Germans are well acquainted with the practices of US private equity firms. They call them Heuschrecke ("locusts") because they often take controlling interests in companies, load them with debt while paying themselves lavish "management fees'. Once the companies are hollowed out, they force the companies into insolvencey, leaving the workers without employment. The locust then moves on to its next victim.
That is, sadly, exactly what happened to the iconic German catlogue company Neckermann, which was acquired by US private equity company Sun Capital Partners.
German mail-order company Neckermann says it is applying for bankruptcy protection from creditors after failing to satisfy its owner that cost-cutting plans would produce a viable business.
Neckermann said the application was being filed Wednesday at a court in Frankfurt.
The struggling company planned to cut 1,380 of its roughly 2,400 jobs in Germany in order to secure financing for the future. Earlier Wednesday, it agreed with employee and union representatives on a compromise that would have seen "limited" payoffs and other aid for laid-off employees.
But Neckermann said its owner decided the result wasn't sustainable and refused to provide further financing.
And so 2,400 workers have lost their livelihood. Time for the "locust" to move on - "Die Heuschrecke zieht weiter":
Noch im April wollte Sun Capital 25 Millionen in Neckermann.de investieren. Sun Capital gilt als sogenannte Heuschrecke der Finanzwelt. Darunter verstehen Experten Investoren, die einem Unternehmen solange zuträglich sind, wie es schwarze Zahlen schreibt. Fällt ein Unternehmen in die roten Zahlen, verlässt die „Finanz-Heuschrecke“ das Betätigungsfeld und zieht weiter, ohne Rücksicht auf die Konseqenzen für Mitarbeiter und betroffenes Unternehmen.
(As late as April Sun Capital wanted to invest 25 million euros in Neckermann. Sun Capital is viewed as a socalled locust in the fiancial industry. Experts see them as investors who are beneficial to companies as long as they are profitable. If a company starts losing money, however, the "finance locust" withdraws from the field of action and moves on, without any consideration for the employees of the company.)
Americans are now learning the truth about private equity as they learn more about the record of presidential candidate Mitt Romney, whose compnay Bain Capital set the gold standard for predatory locust behavior. Romney made hundreds of millions putting debt into its portfolio companies, off-shoring and oursourcin the US jobs, firing the remaining workers, and they hiding the profits in Swiss and Cayman Islands accounts.
See my post A Locust in the White House?
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