
Vista Equity Partners revamps software companies by following detailed protocols - jedwhite
https://www.wsj.com/articles/billionaires-secret-buyout-formula-110-instructions-and-an-intelligence-test-1531151197
======
hn_throwaway_99
Two thoughts on this article:

1\. I agree with the "tastes like chicken" argument, _especially_ for
enterprise software. Most enterprise software is basically CRUD apps with a
data analytics component where most of the complexity is in integrating with
existing 3rd party systems and processes. It really is mostly plumbing.

2\. I think this article does a fairly good job in raising the red flag that
most of the profits are on paper. I say this because a funny thing about
enterprise subscription software is that companies can spend a lot of money on
it, but the purchasers are often not the people actually using the software.
This can create a situation where things look OK for a while as the revenue
rolls in, until one day when the folks with purchasing decision power actually
talk to the end users, and the end users say how much they hate the product
and all they are doing is working around it with an inefficient process (yes,
I've been involved with enterprise software before). Then the software
subscription is cancelled, and the subscription revenue can have a huge
decline over a very short period.

~~~
mathattack
Yes. The future cash flows look great when gross Churn is less than 10% and
net Churn is negative. But if you underinvest, eventually the tide turns. Look
at Taleo as an example. I’m sure they had great Churn metrics once upon a
time. Now it’s a signal that a company has obsolete technology.

------
a-dub
It's fun to read glassdoor reviews from their acquirees.

Sounds like the formula is:

1) Buy the company

2) Shut down the main office and move it to some cheaper city, accept
attrition

3) Fire all employees over 30 (using the patented "IQ" test as a cover),
replace them with young kids or "HPELs"

4) Install a Glengarry Glen Ross style sales regime

5) Hold on for a few quarters while numbers are improved from all the cost
cutting

6) Quickly bail and sell the thing off before anyone notices it's all being
held up by duct tape and bailing wire

7) Wash hands. Repeat.

~~~
TheCoelacanth
I work at a company that was acquired by Vista a few years ago and I haven't
noticed much of that.

The main office is in a pretty expensive location and it is currently being
expanded to close to double the size it was when the company was acquired.

There are a lot of young kids being hired, but also a lot of older people as
well. Attrition has been pretty low and I think only a handful of people at
the entire company have been layed off.

Cost cutting does not seem to have been particularly extreme if it has
occurred. The benefits package and travel policies have gotten slightly more
generous since the acquisition and annual raises have continued the trends
from before the acquisition which made it possible to keep reasonably close to
what you could get by changing companies.

------
snarfy
I work for a company that was acquired by Vista. Ask me anything.

~~~
sigacts
What kind of questions were asked as part of the cognitive test?

~~~
emmp
It's the CCAT.

[https://www.criteriacorp.com/resources/ccat_prep.php](https://www.criteriacorp.com/resources/ccat_prep.php)

Source: myself. I also work for a Vista company

~~~
AlexCoventry
As an Android user, I perceive discrimination against my tribe in the
provision of only an iOS test-prep. :-) (Search for JobFlare.)

------
Puer
Full article here:

[https://outline.com/6kWxDs](https://outline.com/6kWxDs)

~~~
atomical
How do publishers feel about this?

~~~
therein
Same way they feel about this [1], they are simply unaware.

[1]
[https://www.google.com/search?q=Billionaire’s+Secret+Buyout+...](https://www.google.com/search?q=Billionaire’s+Secret+Buyout+Formula%3A+110+Instructions+and+an+Intelligence+Test&oq=Billionaire’s+Secret+Buyout+Formula%3A+110+Instructions+and+an+Intelligence+Test&aqs=chrome..69i57j69i61j69i60j69i61.933j0j7&sourceid=chrome&ie=UTF-8)

~~~
sigacts
That doesn't work for the Wall Street Journal any more, and hasn't for a year:
[https://www.bloomberg.com/news/articles/2017-06-05/wsj-
ends-...](https://www.bloomberg.com/news/articles/2017-06-05/wsj-ends-google-
users-free-ride-then-fades-in-search-results)

~~~
therein
I don't question your source but my personal experience is that it still
consistently works. It works just now in fact.

------
wb36
"Vista has yet to unload some of its biggest bets,"

Translation - the majority of the returns reported here are based on estimated
valuations calculated by Vista rather than actual returns resulting from
business sales. It goes without saying that 99.99% of the time this means the
returns are inflated. It is possible that they've only calculated returns
based on companies sold, but unlikely.

So not only can they manipulate the valuation on firms they haven't sold to
make their funds look better. Even with that + the ability to fudge IRR
numbers, their last few fund returns are not so mind blowing that we should
believe these guys have a magic formula.

------
apohn
I worked for a company that was acquired by Vista. Was there for a few years
before the acquisition and ~18 months after.

I'll just say this - whatever Vista's top secret directives are, they didn't
seem to have any sensible directives around employee retention for individual
contributors. IMO their policies actually encouraged people to leave. The team
I was on lost 6 people in 6 months and it became comical to watch my manager
try to hire people as upper management constantly froze/unfroze hiring,
destroying hiring pipelines and providing a terrible experience to some great
candidates.

I've kept in touch with quite a few of my colleagues from those years and
there's a clear pattern. People who have left (including me) have gotten
promotions, large pay raises, are working for companies with better brand
recognition, etc. People who stayed are doing the same jobs for basically the
same pay, but have a much higher workload to fill all the gaps that came from
multiple rounds of layoffs and higher than expected (the CEO stated this in an
all-hands call) attrition.

Lesson I learned in all this: Private equity acquisition = Immediately find a
new job. If you have a good manager ask them to lay you off so you get a
severance package and help the manager hit their headcount reduction quota.
Unless you are in a privileged position, you're not going to get anything for
sticking with the company through tough times.

------
andyidsinga
If i ever encounter a situation where I'm selling my company and the buyer
asks me to submit to a "proprietary cognitive assessment" ..I think there are
going to be more $ involved. I'm not at all convinced one should give that
information away for free - meaning this is a separate fee negotiated outside
of the business price.

So, here's the complication - I can speak for myself in this regard, but i'm
not sure how a principal could or should navigate this issue with coworkers or
on behalf of employees.

ideas?

------
checker659
> Vista is currently trying to raise $12 billion for a new buyout fund.

Ok

~~~
sushid
Yeah it sounds like a typical puff piece for me. Oh look how methodical this
man/firm is!

His company is progressive and he's a philanthropist to boot!

No negative acquisitions experiences or anything like that in the article
either.

------
thisisit
Companies come up with all sorts of reasons to fire people. Especially after
they go through years of excess.

A friend who works at ANZ tells me that they have come up with another way of
culling jobs. They have embraced Agile wholeheartedly. And every employee has
to be certified in Agile. Once an employee is certified he has to apply to be
part of a squad, chapter, tribe etc.

Now to ensure that people are fired for "performance" reasons, there are only
800 openings up for grabs for 1000 odd people.

I think it is a nightmare when after spending years in a company you have to
re-apply back to just keep your job.

------
pedalpete
"The ultimate gauge of success for any private-equity firm, however, is the
price at which it cashes out of its investments."

Is this correct? That sounds like the measure of success for a VC, I thought
PE was about a consistent return better than the public markets, I didn't
think that had to mean "cashing out".

~~~
PakG1
Can't different PE groups have different strategies? A note from Buffett on
PE:

 _Unlike LBO operators and private equity firms, we have no “exit” strategy —
we buy to keep. That’s one reason why Berkshire is usually the first — and
sometimes the only — choice for sellers and their managers.

Some years back our competitors were known as “leveraged-buyout operators.”
But LBO became a bad name. So in Orwellian fashion, the buyout firms decided
to change their moniker. What they did not change, though, were the essential
ingredients of their previous operations, including their cherished fee
structures and love of leverage. Their new label became “private equity,” a
name that turns the facts upside-down: A purchase of a business by these firms
almost invariably results in dramatic reductions in the equity portion of the
acquiree’s capital structure compared to that previously existing. A number of
these acquirees, purchased only two to three years ago, are now in mortal
danger because of the debt piled on them by their private-equity buyers. Much
of the bank debt is selling below 70 ¢ on the dollar, and the public debt has
taken a far greater beating. The private-equity firms, it should be noted, are
not rushing in to inject the equity their wards now desperately need. Instead,
they’re keeping their remaining funds very private._

[https://www.quora.com/Is-Berkshire-Hathaway-a-private-
equity...](https://www.quora.com/Is-Berkshire-Hathaway-a-private-equity-firm-
If-not-what-would-you-call-it-and-what-are-da-differences-between-its-way-and-
PE-firms)

------
qop
Why are WSJ links still allowed on HN?

Or any paid-reader only sources?

~~~
tomhoward
Paywall bypass link:

[http://archive.is/UUhj6](http://archive.is/UUhj6)

HN FAQs [1]:

 _It 's ok to post stories from sites with paywalls that have workarounds.

In comments, it's ok to ask how to read an article and to help other users do
so. But please don't post complaints about paywalls. Those are off topic._

[1]
[https://news.ycombinator.com/newsfaq.html](https://news.ycombinator.com/newsfaq.html)

------
jacques_chester
> _A personality test aims to determine which of them are suited to which
> jobs. Salespeople are better off being extroverted, and software developers
> more introverted._

If my eyeballs were rolling any harder at this they'd pop out of their sockets
and race off over the back of my head.

That's the thing about billionaires. Everyone agrees with them. Just ask them:
everyone they knows agrees with them. Every brainfart is the golden truth,
hand-delivered by Minerva. The idea that people might be nodding at any
halfbaked notion to get a fullbaked paycheque seems to have slipped their
mind.

> _Vista, which has done more than 300 deals, tells investors it has never
> lost money on a buyout_

I can't tell who they're kidding here, their customers or themselves.

~~~
SamReidHughes
Is that controversial? Software development doesn't have a lot of human
interaction, compared to, say, sales, golf instruction, or professional
basketball, so introverts like it more.

~~~
walterbell
If humans use the software, it may be useful to interact with humans to
understand human requirements.

~~~
SamReidHughes
So? It's still way less interaction than sales.

~~~
walterbell
It’s not about hours of interaction. One poor sales interaction can hurt one
transaction. One poor requirements interaction can have years of software
consequences.

~~~
SamReidHughes
So what? Introverts are perfectly good at doing that. And they're happier than
extroverts at a job where there's less of that.

~~~
perl4ever
Being comfortable meeting new people every day, constantly, outside the
company vs. being comfortable interacting with people you know within your
department and occasionally elsewhere in the company may divide people, but
should it really be called extroversion vs. introversion? Is this the normal
meaning of the words?

If one person is sustained by issuing fake smiles to strangers, and another by
exchanging real ones with colleagues, how is that extroversion vs.
introversion?

------
neo4sure
This is nothing new. The socio-economic hierarchy was there in every human
society throughout history. Some times journalists don't have any imagination.

~~~
StaticRedux
Not everything requires imagination. Sometimes explanation is good too. While
it may be obvious to you, other people find it enlightening and interesting.

