This is exactly it! (WSJ - subscription req'd)
Financial engineering is a tool, and useful one at that. But if it is the entire modus operandi of the big buyout firms, it is a dead end proposition.
Maybe I'm just on my compassionate capitalism kick again, but where is the corporate responsibility here? Why is there such blatant excess being exercised against the acquired firms? Don't that have anything better to do with their funds than to pay dividends to their sponsors? What about actually growing the business? Hell, RUNNING the business profitably might be worthwhile.
My problem isn't with the fact that the cash flows support this kind of transaction (for now). My problem is that the funds should be supporting the business, and once all the operational objectives have been funded, then the sponsors should be able to take a little more off the table. Its the same kind of analysis as Roger Ehrenberg at Information Arbitrage made for Apple developing a VC strategy two weeks ago.
Leon Black has the right to make his money, no doubt. But throw off the dividends once the sustainability and profitability are in place. Not before. That's all I ask.