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More Than Financial Engineering

October 8, 2012

When a company is in the leveraged buy-out business you can expect a lot of financial engineering to take place. It is a way of buying a company often using debt and the collateral may be the target company itself. The return to equity is high here since debt comprises much of the investment involved.

Platinum Equity is a company based in Beverly Hills, California. It was founded in 1995 by Tom Gores and is no stranger to leveraged buyouts (LBOs).  The company has gone beyond leveraged buyouts it actually has gone as far as to patent M&A&O®. This involves traditional merger and acquisition plus operational expertise. After acquiring a company it provides operational guidance and may add more assets to realize the true potential or value of a company.

Platinum Equity looks to buy or invest in companies that foremost must have recurring revenues. These businesses typically have an established brand and customer base. These may be private companies, public companies that want to become private, as well as a business that a large corporation wants to divest of.  Since Platinum has an existing list of companies in its portfolio, it also looks to buy or invest in companies that are a strategic fit or add-on to its existing portfolio.

One of the business operations carried out by Platinum was the October 2004 acquisition of CompuCom Systems, Inc. which was one of the largest public-to-private transactions in 2004. Then in the last month of 2004 Platinum acquired the IT Solutions division of General Electric.  Its merger with CompuCom produced a company with $1.7 billion in annual revenues with more than $500 million in services. Platinum held on to the combined company until it was sold in 2007 to Court Square Capital Partners.

Platinum has made similar deals in other fields like in logistics and distribution and in industrials. It makes the necessary investments and brings the company to good health. A healthy company can command a good price. Platinum has profited handsomely from its numerous M&A&O® undertakings.

 

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