CityLink, a British parcel delivery service, has fallen on hard times, and financial journalist Alex Brummer holds private equity responsible, as reported by the Daily Mail. While the parcel company has been a disappointment for a while, there was hope when private equity took a stake in the company. There was hope that City Link would benefit from the growth of ecommerce, but Better Capital, which owns a sizeable stake in the company, thought it was appropriate to eliminate 2, 727 just prior to the holidays.
Better Capital was similarly unkind to Phones 4U, and backed out after having collected a substantial dividend. Brummer thinks that Better Capital did something really bad in the sense that they saw CityLink was a dying company. As he noted the comments of an analyst at Ernst & Young, trading an insolvent company can be a crime. Brummer thinks CityLink is a cautionary tale in the trend of flipping companies.
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