https://finbox.com/ideas/zombie-companies-list
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Solid point. You are right. I heard somewhere that MH made tons of $$$ when Cengage emerged from bankruptcy.
MH’s base salary may be $650k, but I am sure there are all kinds of performance bonuses that dwarf that number. When all the Pearson execs came over during bankruptcy they were absolutely desperate and determined to turn a short-term profit at whatever the cost because they had big payouts waiting for them.
Working at Cengage throughout the private equity sale, bankruptcy and the years following bankruptcy opened my eyes to how morally bankrupt the private equity world is. I’m no socialist and believe in a free market, but how is it legal to purchase an entire company while having almost none of your own skin in the game financially? And how is it legal to take out loans on an already over-leveraged company just to pay out dividends? That’s not competing in a free market…that is outright fraud. If you or I did that with a house or small business we would be indicted. But it’s just another day for the Wall Street boys.
That’s why I left cengage cheerfully because the writing is on the wall. There’s no upside, it’s over. Once they figured out how to put free ebooks on subsidized servers, it was over.
Thank you bill and Melinda gates foundation. Can I have another boostah please?
What a shame that a few bad apples have to spoil a good time for everyone by breaking the rules.
@3ihh+1kdUie4v Management has been a revolving door other than MH. I’m not sure kicking him to the curb does much. Relatively speaking, he works quite cheaply. I think his salary is $650k.
Why would anyone want that job anyways? There is zero upside. Only failure. Going to work everyday would suck, unless you are a sociopath, which he probably is.
My guess is MH will ride this to the bottom, make some decent coin and then move onto the next APAX project, or retire.
@3pzf+1kdUie4v This is a brilliant post. Private Equity rarely loses. But the list of companies it has destroyed goes on and on. It’s also why finance at its most darkest, rules the world.
The company, Cengage is dead man walking and will continue that trudge until APAX and its rich shareholders wring every bit of life out of it. They know EXACTLY what they are doing.
Horrible people may inhabit the private equity ecosystem, but they are not d-mb.
It will be interesting to see how Cengage deals with its ballooning debt payments.
Apax has made a fortune from Cengage over the years.
They financed the vast majority of the company’s purchase with debt. So the actual investors lost nothing there…just the pension funds d-mb enough to think that a textbook publisher was worth 7 billion dollars.
Once Apax quickly realized they would never be able to make money in an IPO they quickly pivoted to Plan B: loot the company. Every year leading up to bankruptcy Apax was telling management to pay them millions in “dividends.” It’s all there in the financial statements. That’s not to mention whatever ridiculous consulting fees Apax was likely charging Cengage.
Then, with insider knowledge that the company would be filing for Chapter 11, Apax bought up most of the company’s preferred debt for pennies on the dollar. That allowed them to double dip when all that debt was exchanged for equity. Other investors howled that it was insider trading (it was) but no one cared.
Current management is still in place because they do exactly what Apax wants them to do…cut costs by any means necessary and give cash to the private equity shareholders. They know the industry is a loser, but there’s money to be made from a loser. You can be sure the looting is still happening and will continue until Cengage’s lifeless corpse is finally liquidated. And they’ll wring every penny out of that too.
Classic private equity financial engineering. It’s why people like KC are the absolute lowest forms of human filth.
Just scary bad. I still don't understand why Apax doesn't dump the current management. It's been about 10+ years of bad news.
Is Cengage just a writeoff for them or are they using it as a debt vehicle for other investments?
When is management going to address the growing monkeypox infections in the ranks?
I know they’re making a sweet dime selling all the professor contact and adoption data in the crm. There’s a reason they make the reps spend weeks and weeks every year serving as data entry clerks
Look at enrollment trends and population. They will burn it all to the ground. 2nd bankruptcy will be within three years. Watch.
Cengage has been a zombie corporation since it was sold off from Thomson. Who is making money off this company is beyond me.