Private Equity Triage: If you don't like what a private equity firm did to your company, buy it back.

Posted by: Emily Thornton on February 12, 2009

Here’s one of the more radical ways to deal with a private equity deal that has gone bad:

The sons of the founder of defunct retailer Mervyns, Mervin Morris, have purchased the retailer’s name and all its Internet-related intellectual properties. They’re considering reopening locations of the discount department store their father opened nearly 60 years ago in San Lorenzo, Calif.

Target sold Mervyns for $1.2 billion to a group of private equity titans in 2004 —- Sun Capital Partners Inc., Cerberus Capital Management L.P., and Lubert-Adler. But the company was liquidated last year after the firms stripped it of real estate assets, nearly doubled its rent, and saddled it with $800 million in debt while sucking out more than $400 million in cash for themselves, according to the company.

Mervyns’ founder was so upset, he wrote to BusinessWeek that he felt the private equity firms were responsible for the “rape” of Mervyns. For their part, the one private equity firm willing to comment on the record— Sun Capital—- pointed out that when it bought Mervyns the company was struggling. “Financial headwinds and the challenging retail environment proved insurmountable,” Sun said in a statement.

It will be interesting to see if the sons of Mervin Morris will be able to resurrect the department store that the private equity firms could not.

Reader Comments

CADiver

February 12, 2009 7:23 PM

Unfortunately, this happens too often, these "Private Equity" groups are not interested in the companies they buy, they do not invest for the long run, just long enough to strip the companies of their assets and make a profit selling these assets. They could care less about the companies.
We saw a lot of that in the eighties ("Barbarians at the gate")and they are back again. I bet we'll see a lot of similar bankruptcies in the coming months, watch for Chrysler as the next.

Jed Clampet

February 12, 2009 7:43 PM

Who cares if a Mervyn's opens?

Jeremy Slate

February 12, 2009 9:20 PM

Private Equity Firms are difficult to deal with in may circumstances and most business people should stay away from them. However, there is a time and a place to use private equity firms.

Carl

February 12, 2009 11:15 PM

It is understatement that Mervyns’ founder son was upset, he must be very furious what happened to Mervyns, those private equity titans are pure speculators, they don't plan to run the business, and most of the time don’t know how but mainly to ripe profit and sell it again, regardless if the business will go bankrupt eventually. That's way bailing our Chrysler was a bad move, it is better to bail out GM and Ford only, but private equity titan who doesn’t care about the workers, just care how to please Wall Street with artificial profit then spend it as bonuses.

money.n'ever.enuf

February 12, 2009 11:36 PM

You get what you ask for when you team up with someone for whom THE goal is money -- he just goes for the money, all morals, ethics, laws (they keep pens of expensive lawyers to take care of this department). The moral of Mervyns is just one of the many that litters around. If your company is owned by one of these bastards, get out when you are still in demand.

Bruce Johnson

February 15, 2009 11:00 AM

Private equity people care about three things only: money, money, and money. It is naive and foolish to think that they care about local communities, employee well-being, or long-term value creation. They would themselves not even claim to be anything but greedy, avaricious, selfish, and cold hearted. Dance with them at your own peril.

ROBERT VALENCIA

February 18, 2009 3:24 PM

Hello Im a mervyns employee I feel that the closing of mervyns has been a very drastic blow to our comunity here in Rancho cucamonga . Not just the comunity but to all of my fellow employees at mervyns store #230 in Rancho cucamonga.The executives at the top should really think long and hard about what it has done to all of the dedicated mervyns employees that worked so deligantly to keep all the stores operating as it once did.I would love to get my job back ,being that I am now having a hard time finding a another job .I personally would really like to hear from someone at the top about whether mervyns is going to reopening or not ,cause there are alot of mervyns employees that are good hard working people that were put out of jobs.The liquidaters went in and raped our store not caring about anyones needs.All the liquidaters cared about is what they themselves could profit from this trajic misshap.sincerely looking for work ex mervyns employee#90073692

ex mervyns emplyee

February 19, 2009 4:07 PM

Hi i work for mervyns for a long time it was like my second home it will be very nice if i can be able to get my job back times are bad right now .Im having a hard time finding another job. please keep me inform thank you.

Angel Harvey

February 19, 2009 5:32 PM

I'm a ex-Mervyn's employee, was with them for twenty years. I loved my job. Target is also to blame for selling Mervyn's to a hatchet group. Mervyn's was a cash cow for Target. Mervyn's made a profit yearly for Target. How many new Target stores have they opened since selling Mervyn's? I hear Kohl's is trying to buy some Mervyn's stores? I hear Kohl's treats their employees bad. The old Mervyn's had a relationship with there employees. Not the last four years of Mervyn's with the hatchet group. How many retailers has employees working with they for over twenty years? Mervyn's!!! You felt like family working at Mervyn's. All other Department Stores your just a number. I know someone that works for Kohl's and she's just a number. Would be nice if Mr. Morris's sons did rebuild some Mervyn's stores. Thank you Mr. Morris for starting a store like Mervyn's.

Irene

February 20, 2009 9:03 PM

I am also an ex-Mervyns employee from the Chino, Ca. store. I was employed there for 6 wonderful years. It was a very sad day for us and yes even the customers, when our store closed on 12-28-08. I hope Mr. Morris's sons do start to open Mervyns stores, we also miss the products Hillard & Hansen, High Sierra, etc. Thank you

lydia davis

March 6, 2009 10:16 PM

I opened up the Mervyns store in Westchester as a retail clerk in 1991. I took great pride in my job and the company I worked for. We were treated well by Target, but after the venture capitalist took over and told us THEY could be more competive by taking away all of our benefits,I left after working for Mervyns for 14 years. I saw the writing on the wall. I now work across the street from Mervyns and it saddens me to see the empty building and the old familiar sign.I see many of the customers I used to serve. We all miss not having Mervyns around. I hope the Morris brothers do decide to open the store. I'm ready to shop at Mervyns again!

robin

March 13, 2009 4:55 PM

I too am a former employee,Fontana & Apple Valley. Please Mr, Morris will you let us bring your company back to the family oriented, great business that it once was.

Deborah

April 16, 2009 5:38 PM

I was also an employee I was with Mervyns for 13 years, I opened up the Highland store in 1995. I hope that they will bring back Mervyns store's again it was like working with your family, and we need to bring that back and Mervyns store's back to the community.

Izzie

May 6, 2009 1:05 AM

I was a long time Mervyn's shopper and I miss it! I hope the Morris Bros are able to bring it back. You guys have my vote!

angel

June 3, 2009 1:07 AM

I too am a former Mervyn's employee for twenty years in Phoenix.I hope the Mervin Morris sons can bring Mervyn's back. I loved my job and as we said at Mervyn's our family. We still get together my Mervyn's family. I'm planning a reunion this year for my Mervyn's family.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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