A Bad Case Of Venture Capital Envy

LBO funds are starting to pile into high-risk Internet deals

The world of leveraged buyouts has never been glamorous. It's about finding down-on-their-luck companies, piling them up with debt, siphoning off cash flow, refocusing management, and flipping them to make a bundle. Mundane, maybe, but a formula that has worked like a charm: Annual returns, after fees, for top-drawer funds averaged 22.7% over the past 20 years, vs. 19.7% for the Standard & Poor's 500-stock index.

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