Comments on: Why Silver Lake isn’t harmed by being evil A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: klhoughton Fri, 01 Jul 2011 03:31:30 +0000 If you believe in Superstars (op cit. Rosen, 1981, et seq.), then the question becomes whether the people who stayed are being credited excessively or the ones who left are being debited too little.

As Charlie Stross sadly points out, money in a VC/Built-to-Flip situation doesn’t follow to the technologists.

TED is correct on a reputation basis, of course, but the significance will depend in part upon who SL tends to dump and how key they are viewed as being to the company internally at the upper levels. I doubt it will have a major impact on SL’s business, though I would hope to be wrong.

By: ChristopherBudd Tue, 28 Jun 2011 18:39:18 +0000 Nice detailed article, thank you.

Setting all other things aside, I will say as someone that manages PR crises, Skype’s and Silver Lake’s handling of this isn’t well done from a communications point of view. I’ve got more details here:

By: BryanStarbuck Mon, 27 Jun 2011 19:37:27 +0000 I disagree. I think their reputation will be damaged in a big way — by the way of Talent. I disagree because they need the half of Talent that are A-Players and brilliant pioneers.

The A-Players who are pioneers are critical for these companies, or they wouldn’t give them stock options at all. A private equity firm that takes over a chain of retirement homes doesn’t pay stock options because they don’t need A-Player pioneers. They need them in great tech companies.

A-Player pioneers will abandon Silver Lake companies (and other evil PE companies) because:
1. A-Players know their YEARS of hard work will result in nothing because…
2. Employees can be fired at any time. (At will) and would lose their stock options
3. Great employees often must leave because of politics. People don’t want years of stock flushed away because of politics.
4. It is easy for employers to “trump up” reasons to fire employees “for cause”.
5. Life events may mandate an employee leave (need to relocate for a spouse, etc.)

The worst part is that companies will often tell employees “Yes we can take back your options. BUT we never have yet. BUT I don’t think we ever would”. Lawyers would say managers should never say this, but it happens often because that is managers answer when employees ask “Why in the world do I work hard for years and lose my options”. This construct creates a chasm of confusion, which is only good when an employer wants to trick employees into working hard and then losing their options.

By: tiger4 Mon, 27 Jun 2011 19:37:04 +0000 hasn’t this whole story already been debunked and been shown that it was the Skype CEO who made the call to fire his people rather than SL? In any case i think the story is ridiculous, not because i don’t think SL could be that evil/greedy, but because they are not that stupid and the sums involved were not consequential.

By: RobertWBoyd Mon, 27 Jun 2011 19:15:34 +0000 Also, isn’t it possible that employees of companies bought by Silver Lake might be tempted to leave, and that it might be hard to attract future employees based on their reputation? Are there enough high-quality executives and scientists looking for work that Silver Lake can afford to have an anti-employee reputation? These people aren’t cogs.

By: Danny_Black Mon, 27 Jun 2011 17:45:17 +0000 One only has to look at Paulson’s bet on SinoForest to see how omniscient he really is.

By: Danny_Black Mon, 27 Jun 2011 17:44:01 +0000 Abacus didn’t hurt GS because everyone with more than two brain cells knew the case had no real basis.

By: EpicureanDeal Mon, 27 Jun 2011 16:50:41 +0000 I’m not so sure, Felix. Think about it: the publicity will make entrepreneurs and managers more wary of signing up with Silver Lake, and their employment attorneys more careful to protect their clients’ interests. Investment bankers like me will remind clients of this incident (if they need reminding), because we are always interested–other things being equal–in getting good investment partners for the companies we sell. We keep track of PE firms’ bad behavior and reputations very closely, because it matters.

Often, a PE firm with a good reputation as a partner will win an auction against one with a bad one, even if the bad one offers more money. Sure, Silver Lake has lots of money, but so does everyone else in PE land. Silver Lake’s money is no greener than anyone else’s, and there is no shortage of potential PE buyers for any company.

I really do think this public tarring will hurt Silver Lake’s business at the margin for some time going forward. Will they fold, or fail completely? Of course not, if only because some sellers–often the ones who don’t plan to stick around after the buyout anyway–couldn’t care less whether their new majority owner is a bunch of a**holes. But many do.

Time, as they say, will tell. But I guarantee the chief guys at Silver Lake are worried.

By: GRRR Mon, 27 Jun 2011 16:50:04 +0000 ….or they can change their name like Blackwater did.