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There was an LBO craze in the 80s, culminating (so the story goes) with the bidding war for RJR Nabisco - documented in Barbarians at the gate

They were unpopular with many, the idea was that a PE firm would buy the company with debt and then sell off parts and make other parts more efficient to service the debt. But underneath that was the idea that companies at the time were not using their assets efficiently, and it was possible to essentially use that efficiency to buy the company.

Tldr, I wonder if we're reaching that phase with big tech, where companies are sl inefficiency that they are ripe for the plucking by buying them off and cutting staff (the new versions of an asset) and streamlining operations.

Twitter is maybe an edge case, but it's plausible. I wouldn't be surprised to find that 90% of Google's recurring revenue comes from < 10% of their operations, and that an efficiency focused operator could capture most of their profit at a significantly lower headcount. Maybe this is the start of something



This happens a lot with mature enterprise software companies. They are bought and R&D is cut to the bone and existing customers that have too high of switching costs are milked for revenue. I’m not sure that model would work for ad revenue companies but you never know.


You mean Oracle's entire business model?


Oracle is a law firm that happens to have a development team attached to it.


A lot of the companies that get bought in LBOs aren't R&D heavy. For instance, you'll rarely see a pharma company LBO'd.

Even in tech, the type of companies you see bought out are ones like Rackspace. Not exactly cutting edge scientific research firms. LBO firms typically want a lot of physical assets and stable cash flow, i.e old economy firms like utilities and manufacturers and retailers.


Chrome does not directly generate revenue, doesn't mean Google will simply axe their entire team. Similarly there will be other products just to mitigate competition to protect the primary profit generators.

And sometimes simply the 10% of operations requires the support of 90% of the operations to generate 90% of the revenues. Its a large team effort.


If you've worked in the industry for longer than 5 minutes, ... this is incredibly obvious.


Facebo... I mean Meta looks like a good target :)




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