It hasn’t been a fun few years for once-respected tech news outfit CNET. After being purchased by private equity backed marketing firm Red Ventures in 2020, the company has been in a downward…
A private equity firms purchase usually means they’ll strip the company and its customers/users of as much value as possible, then sell whatever scraps (brand) is left over.
Red Ventures is an American media company that owns and operates brands such as Lonely Planet, CNET, ZDNet, The Points Guy, Healthline, and Bankrate.[1] Red Ventures focuses on news, advice, and review websites.[2]
I realize the article was written to make it sound like they lost money on this, but I would be shocked if they had.
To vastly oversimplify it, private equity does a few things to make money on the companies they acquire:
Significantly reduce staff, and increasing workload
Strip and sell off individual assets
Load the company with debt
The last parts are where it goes from amoral to “HOW THE FUCK IS THAT LEGAL?”
The private equity firm will have its own separate entities that provide a variety of services, for example janitorial or administrative.
The new private equity owners will then replace all the current vendors, with their own entities at a expentionally hirer costs. All the while, paying themselves gigantic consulting fees.
Basically those are all just ways to legally embezzle money by extracting all the resources from the company. Once that’s done, they’ll sell the last thing of value: the brand name itself e.g. CNET, VICE, etc.
If there is no money in the brand itself, then they’ll just dissolve the company.
Red Ventures?
I know someone who works there. Despite them explaining to me, more than once, what RV does, I still have no idea what Red Ventures actually does.
My guess: turn failing big companies into failing little ones.
Strip them for parts (which is to say extract all the value in the form of golden parachutes)
A private equity firms purchase usually means they’ll strip the company and its customers/users of as much value as possible, then sell whatever scraps (brand) is left over.
From wiki
Seems pretty straightforward.
I realize the article was written to make it sound like they lost money on this, but I would be shocked if they had.
To vastly oversimplify it, private equity does a few things to make money on the companies they acquire:
The last parts are where it goes from amoral to “HOW THE FUCK IS THAT LEGAL?”
The private equity firm will have its own separate entities that provide a variety of services, for example janitorial or administrative.
The new private equity owners will then replace all the current vendors, with their own entities at a expentionally hirer costs. All the while, paying themselves gigantic consulting fees.
Basically those are all just ways to legally embezzle money by extracting all the resources from the company. Once that’s done, they’ll sell the last thing of value: the brand name itself e.g. CNET, VICE, etc.
If there is no money in the brand itself, then they’ll just dissolve the company.