The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!)

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The Ten Roads to Riches

PRIVATE

EQUITY'S

BIG

BUCKS

Akin to hedge funds is private

equi~-also

with a 2 and 20 fee scheme.

They

take over troubled publicly traded firms and

fix

them to later

sell at a profit.

These

are often called leveraged buyouts. You do the

takeover, maybe bring in new management, lop off losing divisions,

fund winning ones, and maybe go public again later at higher prices.

Done

right, it's super profitable.

Part

of this is knowing how to bor-

row well. Another part is the skill to spot troubled firms that can be

bought cheaply, because no one sees potential, but can be fixed and

profits boosted to fat levels compared to interest costs incurred with

the buyout.

Recent years have seen record buyout

activity-making

private

equity finn partners huge bucks. Kravis, Kohlberg, and Roberts

(KKR) had a busy

2007-offering

to

buyTXU

Energy for $45 billion.

Co-founder Jerome Kohlberg ($1.5 billion) is no longer with the

firm, but both Henry Kravis and George Roberts are, with match-

ing $5.5 billion net worths. Another group taking advantage of the

times has been Carlyle

Group

founders-William

Conway Jr. ($2.5

billion),

Daniel D'Aniello ($2.5 billion), and David Rubenstein

($2.5 billionj.l "

Corporate

Raiders

Lead

to

a

Better

World

The

media paints these

OPMers

as greedy scumbags,

but

why?

The

stock can get a nice price bump when deals are announced.

This

is capitalism's Darwinism. We all benefit from improved efficiency,

productivity, ...