Freescale: When a Buyout Goes Bad
Article about Freescale's buyout woes:
It's a long one, so here's some quotables:
"Freescale's rich price tag—$17.6 billion, then the biggest tech buyout ever—raised more doubts among the financial cognoscenti. 'The deal was priced for perfection,' says one private equity veteran. In paying so much, the buyers—some of the world's biggest and most respected dealmakers—were essentially betting that nothing would go wrong."
"But Freescale's owners saddled it with $9.5 billion to pay for the deal. Now the company must come up with $375 million in interest payments every six months. Freescale's junk-rated debt trades for as little as 69 cents on the dollar."
"But few recent buyouts have been more disastrous than Freescale's. Its owners estimate it will take four years just to recoup their investment, much less generate returns."
"Freescale expects to have $1.2 billion in cash on hand by June, enough to keep it going for a while. But its longer-term future is uncertain."
"As the buyout firms increased pressure on Mayer to stop the bleeding, he resorted to layoffs, firing 700 people. One former engineer says that as she walked into her boss's office to sign her pink slip and collect cardboard boxes to cart away her belongings, she thought about how three months earlier the manager had gushed about her importance to the organization."
Perhaps interviewees should be asking Freescale HR the "Where do you see yourself in 5 years" question.