Mervyns sues ex-owners, and other tales of buyout woes
As detailed in the Wall St. Journal, (subscription required) the Mervyns team claims that Target set up the stores to fail when it cut a deal with a group of investors. The two-part transaction sold the stores and the real estate separately. The new owners then leased back the properties to the stores and effectively put them out of business with increased fees. Mervyns went into bankruptcy over the summer and will be shutting down a slew of stores.
As retail and restaurant businesses continue to fail in this sour economy, you're going to see a lot more of these stories cropping up, and probably a lot more hurt feelings. It's an economic lesson that most of us can learn something from, even for personal finances. When you are in economic trouble and seek help, the person or entity who kicks in cash to help you is likely going to take more from you in the end.
Mervyns was valuable mostly because of its real estate holdings, and so the equity group came in and took what it could from it. Mervyns failed, but that's not going to cause the owners to lose much sleep, because they can just rent out the properties to somebody else. The current mortgage crisis is being caused by similar thinking, as homeowners fail on their loans. The banks were willing to dole out bad loans because, in the end, they will own the property and can resell it for some value.