Leveraged Buyouts abbreviated as LBOs were popular in the financial market right before the ‘Great Depression’ that lasted from 2007-2010. At that time, banks were finding money lending lucrative and an easy facet of their enterprise. All of this changed with the depression of 2008. Banks had to do heavy buyouts with the help of US government, for major financial organizations such as Lehman Brothers and AIG; left them bitter and very careful.
Negative Media Shadow on LBO’s
LBOs used to have negative connotations because they make great negative publicity stories for the press. But now, they are considered condemnable because major financial organizations that took life’s money from the common man and lost it were bought out by other alligators that didn’t compensate.
Hollywood and Corporate Financing
But despite the unfortunate events of the ‘Great Depression’ and the role buyouts played in the aftermath, LBO’s are effective in saving a company’s future. Not every LBO is predatory, LBOs can be done by the company senior management called Management Buyout or MBO instead, to save company assets, or it can even be a part of a longer plan. But in a world where LBOs remind people of the depression and (1993) corporate classic ‘Barbarians at the Gate’, these facts need to be re-iterated and reminded again and again.
“Inside Job” (2010)
Another significant film that contributed greatly to the bad identity of LBOs would be the infamous ‘Wall-Street’ (1987) starring Michael Douglas and Charlie Sheen. But the one documentary that gave a serious credibility to condemned LBO’s is Charles H. Ferguson’s ‘Inside Job’ released in (2010), narrated by Matt Damon; it went on to receive an Oscar.
These movies, along with its various exceptionally high profile interviews, condemn the buyouts that happened in the ‘Great Depression’ openly. “Men who destroyed their own companies and plunged the world into financial crisis walked away from the wreckage with their fortunes intact.” – Inside Job.
The infamous documentary goes on to call present US government as ‘It’s a Wall-Street government’. Bail outs that occurred in those days look like an extension or the next level to an LBO and they were condemned by many. Ferguson went on to insist that these bailouts should have never occurred and dissolution of these companies would lead to a much needed purging of the financial systems.
The overlapping shadow of bail outs on LBOs should be taken seriously and LBO’s should be freed of heavy stereotypes.
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