If you want an idea of the penny-pinching nature of private equity buyouts, consider the fate of the monthly Cashcard Retail Activity Index from credit card transaction processor, First Data International.
It has been published monthly since 2003 and highlights monthly flows in cash, EFTPOS, credit card and cheque usage. The most recent survey was published on 5 April and that will be the last. The index is being killed off due to what is called a ‘change of focus’ for First Data, which inherited the measure when it took over Cashcard Australia in 2005.
The survey has a handy bit of extra info each month and helped flesh out the retail sales figures from the Australian Bureau of Statistics. It gave First Data some publicity and brownie points, in the same way the monthly and quarterly surveys from the National Australia Bank earns it brownie points, not to mention the various Westpac-Melbourne Institute surveys, or the ANZ Job Index …
First Data’s US parent was recently acquired by US private equity firm Kohlberg Kravis Roberts for $US29 billion ($A34.73 billion), and is in the process of being loaded up with debt. So, all the ‘fripperies’ and extravagances that cost money are being cut so a huge and early dividend can be paid to KKR, just as Airline Partners Australia proposes to do at Qantas. You get the picture.
Cut the spending, load up the debt to make sure the private equity people get their money first and early, before they have had time to ‘wreak’ their magic management formula. And down in deepest, darkest Australia, a small bit of illuminating information is quietly snuffed out to feed the dividend machine.
It is a small part of why in the end private equity is a mirage: it doesn’t do anything except advance the fortunes of the managements and investors in the private equity funds and make some short-sighted investors feel temporarily more wealthy, until they have to re-invest their money.