Part 6/9:
Strip Assets: Acquired companies typically possess valuable assets. These are sold off, generating immediate cash flow often used to pay dividends to investors rather than reinvest in the business, allowing the equity firm to recoup its investment soon after acquisition.
Cost Cutting: Firms will often impose aggressive measures to reduce expenditures, which may include workforce layoffs and reduced product quality. While this may enhance short-term profitability, it jeopardizes the long-term health of the business.