Maybe They Should Have Quick-Flipped It
Nearly two years ago, I moderated a debate of sorts between Kevin Conway, managing partner of Clayton Dubilier & Rice, and Andrew Ross Sorkin, ubiquitous M&A reporter for the NY Times. It was mostly about the behavior of private equity firms, with lots of talk about CD&R's involvement with car rental company Hertz. Specifically, Sorkin and others had essentially accused Hertz's private equity owners of doing little more than a quick flip ($15b acquisition to IPO in a year). Them's fighting words in LBO land, where most investors fancy themselves operational savants -- able to add value to a company with a touch of their finger (and then, and only then, profit from the improvements). Conway bristled at the overall criticism, in part because CD&R and Hertz's other PE backers still owned most of Hertz, post-IPO. This was an important point emphasized over and over again. In fact, the PE firms still control Hertz today, with 55% of the company's outstanding stock. Well, I'm now thinking that a quick flip might not have been such a terrible idea.
