The web blew up at the same time as the Reagan/Clinton/Bush financial
bombs were detonating, leading to a huge private equity bubble in which
super-wealthy Americans used debt financing and other forms of financial
engineering to buy out successful companies, then hollowed them out, selling off their real-estate and plant, loading them up with debt, and raiding their reserve funds.
This meant that when the internet came along and started to challenge
their markets, these incumbent firms were offering inferior products and
had no money and no ability to borrow in order to pursue experiments to
adapt to the changing market. These century-old companies had weathered
many transitions in their history – the internet’s insurmountable
challenges were as much the fault of debt-loading as they were anything
inherent to the net.
A new analysis in the Financial Times found that the majority of
companies that were acquired in leveraged hedge-fund buyouts “have
either defaulted, gone bankrupt or are in distress.”
The stories of these firms are bananas: they’re taken private, then put
through IPOs, then taken private again, then thrown at the public
markets again. At each turn, the fund managers and at least
some of their investors take home giant paychecks – and the companies’
fortunes get worse and worse.
The internet was always going to challenge these businesses, but they
went up against the net having been cruelly flensed of their assets,
reserves, and will to live.
