Buy It, Strip It, Then Flip It

On July 14, less than seven months after the private-equity trio of Clayton, Dubilier & Rice, Carlyle Group, and Merrill Lynch Global Private Equity bought Hertz Corp. from the ailing Ford Motor Co. for $14 billion, the group filed a preliminary prospectus with the Securities & Exchange Commission to sell shares in an initial public offering.

Buyout firms are celebrated for their ability to take on huge debts, buy neglected companies, turn them around over the course of several years, and sell them to public investors for huge profits. Since 2001 they have delivered to their investors annualized returns in excess of 20%, and have attracted record amounts of capital to buy even bigger companies. But the quick "strip and flip" the Hertz buyout firms are pulling off makes them look more like fast-buck artists than thoughtful turnaround specialists.