Vulture fund
Geierfonds ( English vulture fund ) is a derogatory term for institutional investors (sometimes also hedge funds ) who specialize in purchasing securities from problematic issuers (e.g. insolvent companies or states ) at large discounts from their nominal value .
General
The name is a metaphor for vultures patiently circling over weakened animals in order to ultimately benefit from their lifeless remains.
The word implies, the fund invests not in order with the operations of the acquired company profits to achieve, but from whose remains or the sale of assets revenue to achieve.
Economic aspects
Usually the liquidation value (the value of the individual parts if a company is broken up) is lower than the going concern value (the value of the company if the company continues to operate). In these cases, going on (at least the healthy part of the company) is the more sensible strategy. Since a reduction in production capacities and employees and other cost-saving measures to increase or even restore competitiveness are usually unavoidable, the accusation that “ locusts ” or “vultures” are at work is not uncommon.
In some cases it is not economically feasible to continue the operative business and a liquidation of the company in order to utilize the assets is inevitable in order to invest the proceeds in more promising activities. The decision to process an investment also depends on the owners' individual entrepreneurial goals. If higher returns can be achieved elsewhere in the same or even less time , it makes economic sense to end unprofitable activities through sale or liquidation instead of risking restructuring with an uncertain outcome.
See also
Individual evidence
- ↑ See Geierfonds , in: Die Zeit from May 11, 2005.