Buy, Strip and Flip

The process of a private equity firm buying out a publicly trading company (usually via a leveraged buy out) and then reselling the firm via an IPO a short while after. Since the firms do not manage the acquired company for long, the IPO usually doesn’t do too well.

Private equity firms do so when they believe the acquired firm is undervalued, and when repackaged and sold to investors via a new IPO they can profit by selling it at a higher price. However,  within the short period of time it is hard to create substantial real value for shareholders and in essence not much has changed.