PE Firms and Big Tech Shake-ups

What’s up, this is LGTM, the official newsletter for rest and vesters of yesteryear.

Here’s what we have for you today:

• The scoop on tech layoffs. Is the golden age over?

• Private Equity snatches up fallen tech co’s

• Crypto bull market incoming? We better hope so. It’s all we have left.

Goodbye Rest and Vest, Hello Blind and Grind

If you were also wondering which tech companies are voting people off the island this week, then we have plenty of news for you:

Microsoft announces 10K layoffs, Google 12K. Yikes

Google is not alone among major tech companies for laying off talent but it feels different this time. Meta is burning cash trying to cash in on the Metaverse, Twitter barely made a profit before Elon tacked on an extra billion a year in interest and Amazon is… well Amazon.

Google in contrast continues to post record revenue and profits each quarter. So what do they know that we don’t?

There are two schools of thought:

• Business as usual: The party line on this is that companies over-hired during the pandemic in preparation for an internet boom that turned out to be fleeting once shutdown policies were relaxed. These layoffs represent a small fraction of the workers added during the previous few years.

• The golden age is over: A more cynical view, touted by the likes of David Sacks, is that Elon Musk’s takeover of Twitter has demonstrated how much cost-cutting is possible and has ushered in an era of substantially leaner tech companies.

Google’s layoffs were unique because they were:

❌ Not seniority based (some seriously senior people were let go)

❌ Not performance-based

Working in an org that Google execs view as critical was the only thing that could save you. Bad news for Googlers in the latte art org.

Tech nerds. Meet Private Equity Bros.

With software company valuations in freefall, PE shops are on a buying spree.

The Wall Street jocks are back in charge. Nature is healing.

• Private Equity firm Thoma Bravo just entered into a definitive agreement to buy forensics software company Magnet Forensics for 1.8 Billion– 15% higher than the current price trading on the TSX

• Magnet Forensics shares have risen 87% since Thoma Bravo first announced the deal on October 6

• Thoma Bravo has been in the news a lot lately, outbidding Vista Equity Partners for public spend management company Coupa $8B last month in a take-private deal worth $8B

• Thoma Bravo isn’t the only one getting in on the action. Zendesk, Citrix Systems, and Mcafee were all taken private by PE firms in 2022

We anticipate a whole lot more of this in the coming year. What should we expect from our new Brioni-wearing, firm hand-shaking, Excel-equipped overlords?

These guys don’t give a shit about your new JavaScript library

If history is any guide PE firms will follow their proven playbooks of adding fun features to the company office like ball pits and slides, swapping out the stale office beans for single-origin light roasts, and instituting a universal bring your dog to work policy… sorry wrong notes.

Vista Equity Partners, the biggest software PE firm of them all, reportedly takes acquired companies from operating margins of 20% to 50% within 5 years. They achieve this through aggressive cost-cutting measures like relocating the work hubs to low cost of living areas, often shedding many employees in the process. Former employees also report smaller quality of life cuts like transitioning from premium software to free and shrinking benefit packages.

Quick, Make a Bunch of Ugly NFTS

Maybe this is all a blessing in disguise. If you’ve been laid off, there may be no better time to actually start doing some work. Fox Business, CNBC, and others are optimistic about a coming bull market in the latter half of 2023. So keep on ignoring your smartest friend who’s been trying to soberly inform you about Great Depression 2.0, fire up Figma, and design a collection of 10,000 hideous monsters. Could it really hurt at this point?

Not an artist? You are now. If you’ve been burned one too many times by crypto, open an Instagram page and start plastering it with tasteful AI art like this:

Prompt: "an astronaut takes a bong rip in space"

In all seriousness though, we agree with Paul Graham’s take on this one. Might be time to start thinking of some inventive ways to build a company around AI programs like Midjourney and ChatGPT. We have a bunch of our own ideas, but we’re not going to share them with you.

Guy’s pretty smart

Well readers, stay safe out there. If you need us, we’ll be outside Google HQ trying to create a mean-spirited viral hoax where we impersonate recently laid-off Nooglers. Until next week 👋

Editor’s Note

Since it has become incredibly fashionable to lay off a chunk of your workforce, we at LGTM are considering hiring so that we have more people to potentially lay off. Looking to get rejected or fired from somewhere cool? Email Mike. We’re not going to give you his email. You just have to find it. That’s part of the interview. Good luck.