I upvoted you, but I'm not sure I agree. If you look at people who've really disrupted industries, they don't tend to be like Carl Icahn. Increasingly, as I read up about what happened during the M&A boom of the '80s, it does seem to me that finance played an essentially destructive role during that decade and the three that have followed. I don't see very many advances that would have been impossible without the financial industry. Instead, I see an industry which has become focused on short-term profits in exchange for long-term bailouts. Carl Icahn epitomizes this trend. That's why so many people hate him.
Leveraged buy outs aren't about disruption, they're about efficiency. Any company worth doing a hostile takeover of has a working business model (product market fit) and the acquirer is betting they have a lot of expenditures that are basically irrelevant to what they do to make money, or they are running at far below full utilisation on some resources or capacities, which can be cut without materially effecting anything the customer really cares about.
It usually sucks to be the employee of a company that's just been LBOd because layoffs are almost certainly coming, and whether they are or not, you're going to have to do more work, probably with less resources.
But for society as a whole it should be a win if competently executed; getting the same product/service out of less resources leaves the now excess resources free to be used elsewhere.
well most of the time its about asset stripping and loading up a company with expensive debt and selling it before the chickens come home to roost as a recent number of company collapses in the uk proves)
Or its about forcing companys to do trendy things - bad for the long term by selling off core assets on the cheap BT selling O2 is a classic example.
In theory leveraged buyouts are all about what you describe: getting rid of incompetent management, shedding non-core businesses, and restructuring the company to be more efficient. In practice, LBOs tend to leave companies weaker than before, since people like Carl Icahn strip cash reserves and load the company up on debt instead. This means that the company is running much closer to its financial red-line than before, and so when an unforeseen contingency occurs (like a year of bad sales, or an economic recession) the company is forced into bankruptcy with ruinous costs for its remaining shareholders, managers, and line workers.
Finance probably did play a destructive role and it still does mainly because like you said its not the dividend not the big picture that matters. However, going public is one of the prime factors that subject a company to that world. Staying private keeps you "safe" to a certain degree.
Once you are in public domain I think in the long run being subject to all sorts of positive and negative inputs e.g Icahn, Pershing square weed out weak links and bad fruit. Many times good fruit gets thrown out too without realizing the tree will not yield any more produce if done so.
Finance has a very simple function in terms of what it does for companies. If its making money => it works. If it WAS making money and isn't now => it can still make money with change.
