5 ms·

Off-topic, but can anyone tell me of an instance whereby a software entity was acquired by a VC firm and things turned out great?

skrebbel 7y ago
I don't think VCs often buy companies but PE firms sure do. One example near me is NXP, a semicon business from Eindhoven (NL) where I live. Philips spun them out after loading them with debt,a PE firm bought them. Radical cost cutting, the usual, but they also accomplished a culture change (to some extent). As a former Philips department, the culture was very slow and bureaucratic, more akin to government than a for-profit business. The new owners made it very clear that from then on, money needed to be earned and anything that didn't contribute to that wasn't worth doing. The company became a fair bit more lean and agile as a result, pushing products and updates faster etc.
- coredog64 7y ago
  I’ve experienced a similar result. TPG bought a large stake in OnSemi. Initially they were going to flip it, so were focused on short term results. Eventually, they realized they had an opportunity to do more and loosened up the purse strings. ONNN bought LSIs fabs in Oregon and was able to refocus as a premium supplier rather than a race-to-the-bottom commodity provider.
  - cushychicken 7y ago
    Yeah, On Semi has really turned it around in the last 5 years or so. They were on track to be a jellybean competitor.
jacquesm 7y ago
As Skrebbel already mentioned VC firms rarely acquire companies outright, but it is typical that in such transactions VCs are on the selling side and PE parties are on the buying side. So let's take it as read that you meant PE, in that case, it depends is the usual answer. There are quite a few examples of PE funds buying companies and letting them run as autonomous as possible with positive results and there are examples of PE funds buying a company outright or a controlling interest who then become 'backseat drivers' but without the relevant experience. In those cases - especially if the PE party consists mostly of accountants and financial people - it usually does not take long before the effects become visible. But there are a great many players and the majority of them is both well intentioned and ends up with positive results. The ones you hear and read about in the newspapers are not really representative for the PE market as a whole, that's just the news' habit of focusing on the trainwreck. PE fund returns nX to their LPs versus PE fund buys controlling stake in struggling company and runs it into the ground after loading it up with debt. Which headline do you think will attract more eyeballs?
- x86_64Ubuntu 7y ago
  But I'm not talking about "headlines". I'm talking about declines or stagnation that I've seen firsthand. Qlik and ExtJS/Sencha (an Idera victim) all fall in the pattern of being acquired and falling from grace.
  - jacquesm 7y ago
    I realize, but those are the ones that you will hear about. The bulk of PE investments works out just fine, but quietly. You will find out about them in annual reports and such but because those companies are almost by definition now in private hands there are no reporting requirements in the same way that there are for listed companies or for venture backed companies that are trying their best to pump up their valuation.
  - mbesto 7y ago
    I've worked with 100+ software companies who have been acquired by PE and I honestly can't name many that have stagnated/declined.
steveklabnik 7y ago
Others have pointed out the difference between VC and PE, but I think there's a crucial thing missing from your question: turned out great for whom?
- RugnirViking 7y ago
  I'm assuming they mean users/customers of the firm being aquired.
  - deleted 7y ago
    [deleted]
- bduerst 7y ago
  SOP for PE's is to come in, cut costs, and improve the bottom line without affecting revenue or service. Customers typically aren't affected but employees are.
  - jacquesm 7y ago
    That's one 'kind' of PE, another is the one that will invest very large sums of money to repeat a play in new markets or to professionalize a company across the board and then use them as a cornerstone in a buy-and-build strategy.
  - mbesto 7y ago
    > SOP for PE's is to come in, cut costs, and improve the bottom line without affecting revenue or service. This is fundamentally untrue. Large CAP ($1B+ valuations) is notorious for this, but there's about 5k PE deals per year and those deals are the exception, not the norm, in terms of shear volume. They're great for headlines though! (hello Toys 'R Us) Most of them are about adding value through various means, one of those might be cutting unnecessary costs.
  - deleted 7y ago
    [deleted]
  - formercoder 7y ago
benmarks 7y ago
Magento. Note: am employee.
mbesto 7y ago
PE advisor here. First, VC doesn't acquire businesses, PE does. Second, I've seen NUMEROUS examples of entities acquired by financial sponsors (PE) that work out well. If you look at Vista Equity, Thoma Bravo, Silverlake, TA Associates, Accel-KKR, etc. you'll find an incredible amount of wealth being generated. PS - Depends on what you mean by "turned out great"...

skrebbel 7y ago

I don't think VCs often buy companies but PE firms sure do. One example near me is NXP, a semicon business from Eindhoven (NL) where I live. Philips spun them out after loading them with debt,a PE firm bought them. Radical cost cutting, the usual, but they also accomplished a culture change (to some extent). As a former Philips department, the culture was very slow and bureaucratic, more akin to government than a for-profit business. The new owners made it very clear that from then on, money needed to be earned and anything that didn't contribute to that wasn't worth doing. The company became a fair bit more lean and agile as a result, pushing products and updates faster etc.

coredog64 7y ago
I’ve experienced a similar result. TPG bought a large stake in OnSemi. Initially they were going to flip it, so were focused on short term results. Eventually, they realized they had an opportunity to do more and loosened up the purse strings. ONNN bought LSIs fabs in Oregon and was able to refocus as a premium supplier rather than a race-to-the-bottom commodity provider.
- cushychicken 7y ago
  Yeah, On Semi has really turned it around in the last 5 years or so. They were on track to be a jellybean competitor.

jacquesm 7y ago

As Skrebbel already mentioned VC firms rarely acquire companies outright, but it is typical that in such transactions VCs are on the selling side and PE parties are on the buying side. So let's take it as read that you meant PE, in that case, it depends is the usual answer. There are quite a few examples of PE funds buying companies and letting them run as autonomous as possible with positive results and there are examples of PE funds buying a company outright or a controlling interest who then become 'backseat drivers' but without the relevant experience. In those cases - especially if the PE party consists mostly of accountants and financial people - it usually does not take long before the effects become visible. But there are a great many players and the majority of them is both well intentioned and ends up with positive results. The ones you hear and read about in the newspapers are not really representative for the PE market as a whole, that's just the news' habit of focusing on the trainwreck. PE fund returns nX to their LPs versus PE fund buys controlling stake in struggling company and runs it into the ground after loading it up with debt. Which headline do you think will attract more eyeballs?

x86_64Ubuntu 7y ago
But I'm not talking about "headlines". I'm talking about declines or stagnation that I've seen firsthand. Qlik and ExtJS/Sencha (an Idera victim) all fall in the pattern of being acquired and falling from grace.
- jacquesm 7y ago
  I realize, but those are the ones that you will hear about. The bulk of PE investments works out just fine, but quietly. You will find out about them in annual reports and such but because those companies are almost by definition now in private hands there are no reporting requirements in the same way that there are for listed companies or for venture backed companies that are trying their best to pump up their valuation.
- mbesto 7y ago
  I've worked with 100+ software companies who have been acquired by PE and I honestly can't name many that have stagnated/declined.

steveklabnik 7y ago

Others have pointed out the difference between VC and PE, but I think there's a crucial thing missing from your question: turned out great for whom?

RugnirViking 7y ago
I'm assuming they mean users/customers of the firm being aquired.
- deleted 7y ago
  [deleted]
bduerst 7y ago
SOP for PE's is to come in, cut costs, and improve the bottom line without affecting revenue or service. Customers typically aren't affected but employees are.
- jacquesm 7y ago
  That's one 'kind' of PE, another is the one that will invest very large sums of money to repeat a play in new markets or to professionalize a company across the board and then use them as a cornerstone in a buy-and-build strategy.
- mbesto 7y ago
  > SOP for PE's is to come in, cut costs, and improve the bottom line without affecting revenue or service. This is fundamentally untrue. Large CAP ($1B+ valuations) is notorious for this, but there's about 5k PE deals per year and those deals are the exception, not the norm, in terms of shear volume. They're great for headlines though! (hello Toys 'R Us) Most of them are about adding value through various means, one of those might be cutting unnecessary costs.
- deleted 7y ago
  [deleted]
- formercoder 7y ago

benmarks 7y ago

Magento. Note: am employee.

mbesto 7y ago

PE advisor here. First, VC doesn't acquire businesses, PE does. Second, I've seen NUMEROUS examples of entities acquired by financial sponsors (PE) that work out well. If you look at Vista Equity, Thoma Bravo, Silverlake, TA Associates, Accel-KKR, etc. you'll find an incredible amount of wealth being generated. PS - Depends on what you mean by "turned out great"...