Tuesday, December 23, 2008

From McKinsey Public vs Private

The voice of experience: Public versus private equity

Few directors have served on the boards of both private and public companies. Those who have give their views here about which model works best.

DECEMBER 2008 • Viral Acharya, Conor Kehoe, and Michael Reyner

Advocates of the private-equity model have long argued that the better PE firms perform better than public companies do. This advantage, these advocates say, stems not only from financial engineering but also from stronger operational performance.

Directors who have served on the boards of both public and private companies agree—and add that the behavior of the board is one key element in driving superior operational performance. Among the 20 chairmen or CEOs we recently interviewed as part of a study in the United Kingdom,1 most said that PE boards were significantly more effective than were those of their public counterparts. The results are not comprehensive, nor do they fully reflect the wide diversity of public- and private-company boards. Nevertheless, our findings raise some important issues for public boards and their chairmen.

Monday, December 22, 2008

Is Chrysler iliquid

Most people think they are.
Do most people realize that the car industry in the States recognizes revenue on Car sales for the manufacturers when the car is shipped to the distributor. Strange how in the early 2000's in the computer industry and other industries this was called stuffing the channel. Amazing how a few of the right lobbyists and appropriate donations can get GAAP accounting changed for the car industry. When I saw Cerberus buy Chrysler I wondered (as I have worked with Cerberus) what gap in GAAP had they found in the car industry. Cerberus only focus on cash flow, so immediately they cut car models, shuttered plants and focused on cash not revenue. Novel concept? No this is where the focus for the USA will be in the future. I for one will be eager to watch Chrysler's progress.

Aivars Lode