"Strip and flip” (or “strip ‘n’ flip") is an investment term that sounds like something out of a gentleman’s club. A company is acquired, reorganized ("stripped" of its nonperforming sectors), and then quickly resold ("flipped"). A 2006 Business Week headline was: “Buy it, Strip It, Then Flip It.”
“Strip and flip” has been cited in print since 2005.
Buy, Strip And Flip
When a private equity firm buys out a target firm (usually with a leveraged buyout) and then sells the target firm in an IPO within a relatively short period of time. Along the way, the private equity firm may take out loans to make special dividends or carry out other actions to improve its own financial situation.
8 May 2005, Sunday Herald (Glasgow, UK), “Vulture Culture: Much to the annoyance of the City, private equity firms have amassed billions buying and selling vulnerable companies, but is this process a necessary part of the ecology of modern business?” by Ian Fraser, business section, pg. 5:
In the UK, too, private equity firms have been accused of a range of misdemeanours including “mugging” stock market investors and trying it on with a “strip and flip” approach to companies they acquire.
Friday, July 28, 2006
Buy It, Strip It, Then Flip It
Buyout firms are celebrated for their ability to take on huge debts, buy neglected companies, turn them around over the course of several years, and sell them to public investors for huge profits. Since 2001 they have delivered to their investors annualized returns in excess of 20%, and have attracted record amounts of capital to buy even bigger companies. But the quick “strip and flip” the Hertz buyout firms are pulling off makes them look more like fast-buck artists than thoughtful turnaround specialists.
AUGUST 7, 2006
Buy It, Strip It, Then Flip It
The quick IPO at Hertz makes buyout firms look more like fast-buck artists than turnaround pros. Investor beware
Washington (DC) Post
The Fed Pause That Refreshes? Hardly.
By Steven Pearlstein
Wednesday, August 9, 2006; Page D01
It should tell you everything that the winning strategy in private equity these days goes by the name of “strip and flip”—buy a company, load it up with enough debt to pay yourself a big dividend, then sell it to another private equity firm hoping to do the same thing all over again.
OCTOBER 9, 2006
Beyond The “Strip And Flip”
How Corel, maker of WordPerfect, keeps enriching a private-equity firm
But this isn’t quite a simple case of a “strip and flip” by a private-equity player. In the past, Slusky has sold investments off to other companies. But by taking Corel public, and holding on to 70% of its shares, Slusky has found a way to cash out—and cash in.
Twin Cities Daily Planet
A Strip, A Flip, and a Sinking Ship: The Sale of the Star Tribune
By Jeff Nygaard , Nygaard Notes
January 16, 2007
First of all, the behavior of private equity firms like Avista is considered fairly predictable in the business world. Just last month the influential German weekly magazine Der Spiegel summarized the pattern for which such firms have recently become famous, saying that “The emphasis is on quick money, short-term results, and the highest possible returns for their investors, regardless of what it means for their prey.” By “their prey,” they mean the companies they purchase, like the Star Tribune. The industry term for this pattern is “Buy it, strip it and flip it.” Or, more simply: “Strip and flip.”
United Auto Workers Support Chrysler Sale
by Frank Langfitt
May 15, 2007
Private equity firms and unions are usually at odds. While private equity is generally looking to cut costs by cutting jobs and benefits, unions are busy trying to protect them.
So, the United Auto Workers’ endorsement of the sale of Chrysler to private equity firm Cerberus has come as a surprise to many.
Until recently, UAW head Ron Gettelfinger was no fan of private equity firms. Earlier this year, he warned that if such a firm took over Chrysler it would “strip and flip” the automaker, selling off its assets and destroy the company.
The origins and legacy of Enron’s collapse
By Malcolm S. Salter
Cambridge, MA: Harvard University Press
As for adherents to the “rip, strip, and flip” school of thought, they have typically generalized from a few notable examples of rapid cost cutting followed by quick sales of portfolio companies to secondary financial or strategic buyers.
Where Have All the Leaders Gone?
By Lee Iacocca with Catherine Whitney
New York, NY: Scribner
The biggest fear that people have about private equity firms like Cerberus is that their basic goal is to strip and flip. That is, they buy ailing companies on the cheap, “restructure” them by slashing costs, jobs, and benefits, then resell them for a big profit.
New York City • Banking/Finance/Insurance • (0) Comments • Monday, August 10, 2009 • Permalink