IN DEFENSE OF MILKING THE CASH COW.

I'm skeptical of business fads, including the restructuring that often took away capital for upgrading existing plant and fired the institutional memory.  Daniel Henninger (via Betsy's Page) offers the other side of the story.

Airlines, ground transportation, cable and broadcasting, oil and gas, banking and financial services all experienced regulatory rollback. Meanwhile, a competitive, globalized marketplace was rising. Management at some of America's biggest companies, confused by these rapid changes, found themselves sitting on huge piles of unused or poorly deployed cash and assets.

Thousands of Mitt Romneys allied with huge pension funds representing colleges, unions and the like, plus a rising cadre of institutional money managers, to force corporate America to reboot. In the 1980s almost half of major U.S. corporations got takeover offers.

Singling out this or that Bain case study amid the jostling and bumping is pointless. This was a historic and necessary cleansing of the Augean stables of the American economy. It caused a positive revolution in U.S. management, financial analysis, incentives, governance and market-based discipline. It led directly to the 1990s boom years. And it gave the U.S. two decades of breathing room while Europe, with some exceptions, choked.

Post hoc, nec ergo propter hoc.  "Positive revolution" or twenty years of fads that made merger promoters and a few CEOs rich?  You decide.  And take the time to read and understand Mergers, Sell-Offs, and Economic Efficiency.  Half of the mergers of the late conglomerate, early leveraged buyout eras were sales of divisions of the acquired company to other companies participating in the same or a related market.  The management of an airline conferred no special skill in running hotels or renting cars, and expertise at making steel did not translate well into selling groceries.  Did the efficiency gains from redeploying the cash exceed the management and promotion fees pocketed by the institutional money managers?  Or did those institutional money managers, dizzy with success, become vampire squids?