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Companies often acquire other companies for the purpose of running them into the ground. They take a few of the best workers and assets,kick everyone else out,

by c3534l 9y ago

Companies often acquire other companies for the purpose of running them into the ground. They take a few of the best workers and assets,kick everyone else out, move the office, and it's almost as if the company never existed in the first place. It's the purchasing company that sets the rules, and they typically want their acquisition to assimilate into the borg collective. There would probably be a very different outcome is Humble Bundle bought IGN.

baddox 9y ago
I don’t think I would call it the “purpose” of an acquisition. “Intent,” perhaps, or “acceptable worst-case scenario,” but not “purpose,” unless of course the purpose was merely to eliminate a future competitive threat (which seems doubtful in this case).
- moron4hire 9y ago
  Say you know a farmer who you think has land and equipment worth $1 000 000 on the secondary market, he only clears enough to cover his operating expenses every year, and he's willing to sell the whole thing for $500 000 (maybe he doesn't know what he has). You'd absolutely buy with the intention of liquidating and it'd have nothing to do with "competitive threat". Markets are "efficient". If one entity is not using a resource in the most efficient way, there is a chance for someone to buy them out. It's another form of arbitrage.
  - TeMPOraL 9y ago
    It's important to understand the "efficiency" here, though. Companies that operate ethically and provide actual value to customers are not usually at the peak of efficiency. A farmer from your example might be only breaking even because he farms sustainably, making sure not to diminish the fertility of the soil. A more efficient buyer would instead extract all the value from the soil and then sell it off as construction ground. Similarly, in the realm of Internet businesses, a business that employs massive tracking, shady advertisement and plethora of dishonest and anticonsumer practices will be more efficient at exploiting the market than the one which does not. Which is to say, peak market efficiency is not always something good to have.
  - baddox 9y ago
    I’m not sure how appropriate that analogy is. Why would the farmer be so off on his estimate of the value of his farm? That seems unlikely, unless the buyer has some ability to re-sell that the farmer lacks, or an emergency situation where the farmer needs to liquidate very quickly and can’t afford researching or looking for competing buy offers.
    - moron4hire 9y ago
      Maybe he's retiring. I don't know, it's a contrived scenario. Replace "farm" with "frobnication lab". Reduce the margin until you feel comfortable.

by c3534l 9y ago

baddox 9y ago

I don’t think I would call it the “purpose” of an acquisition. “Intent,” perhaps, or “acceptable worst-case scenario,” but not “purpose,” unless of course the purpose was merely to eliminate a future competitive threat (which seems doubtful in this case).

moron4hire 9y ago
Say you know a farmer who you think has land and equipment worth $1 000 000 on the secondary market, he only clears enough to cover his operating expenses every year, and he's willing to sell the whole thing for $500 000 (maybe he doesn't know what he has). You'd absolutely buy with the intention of liquidating and it'd have nothing to do with "competitive threat". Markets are "efficient". If one entity is not using a resource in the most efficient way, there is a chance for someone to buy them out. It's another form of arbitrage.
- TeMPOraL 9y ago
  It's important to understand the "efficiency" here, though. Companies that operate ethically and provide actual value to customers are not usually at the peak of efficiency. A farmer from your example might be only breaking even because he farms sustainably, making sure not to diminish the fertility of the soil. A more efficient buyer would instead extract all the value from the soil and then sell it off as construction ground. Similarly, in the realm of Internet businesses, a business that employs massive tracking, shady advertisement and plethora of dishonest and anticonsumer practices will be more efficient at exploiting the market than the one which does not. Which is to say, peak market efficiency is not always something good to have.
- baddox 9y ago
  I’m not sure how appropriate that analogy is. Why would the farmer be so off on his estimate of the value of his farm? That seems unlikely, unless the buyer has some ability to re-sell that the farmer lacks, or an emergency situation where the farmer needs to liquidate very quickly and can’t afford researching or looking for competing buy offers.
  - moron4hire 9y ago
    Maybe he's retiring. I don't know, it's a contrived scenario. Replace "farm" with "frobnication lab". Reduce the margin until you feel comfortable.