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CenturyLink does this too - they're a tech holding company who buys and sells companies (Level3, Tier3, Savvis, Cyxtera, Electricbox, etc) in order to reap M&A
by stephengillie 9y ago
CenturyLink does this too - they're a tech holding company who buys and sells companies (Level3, Tier3, Savvis, Cyxtera, Electricbox, etc) in order to reap M&A tax benefits while squeezing the engineers.
Of course, these businesses don't make enough money to cover the massive shareholder draw, so it's all a stage play to convince Wells Fargo to loan them enough to pay those dividends.
It's an untenable and irrational position in the long run, but markets can remain irrational longer than individuals can remain solvent. And many businesses are in this same situation, needing bank loans to pay never-reducing dividends.
- pm90 9y ago> order to reap M&A tax benefits while squeezing the engineers. This is true also of companies that are taken over by private equity firms, although that is probably common knowledge by now. e.g. every single one in my team at Rackspace has left for a different role (all at different companies, all at different times) after being acquired by PE firm. Sometimes I wonder how the engineers can't see this coming. Sure there are cost savings to be made by streamlining product offerings, cutting the "recreational budget" etc (i.e. money for office parties). But the biggest cost center for tech companies are its employees (probably that and real estate).
- walterbell 9y agoWhat's the M&A tax benefit? Do you mean tax-deductible interest payments on loans used to finance the purchase, as used by private equity?