Business Blog: Hoover’s Business Insight Zone

Catching up on some reading, I came across this Carol Hymowitz column from a week ago:

Chiefs Who Bucked Early Spending Spree Have the Upper Hand

It used to be that private-equity investors were using piles of debt to acquire companies, and executives who borrowed to expand businesses or repurchase their company shares were lauded for their business acumen. Now, those who were much more cautious about spending and borrowing are the ones who look savvy, as debt markets roil, large deals collapse or are renegotiated at lower prices, and fears of a recession mount.

I’ve talked before about my own esteem for those who keep their powder dry. As Hymowitz points out, having cash on hand gives them a lot of latitude for operations in good times and bad.

My thumbnail view: during the private equity boom of the past couple of years, the getting was so good for pursuing maximum returns in the short run that some companies forgot that success isn’t all about what you do this quarter, or even this year. Yes, go get your profits, but also be ready to operate well when times change. These days, it’s often those who kept “excess” cash on hand who are in the best position.