[HN Gopher] Private equity firm announces a purchase offer with ...
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Private equity firm announces a purchase offer with the intent to
delist SUSE
Author : mroche
Score : 102 points
Date : 2023-08-17 19:40 UTC (3 hours ago)
(HTM) web link (www.suse.com)
(TXT) w3m dump (www.suse.com)
| bloopernova wrote:
| What are the success stories of private equity firms taking over
| a corporation? (Where success is the products are still made,
| quality and staffing is maintained at previous levels)
| pclmulqdq wrote:
| Steinway is my go-to example, but it was done on a very
| specific (hyper-long-term) investment thesis, not a standard
| "corporate raider" investment. I'm guessing that SUSE is not in
| the same position.
| kmeisthax wrote:
| None. Private equity's entire business model is to suck the
| quality and staffing out of the product and make money off the
| gap between the product getting cheaper and people moving to a
| viable alternative.
| silisili wrote:
| That's been my experience twice now personally, and having
| read numerous other accounts. They'll always tell you after
| purchase that's not the case, how they see long term value,
| want to grow it, etc etc.
|
| It's never true - if PE buys your company, run for the hills.
| NotYourLawyer wrote:
| Private equity already owns 79% of Suse.
| gumby wrote:
| Conversely I would answer "high".
|
| PE is basically a parasitic business, designed to suck money
| out of the purchased company until it collapses. You do this
| by borrowing a ton of money to purchase the company. Then for
| the privilege the company pays the buyer a special bonus that
| conveniently covers its costs (and often more) out of the
| cash it had on hand when bought. Then the buyer continues to
| get various payment streams, like guaranteed dividends or all
| sorts of other obligations, until the company collapses.
|
| Sad to say I'm not exaggerating.
|
| I say "basically" because there are a couple of exceptions.
| Dell was purchased in a special deal with the founder so that
| the company actually operates but the founder was enriched in
| the process.
|
| VC is a branch of private equity (an almost invisible pimple
| on the PE business TBH) where they don't buy the whole
| company and hope to make money on the IPO. But it's a small
| business: there are numerous companies out there with an
| asset base larger than the entire VC industry.
| akomtu wrote:
| It's a sign of the last stage of an economic cycle when money
| is made by creatively destroying value, instead of creating
| it.
| jacooper wrote:
| Well, SUSE after Novell was in a woeful state, EQT got them to
| where they are right now.
| jzb wrote:
| To be fair, SUSE _before_ Novell was in a worse state. If I'm
| not mistaken they were close to missing payroll and has tried
| to shop themselves to Sun before Novell agreed to buy them.
|
| Evil IBM(TM) threw in $50m to help the deal along and
| preserve SuSE for its hardware.
|
| Also, it didn't help that SUSE folks and Ximian folks were
| like oil and water. Novell tried a combo that made sense on
| paper but there was culture clash.
| amerine wrote:
| This^^^
|
| I actually think this has the same potential of a "good" PE
| move as the Dell success.
| shrubble wrote:
| Dell I think would be one?
|
| Basically you get rid of the quarterly reporting grind and it
| lets you focus on the business even if certain initiatives are
| going to depress shorter term results, but pay off over the
| long term.
| [deleted]
| ImprovedSilence wrote:
| that feels a little different because i thought michael dell
| was a large part of that "private equity".
| gumby wrote:
| He was, so he structured a special deal that mostly
| benefited him but also shared a bit with friends who did
| the rest of the deal.
| jandrese wrote:
| Dell is a special case because it was the original founder
| who delisted the stock. Not some Bain Capital type firm that
| was just buying it to suck the marrow out of the bones before
| tossing it in the trash.
| aeyes wrote:
| Silver Lake Partners gave the majority of the capital when
| they took Dell private, ~$20B of the $25B total
| eric-hu wrote:
| You just educated me on Michael Dell taking Dell private
| again. I didn't realize he did so with the backing of PE.
|
| https://www.forbes.com/sites/connieguglielmo/2013/10/30/you-.
| ..
| emmett wrote:
| Safeway seems to be run pretty well, after being taken private
| by PE in the 80s.
|
| Warren Buffet runs Berkshire Hathaway which is acts as a PE
| firm. Here's a list of everything they own and have owned for
| decades: https://finmasters.com/berkshire-hathaway-
| subsidiaries/#cons...
|
| There are plenty of other examples.
|
| PE is just "ownership not through the public stock markets"
| which is like...the default, actually.
| lotsofpulp wrote:
| Safeway lost a ton of money getting tangled up with Theranos
| 10 years ago, and the following year was bought by Cerberus
| (then owner of Albertsons).
|
| http://www.wsj.com/articles/safeway-theranos-split-
| after-350...
|
| Albertsons (including Safeway) was IPO'd in Jun 2020, and now
| is set to be bought by Kroger.
| skywhopper wrote:
| lol. This does not happen, at least not intentionally. PE
| takeovers are solely about turning companies with a relatively
| stable revenue stream into a packageable financial product.
| Huge cuts will be made to staff, support, and R&D to get
| expenses to a specific level, and large amounts of debt will be
| taken on under the company's name, to deliver a specific ROI to
| the PE investors over a relatively short term window of four to
| five years, all under the assumption that the company will be
| able to coast for that time on its previous success, after
| which point it can be sold for IP, trademarks, and any physical
| plant, or just allowed to go bankrupt under the unsustainable
| debt load and lack of investment.
|
| That's the _purpose_ of PE firms. They accept pre-investment in
| this sort of scheme, and do this with several companies at once
| over a 5-7 year total period, taking a slice of the revenue
| with no capital risk of their own, and the investors get a good
| 5-7 years of 12-18% ROI. The companies are trash at the end of
| the cycle but hey, that 's capitalism.
|
| Source: I was "lucky" enough to work for a tech startup through
| its IPO period after which it was acquired by PE, and exactly
| the above happened. We had the opportunity to "buy in" to the
| investment cycle with our own money, and so they had a pretty
| detailed presentation about exactly how this all works. I was
| somewhat surprised by how honest they were willing to be with
| the employees (although it did take a little bit of reading
| between the lines).
| gumby wrote:
| > I was somewhat surprised by how honest they were willing to
| be with the employees
|
| Since your company had IPOed the SEC required them to be
| honest with anyone interested in buying in.
| Havoc wrote:
| You don't hear from them.
|
| Think about it - you're having beers with a friend and he goes
| "so the company got bought out and then nothing changed".
| _blank stares as everyone waits for the point / rest of story_
|
| You hear only of the dramatic ones. Bit like news is nearly
| entirely bad - bad news sells.
|
| People forget that PE firms are buying equity. If the company
| prospers they get the upside. Contrary to popular hn belief
| destroying the thing you just paid a lot of money for is not
| standard game plan.
|
| >Where success is the products are still made, quality and
| staffing is maintained
|
| The world you describe is not the world we live in. Shareholder
| objectives - PE or otherwise - is to maximize value. It's not
| an artisanal hobby where highest possible quality product is
| the end goal.
| dboreham wrote:
| There are many such companies (otherwise PE as a concept would
| eventually die out as the supply of fools becomes exhausted).
| But just one example: Gibson.
| username332211 wrote:
| Suse IPOd in 2021 at 30EUR/share. Now they are buying it back at
| 16.
|
| I think we should thank everyone who bought shares at the IPO for
| their charitable contribution to open source software.
| r0ckarong wrote:
| And thus the squeeze cycle can begin anew. Brauckmann made his
| money, DiDonato made her money, the EQT guys made their money.
| Time to share this cake with more ants.
| jacooper wrote:
| It's the same EQT firm buying them back.
| yawaramin wrote:
| So...uh...after all that drama from SuSE about how 'IBM'
| destroyed RHEL after acquiring Red Hat, they turn around and get
| acquired by the nearest bidder. That's hilarious. Nowadays I
| often compare this kind of hypocrisy to the 'Avengers: Age of
| Ultron' scene where Strucker shouts 'No surrender!' and riles up
| his henchmen, then immediately turns to his second-in-command and
| says, 'I am going to surrender'.
| username332211 wrote:
| Can you revise your statement when you read the second
| paragraph of the press release?
| yawaramin wrote:
| Did SuSE bother to read the GPL license before they made
| their statements about RHEL?
| username332211 wrote:
| What does that have to do with you pontificating on events
| that aren't actually happening?
| yawaramin wrote:
| Bingo.
| NotYourLawyer wrote:
| The company is already 79% owned by the acquirer. Who exactly
| do you think should be slamming on the brakes here?
| zeruch wrote:
| Private Equity needs to be regulated into oblivion.
| whizzter wrote:
| While fears of PE is quite well founded in many cases, EQT might
| be one group that might actually have proper long term interests.
|
| Ownership of EQT goes up to Investor and the Swedish Wallenberg
| family, they're the same people that among other things has held
| big stakes in Ericsson, Astra Zeneca (The British covid
| vaccine),etc over 90 years by now.
| doctoboggan wrote:
| Recently I've been getting more and more into the Rancher
| ecosystem as they always have some offering that meets my needs
| and I can trust it will interop well enough.
|
| I really hope that this does not affect the future of Rancher.
| cyberpunk wrote:
| RKE is Apache licensed, I think it has a long future.
| janosdebugs wrote:
| The license matters little if SuSE is the one footing the
| bill for developing it.
| CharlesW wrote:
| HN SmartFriends(tm), what does this mean? What's the risk for
| companies which are highly invested in SUSE?
| JonChesterfield wrote:
| The PE firm sees a path to profit by changing things about
| SUSE. This might be fine - e.g. they can write off the existing
| debt to themselves in order to strengthen the company finances.
| If the exit plan is some variant on improving the company and
| selling it on, could be good all round.
|
| The trepidation is that PE firms are also a bit prone to asset
| stripping and discarding the remaining carcass of the
| organisation, in which case this marks the beginning of the end
| of SUSE.
|
| I've no idea how to tell which path is more likely or even
| which is their current intent though.
| mamonster wrote:
| There are usually 2 plays tech PE does:
|
| 1)Expedited vendor lock-in: Figure out who is locked into the
| software, make the software maximally shitty/maximally costly
| so that these people would still not switch and then make money
| off the cost savings/higher prices and hope to make up
| investment.
|
| 2)Off market prep for trade sale: SUSE could be interesting for
| someone to acquire but a competitor/strategic buyer can't
| afford to buy the company and do the reorgs needed itself as it
| would tank the share price too much. The PE firm buys it, does
| the reorg off market and then does a trade sale of a reorged
| company to the buyer, but only now SUSE is way better as an
| acquisition target.
| jacooper wrote:
| EQT already owned the majority of SUSE, I doubt this will
| change anything.
| jacooper wrote:
| Not again..... Edit: it's the same EQT firm that made the SUSE
| IPO, and owned the majority of it since 2018.
| chucky_z wrote:
| I've never seen anything good come out of PE delisting like this.
| Someone please correct me if I'm wrong.
| hkatx wrote:
| X formerly twitter was one of the biggest LBO in history which
| is typically the process PE companies acquire companies as
| well. Priority is to increase margin, because the leverage
| comes from loan and debt servicing & principal repayment are
| pretty big sums. Its done capex reduction. Easiest way to do it
| is to reduce labor cost. X went from >7000 to ~1500(I may be
| off on numbers) Another is to increase revenue, so twitter
| blue(a subscription) and increasing incentives to be on twitter
| blue(no ads, potential account growth because you are shown up
| on follow list, no or less throttle on number of posts in
| feed).
| heylook wrote:
| Sir, this is a Wendy's.
| subtextminer wrote:
| Yet another reason to move to Debian.
|
| While in many ways not comparable to what's happened with Redhat,
| with Suse turning to the dark side one wonders how much longer
| Canonical will last before doing something similar.
|
| Make no doubt about it, private equity is all about short term
| shareholder returns. That's not a bad things in principle but if
| you don't want to wake up yet again with your distro having the
| rug pulled out from under it, switch to Debian.
| jzb wrote:
| If you consider Red Hat "on the dark side" but not Canonical,
| I'm curious how you're defining dark side.
| jkaplowitz wrote:
| I presume their definition is "owned by some huge and/or evil
| parent corp", together with viewing IBM and private equity
| firms as each having one or both of those attributes.
|
| I've seen many valid criticisms of Canonical, but huge
| doesn't seem applicable to them and evil seems to go beyond
| what's fair for their flaws. As for their owner, again, few
| would place Mark Shuttleworth in the same category as either
| IBM or private equity firms, other than probably having had a
| peak (though not current) net worth of over $1 billion.
| username332211 wrote:
| SUSE S.A. has been owned by this very same private equity
| company since 2018. In 2021 one fifth of the outstanding shares
| were offered to investors at the Frankfurt Stock exchange.Now
| that fifth is being acquired by the same private equity
| company.
|
| If there was any turn "to the dark side", surely it must have
| happened 5 years ago, not today, right?
|
| Edit: Apparently time flies faster when you're bad at math.
| jolux wrote:
| I really hope 2018 wasn't seven years ago.
| jkaplowitz wrote:
| Debian is great indeed (I am a a Debian developer myself
| although rather inactive) - but today's news isn't much of a
| change in whether SUSE is or isn't on any definition of the
| dark side.
|
| Why do I say that? Simply, as per the linked announcement
| itself, this takeover offer is by the current majority
| shareholder who already owns 79% of the company. They can
| already win any shareholder vote they want to win. They already
| control SUSE.
|
| Most of what this will do is two things: one, pay the current
| minority shareholders of SUSE 67% more than their shares are
| worth on the open market, and remove the quarterly earnings
| pressures of the German equivalent of Wall Street from SUSE
| management, at least unless and until any future IPO or a sale
| to another public company. Not obvious that this transaction
| makes anything worse than it already was.
|
| There could be a less obvious difference: SUSE currently has a
| German corporate structure with very strong worker rights
| including participating alongside management on the supervisory
| board. If they get rid of the German entity and keep only a
| Luxembourg entity, that may no longer apply, though German
| labour law certainly still would for employers based in
| Germany. I'm not an expert on any differences between German
| and Luxembourg worker governance participation rights, and in
| this paragraph I'm more raising a question than asserting
| anything.
| znpy wrote:
| > If they get rid of the German entity and keep only a
| Luxembourg entity, that may no longer apply
|
| If that was the case, I'd bet 10$ that the german government
| would intervene and block that. Germany is all for free
| market until its their stuff in sale.
| mkl95 wrote:
| > SUSE's Management Board and Supervisory Board support the
| strategic opportunity from delisting of the company as it will
| allow SUSE to focus fully on its operational priorities and
| execution of its long-term strategy
|
| What does this mean? Is their current status adding some
| significant overhead that would go away by going private?
| paxys wrote:
| Going private means you don't have to answer to shareholders
| and their short term demands, which _may_ be a good thing for a
| company. Of course it would be naive to assume that the private
| equity firm that bought it is in it for the good of the
| community rather than pure profit.
| jacooper wrote:
| Shareholder pressure? Maybe because of their recent goodwill
| moves against Red hat?
| pmontra wrote:
| Shareholder pressure is also the need to make the value of
| the share grow, with any mean, or shareholders will buy
| something else and the value of the company will go down, no
| more deals paid with shares, no bonuses for the CEO, etc. A
| private company might attract different managers and pursue
| different goals. However Finance and Industry usually don't
| go along well. Finance eats industries to make profits.
| pyrophane wrote:
| Probably that as a private company it would be easier for them
| to do things that would have negative short term impact on
| revenue but be better for the company in the long term.
| Ensorceled wrote:
| SOX and other SEC regulatory constraints and costs. Disclosure
| rules. Shareholder accountability for strategic decisions.
| Stricter accounting and audit requirements. Often your board
| has representatives of large shareholders, who have their own
| considerations and limitations, as opposed to owners.
| greatNespresso wrote:
| Ok naive question but SUSE was the first Linux distro I used 15
| years ago and never touched it again. For those of HN that use it
| today, what's their strength compared to RHEL or Ubuntu in the
| enterprise world?
| xtracto wrote:
| Just recently I was reading about OpenSuse thimbleweed rolling
| release. I read a lot of Great things about it, everyone said
| it was great.
|
| Then I saw a couple of videos and realized its UI (of their
| control center) is stuck in the 90s and it has several rough
| edges (like when installing it, I wont show you a list of WiFi
| access points, but ask you to manually enter the name of your
| AP and the encryption method... in 2023).
|
| I decided to keep Mint. So far it's been the best distros in
| terms of "not having to bother" so much. I use it as my daily
| dev environment.
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