Sunday, July 08, 2007

Quest Diagnostics and Issues of Leveraged Buyout

Since there is talk of a leveraged buyout relating to Quest Diagnostics I thought that it might be a good idea to do a little research into just exactly how a leveraged buyout works the motor which drives it? What net results can be expected from it? Since I don’t expect much to be said about it at the Teterboro Business Unit it is important that all Quest Diagnostics employees become self educated on this issue.

Since it is clearly an issue which has such far reaching effect on all Quest Diagnostics employees I thought that it was worthy of research. I really don’t like to do a lot of research but fortunately for me and perhaps you as well, the good people at Wikipedia have an article on this very subject of leveraged buyouts.

I will place for your consideration several excerpts at the end of this article since they sort of jumped off the page at me. But if you are someone who like me does not fully understand the concept of a leveraged buyout and its far ranging and sometimes chilling effect, then you might want to take a few minutes to read about this subject of the leveraged buyout.

I have contained within this article a link to that information just in order to simplify your life. Yes, I’m just that sort of guy. Mr. Consideration. Just someone who is always thinking about the next person. A real company sort of guy. The kind of guy who holds open the door for the next person.

All that I can say is that if what is being stated in the
Wikipedia article about leveraged buyouts is accurate then a really good case can be made for the acceptance of a labor union at Quest Diagnostics not just for the logistics department of the Teterboro Business Unit but for every single employee of that company.

Teamsters are starting to look more appealing by the hour. How can that be? It is all a matter of perspective. Place them next to the current management and they aren’t so very pretty. But after looking at the Wikipedia information on this subject and the realization that a leveraged buyout might be in the near future, the teamsters look like a beauty queen.

Perhaps this leveraged buyout issue is why higher end of middle management has been so low key in fighting the union effort this time around the barn. Perhaps they believe that they have been betrayed by the top dogs and figure that they aren’t going to be around long enough to care anymore.

As a matter of fact I would go as far as to say that if I were basing my retirement upon the value of this company basing that investment upon historical perspective then I would be really nervous right about now. I would be demanding that the company tell me what is going on.

It shall be interesting to see how they respond to this and the last article
Quest Diagnostics Brave New World if in fact they do make any response at all. If and when they do I am sure that it will be a subtle response. W.E.L. I got to go do some important weekend stuff. W.E.L. not “inside” stuff, but outside stuff.

Leveraged Buyout

Historically, many LBOs in the 1980s and 1990s focused on reducing wasteful expenditures by corporate managers whose interests were not aligned with shareholders. After a major corporate restructuring, which may involve selling off portions of the company and severe staff reductions, the entity would likely be producing a higher income stream. Because this type of management arbitrage and easy restructuring has largely been accomplished, LBOs today focus more on growth and complicated financial engineering to achieve their returns. Most leveraged buyout firms look to achieve an internal rate of return in excess of 20%.


Failures

Some LBOs in the 1980s and 1990s resulted in corporate bankruptcy, such as Robert Campeau's 1988 buyout of Federated Department Stores and the 1986 buyout of the Revco drug stores. The failure of the Federated buyout was a result of excessive debt financing, comprising about 97% of the total consideration, which led to large interest payments that exceeded the company's operating cash flow. In response to the threat of LBOs, certain companies adopted a number of techniques, such as the poison pill to protect them against hostile takeovers by effectively self-destructing the company if it were to be taken over.

Addendum:

Interestingly an individual at a Quest Diagnostics server located at Quest Diagnostics Teterboro Business Unit entered this blog via a link which I placed at a cafepharma board. A board which I might add has driven tremendous amounts of traffic to this blog thank you very much.

Since the folks at Quest Diagnostics are pretty good at researching the web I wonder if they have already found this blogspot financial blog post on their own. If not please allow me to direct you and everyone else to some excellent research at “ResearchingStocks” since it sets up a good scenario as to why Quest Diagnostics is a takeover target.

I have never seen so many financial institutions looking at this blog. The one which really made me proud though was the financial group in Switzerland. They seem to be paying close attention to this takeover issue. Who knows, maybe they are the funding source.

IP Address 198.240.130.# (Credit Suisse Group / CANA)
ISP Credit Suisse Group / CANA
Location Continent : Europe
Country : Switzerland (Facts)
State/Region : Zurich
City : Zrich
Lat/Long : 47.3667, 8.55 (Map)

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