Why leveraged buyouts are risky.

[AztecWilliam]

Old timers such as yours truly will remember the King Midget, a micro car that was produced from 1946 until about 1970. It was a barebones vehicle, it's wheelbase about 75 inches, and had a tiny engine. At first it was sold as a kit; after a few years Midget Motors produced complete cars.

Anyway, the company ran into trouble in the late '60s. Wikipedia does not indicate this, but I read in one of the car collector magazines that a guy was in Alaska when he saw a pair of King Midgets somewhere in the outback. He was so impressed that he bought the company. Unfortunately, he went into serious debt making the purchase, and the venture failed.

That brings us to this story about Sports Authority. Read it and notice the mention of debt brought by a leveraged buyout. It seems that not all people with business experience and lots of money know what they are going.

money.cnn.com/2016/05/18/news/companies/sports-authority-closing/

AzWm

[AlwaysAnAztec]

Fortunately, the number of LBO's has gone down significantly. They are used to generate gigantic short term profits for the "buyer" who basically takes no risk as the debt is piled on the company itself.  I am surprised that Sports Authority was able to last 10 years after the LBO.