So when an IB is hired to do a sell side job, obviously one of the first things we have to do is value the company. Being that few people outside of management have any real idea of how the company works or how they operate from a P/L perspective, simply advising them on their book value and expected sale value is tremendously helpful. Even if they end up not going through with the sale, they certainly have gained valuable information.

But the CEO/CFO of a company must have a general idea of what the company is worth right? They do the accounting and run the business, is that really that big of a service? You would be surprised at how poorly managed and understood some of these companies are. By the time we get done with a company, it is not uncommon for us to actually know the clients business better than they do. We rip apart every aspect of the company and normalize EBITDA to show the best and most accurate reflection of what the company is actually worth. All too often we have moments on our calls with management where the CFO and CEO both get confused by their own financial data and we have to walk them through it - or, like the other day, we spent all night attempting to correct financial data that was sent to us by management because the numbers did not tie or flow.

Often times we get financial data from these companies that is unorganized , scattered, and poorly foretasted. Through our questioning and pressuring for more data and then refining it, we often actually help the company develop better accounting practices. This all before we ever even take the company to the market. But even if we dont make it to market, we help clear up their books and give management a much more transparent and accurate view of how their company is operating. So I believe there are certain intrinsic benefits to our services before the real stuff even gets started.

Now, the real core business that we are in is shopping these companies around and advising on an appropriate multiple based on industry knowledge. We do the due diligence and line up both strategic and financial buyers. We stay till 3AM and call strategic buyers in Japan, Hong Kong, the rest of China. We wake up early and call Germany, England, the rest of Europe, and then tackle the US. Using years of relation building with Private Equity Groups (PEGS), we call our contacts at these funds and get the teaser on their desk. We get the clients credentials in front of more eyes they could ever dream of. Total access to a global market....and this is at a boutique shop...imagine the resources of a bank like Morgan Stanley or GS. Incredible. Again, I think there is some great value in that service alone for the client.

But what about the buyer? We all hear the big multiples companies pay to acquire others, does this create value or do people just over pay? This is more difficult to answer, but I still think we do create value, specifically because we have the advantage of being a strong middle market firm. Like I said earlier, because these companies are often poorly valued or not valued at all before we walk in, there are better opportunities for acquiring companies to find and buy with real value. Basically in a less efficient market, the chances of scoring a good investment are higher as all the information may not be priced in. Granted that is part of our job and we certainly try to achieve the best valuation possible, but it is difficult to accurately predict how a middle market company being brought into a bigger operation will fair as synergies are formed,the company is integrated or restructured, or how it will grow under new management.

For example, one deal we were working on was for a company that had no $0 in revenue and $0 EBITDA (it's a long story on how we got involved in this deal). They had already gone bankrupt twice and were less than 2 weeks away from going into bankruptcy for a 3rd time. At the last minute we were able to sell the company to a PEG. Through restructuring and strong management by the PEG, within 2 years the SAME company that was hobbling from bankruptcy to bankruptcy generated over $8 million in EBITDA. That is incredible and certainly generated value for the PEG AND the client, as PEG made a nice return and the clients got their payday and had their company saved. Now that the company has been making money again, the PEG has brought it back to the market and we just sold it to a strategic buyer outside of the US.

While this story may seem too good to be true, it is far more common than people think. Obviously not the exact numbers, but most of our clients were previously purchased by PEGS, refocused and are now being sold back into the market market with much stronger financials.

So all in all, so far I have seen value created on both sides of the transactions, but most importantly, I have a much better respect for private equity.
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Last edited by Ryanferr : 06-21-2012 at 12:11 AM.
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  #164  
Old 06-21-2012, 09:01 PM
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http://www.zerohedge.com/news/taibbi...-learned-mafia

We're gonna' need a lotta' rpe.
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  #165  
Old 06-21-2012, 11:58 PM
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Ryan, good for you.

However, the siphoneers (aka private equity, traders, pit bosses, hedge funds, etc.) do NOT create value. They siphon off cash. Value is created through work, products and commodities.

The problem today is that there is not enough "real" work to go around and the work that is real no one wants to do.

Our monetary system requires an exponential growth in the money supply to maintain an expansion of the system.

So the buyer of your "BK" company, they got a great deal...didn't they?

The name of the game is making your nest from the labor of others that are either too stupid or just don't know the real value of their labor. Being savvy on WS requires smarts; but so does being an engineer or electrician. Believe it or not, some smart people decide not to be a siphoneer because they can't live with the thought of being a thief.
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  #166  
Old 06-22-2012, 12:05 AM
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Originally Posted by Atlas Shrugged View Post
Ryan, good for you.

However, the siphoneers (aka private equity, traders, pit bosses, hedge funds, etc.) do NOT create value. They siphon off cash. Value is created through work, products and commodities.

The problem today is that there is not enough "real" work to go around and the work that is real no one wants to do.

Our monetary system requires an exponential growth in the money supply to maintain an expansion of the system.

So the buyer of your "BK" company, they got a great deal...didn't they?

The name of the game is making your nest from the labor of others that are either too stupid or just don't know the real value of their labor. Being savvy on WS requires smarts; but so does being an engineer or electrician. Believe it or not, some smart people decide not to be a siphoneer because they can't live with the thought of being a thief.
I think there is clear evidence that there can be value added by better management. They bring in better people, control costs, get the company access to better and more stable credit/cash lines. They can help tremendously in helping others help themselves. When I was looking at the EBITDA performance my mind was just blown at how a company was performing so consistently poorly for so long, and then was turned around by this PEG within a year and then performed well for years to come. They certainly saved a lot of jobs as they saved the entire company. I would find it hard to look the owners of that company in the eye and tell them they didnt add any value, but that instead they just siphoned money from the company. I think that is far from the truth and the PE guys deserve a lot of credit as good management is a valuable service.
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  #167  
Old 06-22-2012, 12:17 AM
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I think there is clear evidence that there can be value added by better management. They bring in better people, control costs, get the company access to better and more stable credit/cash lines. They can help tremendously in helping others help themselves. When I was looking at the EBITDA performance my mind was just blown at how a company was performing so consistently poorly for so long, and then was turned around by this PEG within a year and then performed well for years to come. They certainly saved a lot of jobs as they saved the entire company. I would find it hard to look the owners of that company in the eye and tell them they didnt add any value, but that instead they just siphoned money from the company. I think that is far from the truth and the PE guys deserve a lot of credit as good management is a valuable service.
Believe what you will, but like I said in the past, most "turn-arounds" have come at the cost of the employees. Look at people like Chainsaw Al Dunlap. He painted up Scott Paper and cooked the books. Did the same at Sunbeam, basically ruining that company. Most of the time, these measures are short term fixes, throttling off business development or R&D for short term gain. That being said, good management is essential and necessary. But I would say that most companies should be privately held and funding, if necessary should come from issuance if debt, if really necessary. When a company goes public, they become a slave to wall street and shoot for the short term Q to Q performance. WS raids the pension plans, the cash and the naive owners and employees.

Just look at the fees for managing a mutual funds. Don't tell me they are justified; they are siphoneers, just taking a percent plus or minus each way. Then you have sell side analysts, always looking to shake down their clients. Why do you think volume is down; people are on to the sham of WS.

For most large HF's or even in your case "sprucing" up the balance sheet. Not sure what you guys suggested to cut to make the EBITDA better, but you can't get something for nothing. How about a little more specifics on the actual changes that reduced fringe or overhead costs...
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  #168  
Old 06-22-2012, 10:16 AM
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It's a long read from Matt Taibbi at Rolling Stone. But it documents the recent corruption convictions in United States of America v. Carollo, Goldberg and Grimm about bond bid rigging.

The Scam Wall Street Learned From the Mafia
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  #169  
Old 06-22-2012, 07:52 PM
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It's a long read from Matt Taibbi at Rolling Stone. But it documents the recent corruption convictions in United States of America v. Carollo, Goldberg and Grimm about bond bid rigging.

The Scam Wall Street Learned From the Mafia
Yep, just business. Makes my point.

Thanks for the link.
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  #170  
Old 07-03-2012, 12:19 PM
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The whole financial industry and oversight is rotten to the core. What can you do? They just keep adding another layer to the house of cards.

Unsealed Documents Expose Morgan Stanley Forcing Rating Agencies To Inflate Ratings

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Is there anything in this "market" that was fair over the past several decades, and was actual price discovery ever actually possible? Because by now it should be very clear going forward all the things that actually make a free and fair market are forever gone, and that without endless fraud and manipulation by all the market participants who realize that anyone defecting the ponzi group means immediate and terminal losses for all, and all those calls for an S&P 400 would actually prove to be overly optimistic.
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