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It's the VC wheel. You buy a successful outfit. Saddle it with the acquisition debt. It's no longer profitable because of debt service. You need more revenue in
by jeffwask 3y ago
It's the VC wheel. You buy a successful outfit. Saddle it with the acquisition debt. It's no longer profitable because of debt service. You need more revenue in a thin margin business. You start alienating users and dumping unrealistic expectations on employees. Company goes boom or dies like a wet fart.
I mean it was purchased by a company that unironically calls itself Gamurs Group.
- StressedDev 3y agoVenture Capitalists do not buy existing profitable companies. They fund startups. You are thinking of private equity or leveraged buyout companies. In private equity, private equity companies buy a company (typically on credit). The private equity company hopes to make a return on its investment. I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. There are two reasons for this. One, it's bad business. Two, very few people are going to lend money for this type of acquisition. If it does happen, it was either probably a mistake or an error.
- finite_depth 3y ago[dead]
- Beldin 3y ago> I also doubt there are a lot of deals where a previously profitable company is unprofitable after the deal. Perhaps - but the fact that a trick has become well-known where companies are acquired only to be burdened with debt from the acquisition is rather telling. And that is not helping profitability. As someone who's less into business / financial news than eg. curling news, I know of a ridiculous amount of companies where this happened. So I really do not doubt this is a common strategy.