7 ms·

I guess it was only a matter of time before they got bought out. It's tough to compete against one of Google, Amazon or Microsoft, competing against all 3 at th

I guess it was only a matter of time before they got bought out. It's tough to compete against one of Google, Amazon or Microsoft, competing against all 3 at the same time in an area that all three consider to be core to their future must just be cut throat! It's never great for a companies employee's to be taken over by a private equity firm, if you actually find someone whose had a good experience then please let me know, but given that this is a 38% premium over what RAX was trading at when the deal leaked on august 3rd, this is almost best case for rack space employee's and given that this is an all cash transaction they should get some liquidity out of the deal!! Given that the RAX board unanimously approved the deal, I'm going to guess this is going through. Often when a company is brought private by a PE firm they'll combine it with other portfolio companies before spinning it back out. I don't see any relevant companies in Apollo's portfolio that could be joined to RAX. If you are wondering who in wall street makes money on these types of deal, its the usual suspects. Everyone wets their beak in take over transactions:) - Financing provided by Citi, Deutsche, Barclays, RBC; - Goldman advised RAX, Morgan Stanley also provided services in connection w/ deal; Citi, Deutsche, Barclays, RBC advised Apollo

calgoo 10y ago
I work for a relatively big European Network Provider and hoster who got privatized last year. Its not all horrible, but there is a lot of BS going around all the time. The worst are the rumors. You try not to listen to them, but when you are not sure if you have a job in 3 months, and you have spent at least a year more less in the same place, it does get to you. The word from above normally talks a lot of cost cutting and Sales! Sales! Sales!, which makes everyone else who is not part of Sales feel even more left out, as if their jobs are not important. When people start saying things like: "I don't care, but just tell me if I have a job or not" things are bad. The job market is still bad here in Spain, so a good paying job is hard to get these days. That means a lot of people stick around just for the financials. I have found some small personal opportunities as well, such as being able to work more from home, making changes in my area regarding things such as legacy products, but anything that costs money is normally out of the question.
- Ecio78 10y ago
  I am sorry to read about is, I think I know which provider you are talking about based on some details you provided, and I can only say good things about the services (phone and network) when I used them in Italy (2005-2011). At that time it was considered one of the best, and also used to hired the best. I heard it started going worse with good people leaving around the end of that period, it seems it's not going better..
whateverdudes 10y ago
Off topic, but can you tell me more about the issue with being taken over by a private equity firm? I work for a 10k employee company who will be taken off stock exchange and sold to a Chinese equity firm.
- frogfuzion 10y ago
  The easiest and quickest way for the Private Equity company to make your business more profitable is through layoffs. They eventually want to sell the company to make a profit for their investors. In many cases this requires layoffs.
- monkmartinez 10y ago
  It doesn't seem so hard to figure out. The problem is the company is now just part of a portfolio that needs to perform to a certain level. The level of uncertainty with respect to Rackspace just increased 1000% both internally and externally. To me, private equity is a vote of no-confidence. Personally, I fall into the group that thinks private equity is probably bad for the economy in general.
- dave_sullivan 10y ago
  Besides cost cutting via layoffs being a favored (although by no means the only) strategy for PE firms, there's also debt servicing. Typically, PE companies buy the company while only putting down a small portion of the purchasing price. They finance the rest through banks. The whole concept is pretty similar to buying a house with a mortgage, except you're buying a company. The debt payments are then a tax write-off, and all/most available company cashflow is diverted to paying off that loan. The ideal company is one with reliable cashflows and access to a growing market (of which I'd say a large cloud infrastructure provider fits the profile). To improve cashflow: pay fewer people less, convert assets to cash, and/or make more money from your core business. Usually a mix of the three. From an organizational standpoint, you can think of it like Rackspace just took out a very large (maybe subprime) mortgage on the company and some new people are going to try to make sure that doesn't turn out to be a horrible bet, first for the investors, then for the company.
nowbacktowork 10y ago
I believe the rumor is they are going to buy hpe after their spin off/merge with CSC. There might be an opportunity there.
- grub5000 10y ago
  Jesus Christ when will this end. I work for HPE and everything is constantly on hold, waiting for these split offs, mergers, new financial year etc. Cant get any travelling or training done. No internal moves. Staff quitting left right and centre. I'm tempted to join them
coredog64 10y ago
Since all the other comments are negative, I'll chime in with a somewhat positive experience with a PE firm (although it wasn't a complete going private move). I worked at OnSemi during the period that TPG was a significant investor. Initially they did enforce some fairly strict standards about how money could be spent. And there was a lot of BS where the quarterly numbers were almost enough to beat the street and so employees were forced to take accrued vacation. However, at the end of the holding period, TPG moved from a "lipstick on the pig" strategy to one of making OnSemi a better company and loosened the purse strings.
- hga 10y ago
  Hmmm, in another domain I'm familiar with, Cerberus Capital Management smushed together a number of firearms and ammo companies into the Freedom Group (https://en.wikipedia.org/wiki/Freedom_Group https://en.wikipedia.org/wiki/Freedom_Group), and without to my knowledge screwing them up. That said, Remington Arms is still a sub-par manufacturer of guns, they haven't noticeably improved their quality, or behavior when caught out, see e.g. the lawsuit they continue to lose WRT to their unsafe Model 700 rifle safeties.
  - monkmartinez 10y ago
    Most of the "freedom group" make the same thing or operate in the same space. That is "tacti-cool" and people that want their names on lists for silencers, SBR's and other goodies they make. I bet there was a crap-ton of consolidation that we didn't hear about. I bet a lot of people lost jobs in said consolidation.
    - hga 10y ago
      No, not really. Only one of their companies is inherently into NFA items, and H&R and Marlin, which bought them prior to it being bought by Freedom, and Dakota and Parker (!) aren't even into those sorts of guns. And Barnes only makes ammo and especially bullets. (Para USA makes double stack 1911s, which are technically "assault weapons" due to the increased magazine capacities, but based on an 106 year old design.) Only Advanced Armament Corporation (silencers), Bushmaster, DPMS, TAPCO (accessories) sell such items, and maybe you'd count Remington's hunting configured and camouflaged AR-10 and AR-15 pattern rifles, but that makes them the antithesis of "tacti-cool". The loss of jobs from the consolidations are well known, plus overlaid with that is Remmington moving more and more stuff out of high cost, unionized, viciously anti-gun New York state, away from their original factory, where they were the first who's still in business to make arms in the US (or so they say, e.g. https://en.wikipedia.org/wiki/Remington_Arms https://en.wikipedia.org/wiki/Remington_Arms and it's certainly a very old company and that complex is obviously very old). ADDED: Without consolidation, it's entirely likely one or more of the traditional hunting arms companies Marlin, Dakota and/or Parker would have gone out of business like H&R did, there's much less Gun Culture 1.0 demand for such, and plenty of fine used specimens available. Remington might have been less likely to do that if still under their original management, on the other hand, under Cerberus they were the first US ammo manufacturer to respond to the 2008 and on ammo shortage by buying new capital equipment to set up new production lines, which is not supposed to be the usual MO of private equity owned firms. So my point is that these consolidated companies' products haven't, to my knowledge, suffered from the process, whereas a lot of us fear Rackspace's offerings will suffer (well, even more than they do today, one reason we can be pretty sure they put themselves up for sale). ADDED: On the other hand, Zilkha & Co, which bought 85% of Colt, is raping it up, down, right and left, the very worst sort of this type of thing.
zymhan 10y ago
Isn't this deal similar to Dell going private? I can certainly imagine how it might not end well for a company that gets taken private, but I also think that trying to innovate and grow in such a competitive environment would be even harder if you have to worry about shareholders breathing down your neck.
- AndyNemmity 10y ago
  Dell going private with it's original owner is very different than a portfolio company taking a company private.
  - zymhan 10y ago
    Ah, yes, that's a good point.

calgoo 10y ago

I work for a relatively big European Network Provider and hoster who got privatized last year. Its not all horrible, but there is a lot of BS going around all the time. The worst are the rumors. You try not to listen to them, but when you are not sure if you have a job in 3 months, and you have spent at least a year more less in the same place, it does get to you. The word from above normally talks a lot of cost cutting and Sales! Sales! Sales!, which makes everyone else who is not part of Sales feel even more left out, as if their jobs are not important. When people start saying things like: "I don't care, but just tell me if I have a job or not" things are bad. The job market is still bad here in Spain, so a good paying job is hard to get these days. That means a lot of people stick around just for the financials. I have found some small personal opportunities as well, such as being able to work more from home, making changes in my area regarding things such as legacy products, but anything that costs money is normally out of the question.

Ecio78 10y ago
I am sorry to read about is, I think I know which provider you are talking about based on some details you provided, and I can only say good things about the services (phone and network) when I used them in Italy (2005-2011). At that time it was considered one of the best, and also used to hired the best. I heard it started going worse with good people leaving around the end of that period, it seems it's not going better..

whateverdudes 10y ago

Off topic, but can you tell me more about the issue with being taken over by a private equity firm? I work for a 10k employee company who will be taken off stock exchange and sold to a Chinese equity firm.

frogfuzion 10y ago
The easiest and quickest way for the Private Equity company to make your business more profitable is through layoffs. They eventually want to sell the company to make a profit for their investors. In many cases this requires layoffs.
monkmartinez 10y ago
It doesn't seem so hard to figure out. The problem is the company is now just part of a portfolio that needs to perform to a certain level. The level of uncertainty with respect to Rackspace just increased 1000% both internally and externally. To me, private equity is a vote of no-confidence. Personally, I fall into the group that thinks private equity is probably bad for the economy in general.
dave_sullivan 10y ago
Besides cost cutting via layoffs being a favored (although by no means the only) strategy for PE firms, there's also debt servicing. Typically, PE companies buy the company while only putting down a small portion of the purchasing price. They finance the rest through banks. The whole concept is pretty similar to buying a house with a mortgage, except you're buying a company. The debt payments are then a tax write-off, and all/most available company cashflow is diverted to paying off that loan. The ideal company is one with reliable cashflows and access to a growing market (of which I'd say a large cloud infrastructure provider fits the profile). To improve cashflow: pay fewer people less, convert assets to cash, and/or make more money from your core business. Usually a mix of the three. From an organizational standpoint, you can think of it like Rackspace just took out a very large (maybe subprime) mortgage on the company and some new people are going to try to make sure that doesn't turn out to be a horrible bet, first for the investors, then for the company.

nowbacktowork 10y ago

I believe the rumor is they are going to buy hpe after their spin off/merge with CSC. There might be an opportunity there.

grub5000 10y ago
Jesus Christ when will this end. I work for HPE and everything is constantly on hold, waiting for these split offs, mergers, new financial year etc. Cant get any travelling or training done. No internal moves. Staff quitting left right and centre. I'm tempted to join them

coredog64 10y ago

Since all the other comments are negative, I'll chime in with a somewhat positive experience with a PE firm (although it wasn't a complete going private move). I worked at OnSemi during the period that TPG was a significant investor. Initially they did enforce some fairly strict standards about how money could be spent. And there was a lot of BS where the quarterly numbers were almost enough to beat the street and so employees were forced to take accrued vacation. However, at the end of the holding period, TPG moved from a "lipstick on the pig" strategy to one of making OnSemi a better company and loosened the purse strings.

hga 10y ago
Hmmm, in another domain I'm familiar with, Cerberus Capital Management smushed together a number of firearms and ammo companies into the Freedom Group (https://en.wikipedia.org/wiki/Freedom_Group https://en.wikipedia.org/wiki/Freedom_Group), and without to my knowledge screwing them up. That said, Remington Arms is still a sub-par manufacturer of guns, they haven't noticeably improved their quality, or behavior when caught out, see e.g. the lawsuit they continue to lose WRT to their unsafe Model 700 rifle safeties.
- monkmartinez 10y ago
  Most of the "freedom group" make the same thing or operate in the same space. That is "tacti-cool" and people that want their names on lists for silencers, SBR's and other goodies they make. I bet there was a crap-ton of consolidation that we didn't hear about. I bet a lot of people lost jobs in said consolidation.
  - hga 10y ago
    No, not really. Only one of their companies is inherently into NFA items, and H&R and Marlin, which bought them prior to it being bought by Freedom, and Dakota and Parker (!) aren't even into those sorts of guns. And Barnes only makes ammo and especially bullets. (Para USA makes double stack 1911s, which are technically "assault weapons" due to the increased magazine capacities, but based on an 106 year old design.) Only Advanced Armament Corporation (silencers), Bushmaster, DPMS, TAPCO (accessories) sell such items, and maybe you'd count Remington's hunting configured and camouflaged AR-10 and AR-15 pattern rifles, but that makes them the antithesis of "tacti-cool". The loss of jobs from the consolidations are well known, plus overlaid with that is Remmington moving more and more stuff out of high cost, unionized, viciously anti-gun New York state, away from their original factory, where they were the first who's still in business to make arms in the US (or so they say, e.g. https://en.wikipedia.org/wiki/Remington_Arms https://en.wikipedia.org/wiki/Remington_Arms and it's certainly a very old company and that complex is obviously very old). ADDED: Without consolidation, it's entirely likely one or more of the traditional hunting arms companies Marlin, Dakota and/or Parker would have gone out of business like H&R did, there's much less Gun Culture 1.0 demand for such, and plenty of fine used specimens available. Remington might have been less likely to do that if still under their original management, on the other hand, under Cerberus they were the first US ammo manufacturer to respond to the 2008 and on ammo shortage by buying new capital equipment to set up new production lines, which is not supposed to be the usual MO of private equity owned firms. So my point is that these consolidated companies' products haven't, to my knowledge, suffered from the process, whereas a lot of us fear Rackspace's offerings will suffer (well, even more than they do today, one reason we can be pretty sure they put themselves up for sale). ADDED: On the other hand, Zilkha & Co, which bought 85% of Colt, is raping it up, down, right and left, the very worst sort of this type of thing.

zymhan 10y ago

Isn't this deal similar to Dell going private? I can certainly imagine how it might not end well for a company that gets taken private, but I also think that trying to innovate and grow in such a competitive environment would be even harder if you have to worry about shareholders breathing down your neck.

AndyNemmity 10y ago
Dell going private with it's original owner is very different than a portfolio company taking a company private.
- zymhan 10y ago
  Ah, yes, that's a good point.