Since this is a recent decision, the decision making process has not had a chance to get a clear understanding of the market. However, the fact that we have seen multiple transactions that have been based on short-term results is very telling. In the past, we have seen several deals that will be based on more than just the short-term bottom line.
Private equity has a way of working on the basis of short-term results, so it’s not surprising that a couple of recent mergers have been based on such short-term results. For example, we heard last week that H&R Block was planning to buy up to 40% of the shares of a company called LendingTree. This deal would have given H&R Block control of over 14% of LendingTree’s shares.
Of course, it’s also quite interesting that HampR Block is buying up so many LendingTree shares because LendingTrees is a financial services company and thus has a lot of value in the public market. The fact that HampR Block is buying up so many shares in a public company makes it all the more interesting to think about.
HampR Block is a private equity firm that invests in companies that are not as publicly traded. They may have been planning to buy up LendingTree because HampR Block was looking to become a bigger player in the private equity world, but now it may be that they have just realized it.
HampR Block is currently the second largest shareholder of LendingTree (the company that was bought up by LendingTree), but I’m not sure if it will have the same influence over the company as they had before. The same thing happens with some companies. When a private equity firm buys up a company, it usually does so to increase the value of certain assets that are being sold.
Private equity is a very complex and high-stakes business, and it’s not clear what the new Block decision, if anything, will mean for the company. If the company becomes less of an equal partner with LendingTree, it could mean the end of private equity as we know it.
Private equity is a very tough game, and it has been tough on LendingTree as well as Block, which has been a bit more laid back about the company’s future. LendingTree is the company that manages the $1.6 trillion of assets that are owned by private equity firms and hedge funds.
That may be changing, but Block seems to be taking a bit of a “if it ain’t broke, don’t fix it” approach when it comes to private equity. If Block continues to be a private equity company, the next step the company will have to take is to decide if it wants to become a pure-play hedge fund. Private equity is a lot more complicated than just being a pure-play hedge fund.
If Block wants to be a pure-play hedge fund, it’s going to have to decide if it wants to be a hedge fund focused on high-yield, asset-backed securities. Hedge funds generally focus on short-term investments that pay a nice return. However, the value of these securities can fall quickly, leaving a portfolio of small chunks of this kind of money. The key question is whether the company wants to have the risk of losing that money.
It doesn’t seem to have any such risk in this case. Block’s recent decision to put more money into its fund to try to get at the low end of the market, and to put less money in to be more conservative, makes it seem like they don’t want to lose money on the company’s investments. Of course, that doesn’t mean they won’t lose money if things go bad.