Vulture Capitalist
Candlefocus EditorOnce they have acquired a company, vulture capitalists apply an aggressive turnaround strategy that involves quickly cutting costs and finding alternative ways to generate revenue. Their primary goal is to restore profitability to the company, increase its value and sell it off as soon as possible. Vulture capitalists typically don't maintain long-term management or ownership of the companies they take over.
An example of a successful vulture capitalist is Wilbur Ross, whose private equity fund was once deeply invested in the auto industry. With Ross at the helm, the fund bought companies like American Motors, Navistar and LTV Corporation, some of which were facing bankruptcy at the time of purchase. Ross and his team promptly cut costs by slashing research, streamlining production and selling off assets. They also renegotiated loans from suppliers and creditors to create more favorable payment terms. As a result of these tactics, Ross' companies achieved profitability for the first time and went on to be sold for millions of dollars.
Vulture capitalism has come to have a negative connotation due to the often harsh restructuring tactics required to bring about a quick turnaround. Cost-cutting measures implemented by vulture capitalists can often mean job losses and welfare cuts for the employees of the companies they acquire. Some say these tactics are necessary to restore the health of a company, while others argue they are exploitative and can adversely impact the communities where the company operates.
Vulture capitalists can be both helpful and harmful to the economy depending on how they operate. When done in a responsible manner, their actions can be beneficial by restoring profitability to troubled companies, creating jobs and ultimately increasing economic growth. However, when they engage in unethical practices such as asset stripping, they harm the economy by overly focusing on the short-term profit and disregarding the long-term well-being of the company and its employees.