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Goldman Sachs and the $580M Black Hole (2012)

• luxpir 11y ago
  For those who also read comments first... Some of the code in Siri originated from Mr. and Mrs. Baker's company, Dragon, which they eventually sold for stock options. Those options tragically turned out to be based on cooked-books and worth nothing, after completion of the sale guided by GS. The ensuing legal battle continues, as do the fortunes of those who bought the remaining Dragon tech (Nuance, specifically) and licensed it to Apple et al.
  • osullivj 11y ago
    The article says they sold for stock, not stock options. Even so, they should have sold for part or all cash. Taking stock that's not blue chip was foolish. However, we should bear in mind the times. It was 99, and the market was roaring ahead.
  • jackgavigan 11y ago
    > The ensuing legal battle continues... Really?
    • JibberMeTimbers 11y ago
      I'm calling you out for this lazy comment. "Ensuing" in this context means after the the failed acquisition and bankruptcy (2001). "Continues" means it's still ongoing. And keep in mind the context of this article is 2012. There is no redundancy.
      • jackgavigan 11y ago
        I have no idea what you're talking about. As was pointed out in another comment[1], Goldman Sachs won the ensuing court case. Which begs the question: Does the legal battle in fact, continue, or is the matter settled (in which case the parent's author is talking crap)? Which is why I asked "Really?" 1: https://news.ycombinator.com/item?id=10994872 https://news.ycombinator.com/item?id=10994872
  • jmnicolas 11y ago
    >Some of the code in Siri originated from Mr. and Mrs. Baker's company, Dragon It's not a fact : "The Bakers believe that some of their technology made its way into Siri."
    • jdmichal 11y ago
      Siri was developed by SRI International, basically as the commercialization of the CALO project [0]. It was initially developed as an app, and was even available in the store. The project was then spun-off into a company, and the developers were working on versions for other platforms. Apple then bought the company, making it exclusively an iOS product and integrating it into the OS. The voice recognition technology was indeed based on Nuance technology [1]. Nuance was also a spin-off from SRI. EDIT: This was all after ScanSoft purchased Nuance, which means it had both Nuance and Dragon technology at the time. However, due to Nuance's history with SRI, I would lean towards that being the more likely option, if they hadn't been integrated by that point. (I worked at SRI during the Siri spin-off time period, and worked with one of the Siri developers on another project.) [0] https://en.wikipedia.org/wiki/CALO https://en.wikipedia.org/wiki/CALO [1] http://techpinions.com/nuance-exec-on-iphone-4s-siri-and-the-future-of-speech/3307 http://techpinions.com/nuance-exec-on-iphone-4s-siri-and-the...
• youngtaff 11y ago
  Looks like Goldman Sachs won the case too - http://www.bloomberg.com/news/articles/2013-06-12/goldman-sachs-s-trial-win-in-dragon-systems-deal-upheld http://www.bloomberg.com/news/articles/2013-06-12/goldman-sa...
  • jjoonathan 11y ago
    > The judge called [Goldman Sachs' actions] “professionally negligent” > the jury concluded that the banking team satisfactorily performed its role for Dragon Systems in all respects > I [the judge] conclude otherwise Yuck.
    • CPLX 11y ago
      Goldman did apparently win a jury trial. While this case looks horrible the idea of a judge respecting a jury's verdict doesn't seem like the horrible part.
      • pc86 11y ago
        Is there precedent for a judge overturning a jury's verdict immediately after it's handed down? I imagine you'd need a reason quite a bit above and beyond "I disagree" but even so I'm not sure if that would violate the right to a jury trial or not.
        • CPLX 11y ago
          Sure, the judge could overturn it as a matter of law. But the jury is supposed to be the ultimate arbiter of facts.
        • dctoedt 11y ago
          In general, in the U.S. a judge can overturn a jury's verdict only if the judge concludes: (i) that no reasonable jury could have reached the verdict on the evidence of record -- if reasonable people could disagree, given the evidence of record,, then the verdict must stand; or (ii) that the verdict was (or was likely to have been -- I forget which it is) the product of bias or prejudice; or (iii) that (in hindsight) the judge screwed up in giving the jury its instructions about how to apply the law. There are also some procedural prerequisites, e.g., for item (i) the losing party must have moved for "judgment as a matter of law" before the case was submitted to the jury, while for item (iii) the losing party must have objected to the flawed jury instructions before they were given to the jury. For federal courts these requirements derive from the Seventh Amendment to the Constitution, which provides in part: " ... no fact tried by a jury, shall be otherwise reexamined in any court of the United States [which means federal courts], than according to the rules of the common law." [1] [1] https://www.law.cornell.edu/constitution/seventh_amendment https://www.law.cornell.edu/constitution/seventh_amendment
• gregdoesit 11y ago
  This case was very well covered at the time. Top 3 things I've learned from this story: 1. If you sell do your company, never do it for all-stock (or at least almost never) 2. Have a plan B in case the company who aquired you goes bankrupt - the very next day. 3. No one will care about your company as much as you do. So don't outsource important parts of the process such as: reading all the paperwork and checking references of the acquirer.
  • alm0stn3v3r 11y ago
    The almost never: https://en.wikipedia.org/wiki/Broadcast.com#Acquisition_by_Yahoo.21 https://en.wikipedia.org/wiki/Broadcast.com#Acquisition_by_Y...
    • CPLX 11y ago
      The much more fascinating part of that story is how Mark Cuban had the foresight to convert the all stock deal to an all cash deal (from his perspective) by engineering a sophisticated straddle hedge on the stock of the acquiring company. A scheme he created by collaborating with, you guessed it, Goldman Sachs.
      • djhn 11y ago
        Where can this fascinating part be read in more detail?
        • CPLX 11y ago
          He alludes to it himself here: http://qr.ae/ROsdtD http://qr.ae/ROsdtD And there are a bunch of technical explanations around, here's one: http://investmentxyz.blogspot.com/2006/05/cubans-collar-anatomy-of-famous-trade.html?m=1 http://investmentxyz.blogspot.com/2006/05/cubans-collar-anat... I remember seeing Cuban himself explain it in detail, that's probably out in the Google somewhere.
        • psykovsky 11y ago
          fascinating? fraud, you mean...
• dh997 11y ago
  Dragon NaturallySpeaking could transcribe continuous speach in the late 90's at nearly full speed, it was amazing. But then it disappeared, this explains it. Moral of the story: don't ever pay upfront for deal advice because interests aren't aligned, light a fire under the due-diligencers by making it a % of the deal. Not everyone at Goldman is evil I can vouch for that personally, but also not everyone there (or in M&A / wall st circles) doesn't gradually acquire some degree of jaded entitlement or dispassionate, insular inhumanity either... that's what a city and high earnings does to some people. Plus, not knowing business, not having a strong relationship with an IB and not doing your own due-diligence are all contributing personal failures. Regardless, the other party spears to have committed fraud and Goldman seems it didn't completely live up to its fiduciary duty in this instance. The nails in these employees' coffins is not meeting with the press to express reasonable and legally-defensible answers, it makes them look guilty. (You've got to know when a blanket best-practice such as not speaking to the press during ongoing legal matters should be broken without compromising the case.)
• ikeboy 11y ago
  Should say 2012
• jackgavigan 11y ago
  A cautionary tale about relying entirely on external advisors. There had been rumours about L&H's book-cooking for a couple of years before the Dragon acquisition and a Goldman Sachs analyst was quoted on the topic [1]. A sad outcome for the Bakers but they weren't entirely blameless (although Goldman Sachs were certainly very lucky to get away scot-free). 1: http://www.wsj.com/articles/SB912638848485991000 http://www.wsj.com/articles/SB912638848485991000
• toyg 11y ago
  Oh, so this is how Dragon died, I always wondered where they had gone. NaturallySpeaking was one of the most, ahem, shared programs of the late '90s. Tried it a few times but with all the corrections it never felt faster than my own typing (and I don't even touch-type). The lessons from this story are two, basically: never cut all-stock deals and never deal with the likes of Goldman if you are not a billion-size business.
  • spacehome 11y ago
    > Tried it a few times but with all the corrections it never felt faster than my own typing (and I don't even touch-type). Then you weren't the target audience. I got it for my grandfather, whose hand tremors made typing all but impossible.
    • pc86 11y ago
      The target audience was anyone who typed a lot. It was not a piece of medical software and was not targeted as such.
      • psykovsky 11y ago
        can you speak faster than you type?
        • ubercow13 11y ago
          Can't most people?
          • deleted 11y ago
            [deleted]
          • tptacek 11y ago
            Not if they type a lot.
            • 11y ago
• jessaustin 11y ago
  Wow that sucks. One is tempted to admire the chutzpah of GS defense lawyers, simultaneously claiming both that their contract was with a company that no longer exists and that the lawsuit was a breach of that contract by the Bakers. Now that was a shitty contract! If one requires M&A work, one must already have an experienced M&A attorney to approve the "engagement letter". To get a reference to such an attorney, one must already have spent lots of money with a different law firm that is large enough to have a partner with a clue. Good luck with that, if you've been spending all your time developing technology rather than e.g. orchestrating dodgy real estate schemes like a particular presidential candidate. The house always wins. As a juror, I would never vote "guilty" on a drug crime. Also, I would always find for the plaintiff if GS were the defendant.
  • psykovsky 11y ago
    Thank you for telling us why you will never be selected to be a juror...
    • jessaustin 11y ago
      I've already served as a juror. Neither of the conditions cited above applied. It's not as though I would hide either of those from the court anyway. They're welcome to conduct their simulation of justice; I decline to take part.
  • pc86 11y ago
    > As a juror, I would never vote "guilty" on a drug crime. What in the world does that have to do with anything? > Also, I would always find for the plaintiff if GS were the defendant. "Presumption of innocence unless I don't like them" and all that, I guess.
    • bittercynic 11y ago
      While it may be slightly OT for this, I think it is an important consideration. It is a very coherent answer to the question: "What should you do if you're required to report for jury duty as part of a system that you think is likely to produce an unjust outcome?"
• tobltobs 11y ago
  I still can remember how 20 years ago my image processing professor used this guy as an example how you can create a successful company out of nothing with the help of computers. The successful image processing company of this professor was killed lately by a patent troll.
• rcarrigan87 11y ago
  It's interesting that the ages of the bankers are so prominently mentioned in the article. Everyone is fairly young, how much experience do they really have? It could be justified if a more senior banker with a lot of experience was overseeing them. But seems like that wasn't the case. It really makes me wonder, how much value are these guys actually adding to the transaction? If a bunch of 20 somethings can broker this deal, are the services really worth the insane fees being charged?
  • refurb 11y ago
    Someone else with IB experience will be here to add details, but those 20 and 30 year-olds were not running the deal. They would have had someone more senior overseeing them. I'm guessing it was a couple analysts and an associate or VP. Those are very junior people. Now as the article said, the deal was quite small for GS, so it's likely the amount of time spent on the deal by the senior person was small.
    • at5 11y ago
      Actually not surprising that GS would let a VP and an associate run this deal. $580MM is small potatoes for Goldman, and it was 99 so they were up to their eyeballs in deals. There was probably a senior banker committee overseeing the deal but they really just rubber stamp stuff and never look at the details. The details in this case were what crushed James Baker's take. Note that a good/experienced banker would advise the client to put in a collar in an all stock deal.
• oneJob 11y ago
  At this point, we have to ask, exactly what is require to get a legal decision that goes against these folks. Given that this case was settled after the financial crisis, and so sentiment would not be on the bankers' side, it is even more surprising.
  • pc86 11y ago
    Some of the comments here surprise me. Why should sentiment matter at all? Defendants are presumed innocent. Except under pretty specific circumstances they do not have to prove their innocence, just cause enough doubt to be construed as reasonable. Some people are able to vote not guilty for a defendant they despise, because that's what you're supposed to do as a juror if the facts dictate. If you're not able to do that, you have no business being on any jury, whether the defendant is a bank or a pauper. And even if you lie during voir dire (which is a crime), with a presumption of innocence all you'll achieve is a hung jury.
    • xixi77 11y ago
      It wasn't a criminal case, so there was no presumption of innocense. The jury found that preponderance of evidence was in favor of the defendant. In theory, sentiment shouldn't matter, but in practice it might, which suggests that perhaps the case was not actually quite as clear-cut as the article implies...
    • oneJob 11y ago
      As the other reply says, it's a civil case. Preponderance of Evidence applies, which is a much, much lower bar. Think, millions of dollars awarded over coffee that was served too hot. And, civil or criminal, if you think that sentiment doesn't come into play, then you probably think justice is blind, politicians don't lie they just over promise, and that the markets are rational. What a wonderfully, blissfully ignorant state to exist in.
• qaq 11y ago
  The biggest take away is find a partner appropriate for the deal size you are doing. A smaller IB for which 5m fee would actually matter would have being a smarter bet.
  • at5 11y ago
    100%. Many boards think that by getting Goldman or Morgan you're covering your ass. They don't realize that unless you're atleast $1BN in size they really are not incentivized to do a thorough job. Why? Because M&A deals are priced off a % fee grid (50bps to ~2% depending on the deal). 2% on 580 doesn't shift the dial for Goldman.
  • gmarx 11y ago
    This is true for many services you buy from other companies. The reputation of a giant is likely based on the top people in that company and sometimes based on the top people who were in that company years ago. Unless you are also a giant company you are probably getting junior people brought on to feed the pyramid. If you can find a smaller practice with smart people you will usually be better off
• jonknee 11y ago
  In the Big Short Danny Moses was not going to do the deal (to short mortgage backed securities) until he got the answer to a question from the bank's sales person: > I'll do it, but only after you explain to me how you are going to fuck me. Seems like an appropriate question whenever dealing with an investment bank.
  • gadders 11y ago
    Or any salesperson.
  • mseebach 11y ago
    Actually, slightly rephrased, it's a reasonable thing to consider for any non-trivial interaction: "What are your stakes here?" Even with the best of intentions, people are complex and complex transactions between two or more of them are complex-squared. Taking the time to make sure both parties understands what the other does and doesn't bring to the table is important for success.
• shadowsun7 11y ago
  It's worth noting that James Baker is very active on Quora these days. His profile: https://www.quora.com/profile/James-Baker-69 https://www.quora.com/profile/James-Baker-69 Here's his response to "What is your worst memory as an entrepreneur": https://www.quora.com/What-is-your-worst-memory-as-an-entrepreneur/answer/James-Baker-69 https://www.quora.com/What-is-your-worst-memory-as-an-entrep... And here's one where he explains that he's financially ok, despite the Dragon fiasco, because he saved enough for retirement: https://www.quora.com/How-did-James-Baker-lose-several-hundred-million-dollars-in-six-months/answer/James-Baker-69 https://www.quora.com/How-did-James-Baker-lose-several-hundr... Most of his answers are really good.
  • bhauer 11y ago
    From the worst memory answer, this stood out: > The technology has progressed less in the last fifteen years than it did every two or three years under Dragon Systems. I suspect he is biased, but it's hard to not agree with the sentiment. It's a shame that someone with such enormous personal motivation in the specific technology space lost the ability and the will to be part of it. And as such, that technology space has suffered. It's a matter of belief since we cannot know how things would have played out differently, but I agree with the sentiment.
    • mseebach 11y ago
      Building something where nothing stood before is monumental, but last weekend I spoke to Google Translate (at a noisy party) and had it instantly and correctly translate what I said to mandarin. I guess what I'm trying to say, is that taking the technology and making it ubiquitous on a mass market is no small fry, either.
      • ElysianEagle 11y ago
        Depends on the resources available to the company trying to popularize the product/idea. If it's a tiny start-up with limited resources, then absolutely, it's a huge accomplishment. If it's a massive company with tons of cash, together with the name recognition and momentum of n number of other products already out...then it's probably not that big of a deal, but still commendable, I guess.
• danmaz74 11y ago
  Should be marked as [2012] in the title. Unfortunately, it looks like the Bakers lost the case, as someone else already pointed out.
• leroy_masochist 11y ago
  A few things to keep in mind: 1. Although GS had passed on investing in L&H, that decision would have been completely unknown to the investment bankers working on the deal for Dragon -- by design. The "Chinese Wall" between the investment banking, securities, and asset management divisions of large financial institutions severely limits the communication between and among these parts of the firm. 2. Investment bankers are not accountants or lawyers. This is stated on the cover page of every investment banking presentation and at the bottom of every email that leaves the network. Telling the Bakers to hire accountants to do accounting diligence was not an abdication of responsibility; it was sound advice, not to mention GS's legal responsibility per numerous SEC regulations. 3. Apart from what may have been discovered during an unrushed diligence process conducted by accountants, there were rampant rumors at the time of the deal that L&H faced cashflow issues. 4. This is the big one: the Bakers got impatient with GS taking what they felt was too long to look at the deal, and decided to meet with L&H on their own in order to get things moving faster. At a meeting not attended by the investment bank they hired to maximize the value received by shareholders in a sale they agreed to take all-stock consideration instead of 50/50 cash/stock. Let that one sink in for a bit. 5. The main reason that the Bakers lost the case against Goldman is that they previously, and successfully, sued L&H and its bankers/accountants alleging that they fraudulently covered up problems to an extent that said problems could not have been reasonably uncovered during a thorough diligence process. Goldman's lawyers used this previous sworn testimony to withering effect in cross-examining the Bakers. Disclaimer: I'm a former GS investment banker. I wasn't there in the late 90's and I'm not there now. My own personal take on this is that, when M&A markets are frothy, banking teams get younger and less experienced because a relatively fixed-quantity resource (licensed investment bankers at a given firm) are being spread thinner and thinner against an increasing number of deals. Keep that in mind and proceed with caution if you have to sell your company under such conditions. In terms of what GS could have done better: I think one of the big issues here was that Gene Sykes, who is a genuinely brilliant guy with excellent bedside manner, was MIA on the deal even though he was nominally in charge of the team. My guess is that if Gene were doing weekly update calls with the Bakers, they would not have done colossally stupid shit like try to hijack the process themselves. I think they were likely getting the right advice from the younger bankers on the team -- don't rush this, we need to do this right, let us have these conversations for you, etc -- but that advice does not carry the same weight coming from a 27-year-old associate compared to when it comes from one of the most accomplished dealmakers of his generation. Also: cash is king. Be very wary of all-stock deals.
• deleted 11y ago
  [deleted]
• yellowstuff 11y ago
  GS isn't blameless, but this article makes things sound a lot worse than they really were. Fortunately for us, the best finance writer in the world is also a former GS banker and a lawyer, and he wrote a much better article on this case 3 years ago: http://dealbreaker.com/2013/01/dragon-systems-shareholders-cant-see-the-bright-side-in-extremely-successful-ma-transaction-that-wiped-out-their-lifes-savings/ http://dealbreaker.com/2013/01/dragon-systems-shareholders-c... The summary is that it's not really the merger adviser's responsibility to look into the stock of a public company acquirer, even though it feels like it ought to be.
  • deleted 11y ago
    [deleted]
  • at5 11y ago
    They absolutely need to take blame for not atleast advising James Baker to put in a collar. All stock deals are hugely risky. A deal being run by a VP and associate is also a no no at most banks, and one would presume Goldman after this fiasco.
    • deleted 11y ago
      [deleted]
    • morgante 11y ago
      > They absolutely need to take blame for not atleast advising James Baker to put in a collar It would seem they actually did. [1] Goldman certainly didn't provide the best service here, but I don't think what they did were illegal. The blame for going through with this transaction falls on the clients who refused to hire an accountant when Goldman recommended it and pushed for an accelerated schedule. Heck, they agreed to an all-stock deal without even having their bankers present. (Of course, the ultimate blame lies with L&H who committed criminal fraud.) [1] http://dealbook.nytimes.com/2013/01/29/lessons-for-entrepreneurs-in-rubble-of-a-collapsed-deal/ http://dealbook.nytimes.com/2013/01/29/lessons-for-entrepren...
      • at5 11y ago
• ratsmack 11y ago
  This may sound rather vindictive, but I have personal reasons for this statement... and that is I hope I can live long enough to see the smoldering corpse of Goldman Sachs being buried in a grave covered with a thick layer of cement. They are a corrupt organisation.
  • at5 11y ago
    Why do you say that?
• ghwwofjfjejidjf 11y ago
  It's good to see that our heavily financialized capitalist system continues to reward innovation. This truly is the best system on earth. Edit: would the downvoters care to share why they don't think this is a great example of capitalism's efficiency at work?
• chatmasta 11y ago
  What an interesting story. I'm surprised the Bakers did not try to repurchase their technology in the bankruptcy sale. If other firms scooped it up for as little as $7m, surely the Bakers could have raised that much from a few opportunistic venture capitalists who understood the technology was better under the care of the Bakers than any other third party. Of course this was right when the dotcom bubble popped, so maybe raising $7m from VCs to buy back technology they just lost in a messy bubble popping deal would be incredibly difficult and require more dilution than it was worth. Also, what if they had just recreated a new company with the same technology? Who would sue them? The acquirer of their IP was bankrupt. Why not rebuild the technology and wait until the secondary acquirer sues? By that time they could have had a fully formed legal argument for their rights to the IP, and probably a better argument than whatever they're using against Goldman. Ultimately, Dragon hired Goldman as an advisor. Only the Dragon board had the ability to approve or deny a deal. Goldman had no vote. Therefore all responsibility for poor decision making should fall on the board, not Goldman. Did Goldman give shitty advice, or none at all? Yes. But it sounds like Dragon knew the advice was shitty, but chose to proceed anyway. No way this case falls in their favor. I just hope they don't lose even more money in the Goldman counter suit. There best hope is a sympathetic jury (is it even a jury trial?) that rules emotionally based on the story of a nice couple of people getting screwed by the venerable Goldman Sachs. I hope for the Bakers' sake they win this case. They seem like remarkably caring people who got tangled up in the wrong place at the wrong time.
  • patmcguire 11y ago
    Re: auction, it's impossible to tell how much the other side would have been willing to pay if the Bakers were bidding it up over $7m.
• lhh 11y ago
  As a banker, I figured I'd offer my perspective: I don't think Goldman did anything illegal, but they certainly did a terrible job serving their client. In my view, investment bankers have an obligation to offer whatever financial and strategic advice the particular client needs, which is a function of that client's sophistication. Some clients are highly sophisticated, don't need any advice, and just want you to find them a buyer at a good price. Others can, for example, simply be good technologists but otherwise not be particularly business or finance savvy, and so will need additional guidance along the way. To look at this particular case, moving from a 50/50 cash/stock deal to an all-stock deal without an increase in total consideration, or without the client REALLY loving the stock of the acquiring company, makes no sense. Guaranteed money upfront is always preferable (unless there are unusual tax circumstances, which I don't see being the case here). This should have been a major point of discussion and negotiation. And if an all-stock deal was decided upon, the client should've been advised with no ambiguity that there are substantial risks involved in such a deal. In any case though, even for the 50/50 deal, substantial due diligence on the acquirer should have been recommended. Spending $50k to verify the quality of $290mm+ in sale proceeds is a no-brainer. This legitimately falls outside of the realm of responsibility of the banker to conduct this due diligence though, and should've been performed by a third party with guidance and oversight by the bankers. The bank here is conflicted anyway - their incentives would clearly be to give the "all clear" sign. Falsified revenue is extremely easy to catch - just follow the cash. I guess the lessons here are don't work with service providers who don't value you, and always keep in mind that ultimately, as the client, you're the one that has to live with the decisions that get made. I'd be remiss if I didn't mention that there are better sources of financial advice. At my firm, we take pride in deeply aligning ourselves with our clients by only charging fees upon successful completion of a transaction, and by being compensated in the same form that our clients are (e.g. had we advised Dragon, we would've been compensated in L&H stock, and would've therefore been highly incentivized to strongly recommend due diligence!). The Dragon/L&H deal is actually one of the case studies that inspired the genesis of our firm. I'd love to chat if this resonates with you: lharris@belstone.com.
  • at5 11y ago
    Former banker here. Really impressed you guys get paid in the same form of consideration as your clients. 100% the way to go.
• smenyp 11y ago
  While I do feel for Dragon Systems and James Baker, I agree with the finer line toed by Matt Levine's article here: http://dealbreaker.com/2013/01/dragon-systems-shareholders-cant-see-the-bright-side-in-extremely-successful-ma-transaction-that-wiped-out-their-lifes-savings/ http://dealbreaker.com/2013/01/dragon-systems-shareholders-c...: "Why would you hire an investment bank to advise you on an M&A deal? It’s sort of an uncomfortable question." This reminds me about Warren Buffet saying that asking an investment bank about M&A advice is like asking a barber if you need a haircut.
• chad_strategic 11y ago
  This is another reason to hate the banks. Goldman Sachs is a ruthless organization and will do anything and everything to make money. They make the mob look, Disney characters. I do agree the Bakers should have done a little better, but still Goldman will take both sides of the trade as point out in the article. This is another example of the banking system destroying intellectual property, for the sake of profit. Meaning, SIRI or voice technology could be a few years ahead had it not been for the fact that Dragon was auction off. (We will never now for sure.) If you want to hire the leader of the goldman four you can do so here: http://richardwayner.com/index.php/about-richard-wayner http://richardwayner.com/index.php/about-richard-wayner
• softyeti 11y ago
  "It was at this meeting that L.& H. proposed shifting the $580 million deal from half stock and half cash to all stock. The Bakers, with their high-priced investment bankers M.I.A., agreed." Case closed.
• rajacombinator 11y ago
  An odd article. I suppose it was written at the time (2012) to capitalize on anti-GS fervor, while at the same time not actually covering anything bad they did. Because in the grand scheme of their criminal activities, this is an absolute nothing burger. In fact, without other info, I'm inclined to side with GS on this one. Some things that would make the story actually interesting include: what were/are GS's connections with senior execs at the L&H co, or at Nuance. Without intent, there's no story here, just incompetence in the worst case. Otherwise it seems like a simple case of a mom n pop team getting in way over their heads and penny pinching at the wrong time. The abnormally low transaction fee (guaranteeing poor service), lack of other DD, failure to instantaneously hedge out their exposure to the acquirer's stock, etc. Also they probably knew the deal was too good to be true at the time, hence the rush to take the all stock deal. Afterwards, seller's remorse and failing to accept their part in the blunder. Very typical.
  • at5 11y ago
    86bps is an ok fee given that you had a VP running this who was on vacation for a number of key events during the deal (http://dealbreaker.com/2013/06/goldman-was-professionally-negligent-on-an-ma-deal-but-its-fine/ http://dealbreaker.com/2013/06/goldman-was-professionally-ne...) PE firms pay a few hundred grand for senior level attention more often than you'd think. Fee grids are based off the complexity of the deal, and frankly the seniority and number of people involved. Banks think about the ROI of their salary payments on a daily basis
• LargeCompanies 11y ago
  Man I am sorry to see one of the major driving forces behind Siri and the alike not getting paid his fair share(billions is his fair share). Personally, I have much smaller inventor-ship horror stories that have taught me any further advances from big money people/companies is that I need to paid ... X huge billion to million dollar company deposit money in my bank and do it now before we go any further with any type of business relationship. Don't ever get drunk on the excitement of the biggest companies and such in the world chasing you .... focus on them paying you/depositing CASH in your bank or hand ..otherwise tell them to take a jump in the lake and to come back to you when they are ready to deposit money in your bank!!!
  • mseebach 11y ago
    If they'd gotten cash, they still wouldn't have gotten what you claim is their "fair share (billions)". They would have gotten about $464mm (80% of $580mm, Seagate had a 20% stake), assuming they didn't get a premium for taking the all-stocks. Taking the stock was their bet on getting their billions.
• boreas 11y ago
  I actually took a math class taught by another former Dragon co-founder not mentioned in this article. I think he got screwed even harder than the Bakers, he always said he was good at math but bad at "business stuff".
• known 11y ago
  Legalize insider trading; It'll fix HFT;
• padseeker 11y ago
  How the hell is it that ALL of the posts saying anything negative about GS have been reported or downvoted or in gray. When did HN become such a staunch defender of investment bankers? Goldman Sachs repeatedly acts in the interest of themselves over their own clients. This is going to be downvoted too, isn't it?
• aftbit 11y ago
  "Goldman’s lawyer, John D. Donovan of Ropes & Gray in Boston, has argued that under the terms of the engagement letter, only Dragon Systems had the right to sue, and Dragon no longer exists. Goldman has even filed a countersuit against Ms. Baker, contending that by suing Goldman she had breached the contract." Wow. I don't know enough colorful language to describe that position.
• nvlr 11y ago
  Jury found in Goldman's favor. It also found that the Bakers had mishandled their roles in the transaction. The jury determined that the Bakers had breached their fiduciary duty to their co-founders in failing to advise them about potential problems with the deal. http://dealbook.nytimes.com/2013/01/24/goldman-overcomes-its-latest-headache/ http://dealbook.nytimes.com/2013/01/24/goldman-overcomes-its...