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Comment by seneca | Hacker News Reader

Rackspace was sold to a private equity company in late 2016. Most of their senior staff has jumped ship since then, and services have been decreasing in quality. It's essentially a different company, and not one I'd host anything important on.

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Is there anyone that gets bought out by a PE company that doesn't go to absolute shit? QlikTech, Sencha, TravisCI all got bought and suffered a marked decline in service and roadmap confidence. Nowadays, when I hear someone is bought by a PE firm, I start looking for the exits.

I really wonder about this when it comes to the longer term viability of tech-focused PE firms. The following seem to be absolutely truisms:

1. The second a company is bought out by PE, all the good employees run for the exits. Corporate America isn't exactly known for its empathy and compassion, but working for a PE-owned company means you can be sure the ownership gives 0 shits about anyone working at the company. I have never heard anything but horror stories of those working for PE-owned shops.

2. Given #1, it means the products of said companies always turn to shit pretty fast.

This makes me really wonder about how PE firms can really work their financial magic in the long term. Perhaps they're just better at extracting value out of companies that are already declining in the first place, so they just suck the blood dry before they discard of the carcass?

That's exactly what they do. Buy when it's good, extract as much money as they can and then sell it on or run it into the ground.

personally, I think PE works something like: it's easier to cut costs than create value, so they buy something, and cut costs like crazy. It'll work with almost anything with enough money coming in. But, I think they often cut deep enough to compromise the long term health of the company, like if you suddenly cut your food budget to almost zero by eating nothing but ramen. In the short term, it's a budget miracle. Keep it up, and you'll die from not getting the vitamins and minerals you need. Before the long term consequences are fully understood and come to pass, they sell they company back off.

I'd agree with another comment here. It doesn't even take a declining company, just one small enough to purchase (realistically, you can't buy Apple, it's just too big) with a stable amount of cash coming in. Getting the cash coming in is hard, that takes creativity and creating value, so they need that part in the bag before purchasing the company. But if you have the cash coming in, any fool can just start cutting costs.

The stable income also helps with leverage. You can use the company you're buying as security for a loan to by the same company based on the stable income. Ta-da! That's another reason they need companies with cash coming in, leverage so they can flip bigger companies.

I'm convinced any idiot with a billion dollars laying around could do it.

re: the latter, the company doesn't have to be declining - although that usually makes it easier to buy. The transaction from the point of view of a PE company is a very different game than say, a product person looking at what could be "done" with a company.

I remember when LimeLight Networks got bought out by PE and their services turned to crap in about six months. It got so bad we got lawyers involved to break our contract with them.

Ha! I've been through something similar (company being sold).

According to my experience, a company that passes from an owner to another one is basically another, completely different company.

This is a shame, I had many years of fantastic experiences with them (running 100's of machines) up till about 2010 when I left a role & have been using AWS since.

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