Mostly speculation... so I dropped this at the drama zone directly...
You might think you are exaggerating, but I know of a recent multi-billion dollar merger where one guy cashed out to over $100 million when the deal went through.Is there the case of surpassing the "greed threshold" where you can't go back? What is your greed threshold?
- $1 million
- $2 million
- $5 million
- $7 million
- $10 - ....
- $50 - ....
- $100 - ...
- $1000 mll.You might think you are exaggerating, but I know of a recent multi-billion dollar merger where one guy cashed out to over $100 million when the deal went through.
I think this story may have begun in October of 2017, when NI got a $59 million dollar investment from the private equity firm, Digital Growth Fund.
I don't know anything about the details of that investment, but I do know something about private equity investments in other entertainment companies. In most cases, the equity firms don't "invest" anything. They borrow it all. And the deals are extremely expensive to execute. Usually there is a very small group of people who get HUGE checks out of making the deal. Again, I don't know anything, but if it's like hundreds of other deals, then a few people at NI and Digital Growth Fund got extremely wealthy from this deal at signing.
As there never was any money, and so much of what was borrowed is already spent by the time the deal goes down-- what is left is monumental debt. So you have to pay that off by either increasing profits or firing people. Perhaps you begin by spending on R&D to see if profits can increase. But if that doesn't work, you fire. Less people, same income, more profit. And you send out PR statements about how you are reorganizing the company so less people are needed. It's going to be much better.
A lot of firing can lead to a downward spiral in profits. This leads to more firing, more automation and more offshoring. Eventually you reach a point where you can't cut any more people. Then the equity firm starts selling off valuable things. Anybody want to buy Kontakt or Komplete Kontrol? Everything is sold to the highest bidder--never to the companies who can do the most with the products.
Surprisingly, by the time the emails go out to everybody telling them to clear out their desks by noon, the equity company sometimes has done remarkably well. As long as the debt gets paid off, they have the huge checks they wrote to themselves at the beginning of the deal. Maybe even some gravy on top from selling off the company in pieces.
This is how Mitt Romney made his money at Bain Capital.
In fairness, it doesn't always work this way. Sometimes equity firms can make companies more profitable. And I have no way of knowing if DGF is anything at all like equity firms I'm familiar with.
I sure hope that the situation at NI is nothing like this, because I love my NI products so much.
But I am concerned.