Summary
The BusinessWeek article referred to above is my nomination for one of the "Best Short Business Stories of 2008". It has everything, lust, greed, envy, vicious internecine battles, tragedy, sorrow, and large doses of human emotions. In a genre as classic as the "Movie Western" it details how Cerberus Capital Management, Sun Capital Partners, and Lubert-Adler bought Mervyn's from Target in 2004, proceeded to load it up with debt, paid themselves $537 million in "distributions" and then took the company into bankruptcy in 2007 and liquidation in 2008.
Analysis
As readers of GLG News will attest,this writer has long vented against the duel notions that: A) private equity knows more about turning around troubled retailers than the retailers themselves, or B) it makes sense for troubled retailers to have their occupancy costs doubled just so their new owners can pay themselves huge bonuses.
This BusinessWeek article, (and to a lesser extent, the shorter WSJ article referred to in the retailtraffic blog) does a superb job of detailing the private equity "playbook" for troubled retailers. It should be Required Reading for all GLG News readers and anyone else interested in getting involved in this type of investments.
In fact I would suggest that it serve as a big red flag for anyone presently invested in any retailer owned or controlled by private equity people.
