[Spooky23]

They “sell” stuff to closely held entities and then lease them back. The principals take a vig from everything.

It’s not always an objective for the target company to go bankrupt, but if they do, the management has already pulled their money out. A company I worked for was a cash cow used to borrow and buy 3 other companies. The combined entity grew due to some growth hack stuff and one-shots, then got acquired. The PE boys made a lot of money, and the company itself was pretty much toast after the second acquisition.

[hack_fraud13]

Thanks I appreciate the clarification. You're referring to a leaseback, right? From the research I've done, I've mostly seen it happen in the context of real estate, e.g. with Darden when Starboard Value took over [0]. I think the rebuttals to management on slide 38.

What I wonder about this is in cases where the real estate is spun off into a REIT, does the original company keep shares in the REIT, or are transactions like this purely for one-time raising capital?

[0]https://www.sec.gov/Archives/edgar/data/940944/0000921895140...