But extremely difficult to prove, or if is proven, to actually win a case on. Essentially, Lone Star Funds stripped Bruno’s of cash, as said above, and then sent it into bankruptcy. This ended a cycle of repeated leveraged buyouts that turned a once-thriving regional chain into a shell of its former self. But don’t take my word for it:
Regional grocers have been frequent targets for leveraged buyouts, with Bruno’s itself being bought that way once before. (The first purchase, by Kohlberg Kravis Roberts & Co., also led to bankruptcy.)
Observers of the industry say that even though supermarkets have razor-thin profit margins, they’re attractive because they take in so much cash.
“There’s a cash flow, and some of the expenses you can control and reduce quite a bit,” said David Livingston, a supermarket consultant based in Pewaukee, Wis.
The savings usually goes to pay down debt and into the pockets of the buyout firm, said Page, the Indiana professor.
But reducing expenses usually means fewer employees and less investment in stores, which tends to turn off customers. “I can’t ever say that the situation got better at the store level,” Livingston said.
Trust me — in Bruno’s case, nothing got better.