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If you're not reading John Hempton's blog, you're missing some of the most thoughtful and straightforward short research available for free on the Internet.

Anyway, he had an interesting post from tomorrow (I love Australia), questioning the logic behind the Bain deal for CFSG.

He’s identified the same problem in the business that prompted us to sell -- massive amounts of customer financing that the company is not being compensated for. I think he’s a little hard on them re: the manufacturing stuff. They’ve said pretty explicitly that they only manufacturing some key equipment and make most of their money on the designing/installing/total solutions thing -- where they source 3rd party equipment.

I think the thing he’s missing is the Ministry of Fire connection that the company had via the former chairman who just died, and I think the fact that that connection disappeared is the company is looking to cash out.

So, all in all, I agree with the conclusion that Bain may be getting a raw deal here. I can’t believe they will be able to collect all of those receivables without factoring a lot of them away at heavy discounts. The weird thing about the press release is that the deal isn’t expected to close until November, which makes me think Bain is still doing diligence -- making their a chance that this deal does not go through.

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