Raid the Zombies
Crain’s Cleveland: “One private equity fund’s ‘zombie’ could be another’s opportunity” by Jim Hill of Benesch Law, “a full-service business law firm with offices in Cleveland, Columbus, Indianapolis, Philadelphia, Shanghai, White Plains and Wilmington.” Jim Hill is executive chairman and also founder of the firm’s private equity group. Hill writes:
…the fact is there are “zombie portfolio companies” in certain funds that will cause true difficulties in raising another fund if there are several of them in one existing fund. In fact, The Economist recently gave the dire prediction that one out of four PE funds worldwide would not be able to raise another fund, due to having too many of these zombie companies…
Hill is optimistic for this environment concluding:
This presents a great opportunity in many cases for a new buyer if they see opportunity through new funding. It is far less so an opportunity for the seller. Stay tuned as this opportunity is on many aggressive funds’ radars as a way to pick up companies that have potential but no additional capital.
I like the use of the word “radar” because aggressive funds’ don’t use radar, aggressive funds are raiders! Recall the Economist article called is “Zombies at the Gates” in a clear pun on “Barbarians at the Gate”. And recall other zombie private equity.
The point of Hill’s article is that there are a lot of zombies out there, hurting, unable to grow, unable to survive, now is the time to kill them, now is the time to steal whatever little they are worth. The government on furlough, but the economy is still on buy low.
And this picture of Benesch staff, almost all white faces rooting “go tribe”. Do they think they aren’t racist because they have one black woman in the picture? That red-faced-feathered-mascot probably doesn’t seem racist to them, it has developed an alternative symbol meaning. This is an old argument, see 1998 New York Times: “Racist Logos” – and see “Indian Mascots, Symbols, and Names in Sports: A Brief History of the Controversy”
Recall ZombieLaw post on “Semiotics of Atrocity – Is a rising sun always a swastika?” and “Zombie Symbols of Gay Marriage – what happens when you take a symbol and fuck it up the ass”. Also recall “zombie” as related to native peoples and indigenous sovereignty. See links in “The Bitumen Zombie Resistance League” and “heavy metal and na(t)ive outsiders”
Zombies are often the faceless generic mindless other, but the Other is often a person too, and we are ourselves mindless. So the lawyers in Cleveland suggest aggressive rading of zombie companies. What else is new… Zombies of the Wild West.
And it’s still the wild west out there in private equity land. The robo-signing zombie foreclosure apocalypse is still upon us. They don’t know if the debt they are selling is any good, or worse they know it’s not. Procedures weren’t followed, notes were destroyed, they can’t trust the valuations and risk committing more fraud in this regulatory climate. Surely they can’t sell what they don’t reasonably believe exists… although maybe they can, I mean, no one believes “zombies” actually exist right? Similar to Hill’s point, I guess, one person’s fiction can be another’s opportunity.
And it’s probably OK to be opportunistic, but just not so much that you’re a pirate or a vampire. (It’s funny how “pirate matey” sounds like private equity and banker sounds like vampire. Or is that just me?) And, I know banks can help people and equity investment is essential for that, but I mean, the Indians team logo is cute too, but it still feels like there is something wrong here.