{"version": "1.0", "type": "rich", "title": "isnt what we're hearing about elon's management of twitter like, pretty standard leveraged buyout stuff?\nlike... yeah he made...", "author_name": "kontextmaschine", "author_url": "https://kontextmaschine.com", "provider_name": "kontextmaschine", "provider_url": "https://kontextmaschine.com", "url": "https://kontextmaschine.com/post/703564083460456448/", "html": "

raginrayguns:

apollopigeon:

centrally-unplanned:

centrally-unplanned:

argumate:

apollopigeon:

raginrayguns:

raginrayguns:

raginrayguns:

isnt what we’re hearing about elon’s management of twitter like, pretty standard leveraged buyout stuff?

like… yeah he made the deal at a bad time and overpaid… but i feel like if borrowing money, buying a company, and then making it a horrible place to work didnt “work” in a certain way then we wouldnt have these private equity ppl and corporate raiders doing it routinely

samo burja posted something similar a few days earlier than me:

New Strategy: The Tech Corporate Raid

Major tech companies are extremely bloated. Possibly money can be made by raising insane capital, buying software giants, then firing 90% of the people working there.

Carl Icahn did this in 1980s Corporate America. Perhaps Elon is the first person to do it to 2020s corporate California with its many UBI jobs.

If Twitter survives and thrives as it seems set to do, we might be witnessing a new model of capitalism emerge.

It might just be the real refuge capital is seeking, rather than failed fads.

also I’m not sure anymore that the timing was bad. Yes, Elon did it when the price was high, but he also did it when it was easy to get the loans. It depends on when he locked in the interest rates.

@youzicha said:

lol, I think one problem with Burja’s proposed strategy is\u2026 where are you going to borrow 1.3 trillion dollars to do a hostile takeover of google? It’s a pretty big bite to swallow.

yeah him generalizing from twtiter to “software giants” is uh it doesn’t work with the usual companies people think of when they hear the phrase “software giants”

It\u2019s not a strategy that would work for someone the size of Google, but there are hundreds of smaller software companies where this strategy would (and has) worked. \u201cBuy a software company, cut jobs, and jack prices\u201d has been a very successful business model for three private equity firms in particular - Vista Equity Partners (owned by Robert Smith, at times the richest black man in America), Silver Lake, and Thoma Bravo. Software companies are often good candidates for PE because they are often founder owned, with all the idiosyncratic management practices that come with it, and they haven\u2019t been through the decades of grinding cost cuts that something like an auto parts company would have already gone through, so there is potentially a lot of fat to cut.

How Private Equity Keeps Winning in Software

the other thing private equity does is buy multiple software companies in the same industry for consolidation purposes of course

The additional thing about Twitter is that Elon is doing it very badly, Leveraged buyouts are too common to be even notable! Its the incompetence on display that makes it a story.

Also the buyout was extremely *not* leveraged, debt wasn\u2019t even a third of the purchase price. Normally to LBO a good chunk of the point is structuring the debt to insulate you from the losses. Musk can\u2019t do this to any notable way (he has done it in the small ways he can).

So its like saying\u00a0\u201cisn\u2019t this corporate restructruing a corporate restructring\u201d which, sure, it is. It doesn\u2019t share enough traits for the comparison to be elucidating beyond the definitional.

This part is not similar to most LBO\u2019s but i\u2019ll admit its similar enough to a few of them:

The king Return To The Office showing some revealed preferences here.

\u201cAlso the buyout was extremely *not* leveraged, debt wasn\u2019t even a third of the purchase price.\u201d

Yes, you would normally see something like 2/3 of the purchase price debt financed (depending on the company and the state of the markets). Elon couldn\u2019t get that kind of leverage because of the absolute size of the deal (it would have maybe ranked as the biggest LBO in history?) and the fact that it was a relatively risky tech company.

yeah, it seems like the absolute amount of debt is comparable to the largest leveraged buyouts, right? So it’s as leveraged of a buyout in dollars if not in percent

and what that’s supposed to explain is the drastic cost cutting at the expense of quality of service. Surely he’s doing that for the same reason as other deeply indebted buyers, and may get similar results

i dont think its the incompetence on display that makes it a story… not that he’s competent necessarily but thats just not why we’re talking about musk firing ppl and stuff

\n

I always get Carl Icahn confused with Lee Iacocca, I think from overhearing about both of them on the ‘80s MacNeil/Lehrer NewsHour before I got my bearings in life.

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