Search

ARM shows SoftBank does tech PE the right way

Tech Crunch 12 Jun 2019 04:20

Private equity firms get a bad rap — and not without reason. In the prototypical example, a bunch of men in suits (and these folks always seem to be men for some reason) swoop in from Manhattan with Excel spreadsheets and pink slips, slashing and burning through an organization while ladening the balance sheet with debt in an algebraic alchemy of monetary extraction.

Vultures, parasites, octopuses — these are folks who almost certainly won popularity contests in high school and now seem to be shooting for most unpopular person to be compared to a crustacean in the Finance section of the WSJ (and there is some damn strong competition in those pages).

Sometimes that restructuring can save an org, and yes, many companies need a Marie Kondo armed with a business plan. But it’s a model that works best for, say, retail chains, and traditionally has been wholly incompatible with the tech industry.

Tech is a tough place for private equity buyouts, since the biggest expense for most companies is talent (i.e. R&D), and cutting R&D is usually the quickest path to cutting the valuation of the asset you just acquired. Unlike retail or manufacturing, there are just less cost levers to manipulate to make the numbers look better, and so PE firms have generally shied away from big tech acquisitions.

Continue reading original article...

Tags

Simon SegarsARMSoftBank GroupMasayoshi SonARM Holdings
You may also like