Its a good post - but it must be said: the CEO (and board?) fucked up hardcore. They let themselves be tempted by acquisition, and then didn't protect themselves or the team in negotiations.
Crazy that all of this was predicted on the actions of two (apparently inexperienced) board members who bit off way, way more than they could chew.
Hindsight is 20/20 of course, but I think even the most greenhorn of finance majors would agree that axing the superstar CEO in a surprise coup isn’t traditionally good business.
He made an unsolicited offer, the board didn't even want him to buy it and explored a bunch of options to prevent a hostile takeover, so he kept pushing, then they said fine, and then the market turned, and then he started walking it back trying to find any reason to back out, but eventually couldn't. This was 100% a self-inflicted wound.
Oh, good, it wasn't their _core_ business. What a bullshit copout - you acquire a company, you own it, warts and all. Who's worse, the crappy company or the company that acquires it and continues to operate it without fixing it?
This reminds me of John Thain at Merrill. The company was headed for the toilet before he got there. He was the boss as the share price fell through the floor. He found a buyer, then asked for a large bonus. Ultimately he was rebuked, and left the combined company.
The difference here... The CEO came from the new buyer, and is getting paid off the acquirer. It certainly looks bad. But... If he was wise enough to sell the company before disaster, there is something to be said for that.
For not performing due diligence when discussing the company's strategy with the new CEO, leading to about two years of fucking around (after a decade of fucking around) and cratering the company's value to the shareholders.
Highly ineffective CEO responsible for destroying a huge amount of value that he originally played a major role in creating. But arguably destroying more value than he himself created. Should probably have made Zach Kirkhorn CEO instead.
CEO was rewarded for increasing artificially the stock price, through stock buy backs. He did a good job at that and a bad job at managing an industrial company.
That s how big companies start to fail, they lose sight of what matters.
FanDuel is going to do like $6B in revenue this year.
This entire story above happened for three reasons:
1. The CEO made terrible decisions in regards to how much and who they raised from. They got in over their hands as the company grew and the entire founding team got fired.
2. The CEO immediately after, who took over an unprofitable business that wasn't growing and was in bad shape after the merger with DraftKings got called off, took a deal that was the best he could do at the time. That CEO was a non-founding CFO before taking over, and was basically put in the C-Suite by KKR as a term of their investment in the business.
3. That deal to PaddyPowerBetfair, now Flutter, was completed about a year before PASPA was repealed and sports betting was legalized in the US. Had #2 happened a year later, or if #2 had happened with that information in mind, the deal terms would have been insanely different and way more valuable.
It's very easy in retrospect to say that the original CEO should have taken different terms, or that the following CEO should have taken a better deal. That's all hindsight.
All that said, I have zero sympathy for the original CEO and founders. I feel loads of sympathy for the employees, but again, if they stayed on after the deal, they're now sitting on an absolute gusher of cash.
He was forced to buy it due to its own inflated ego and stupidity. He tried everything he could to exit the agreement, but failed and had to buy the company at an inflated price.
TL;DR Ken Williams had had a bad experience early on where the company was nearly bankrupt from a bad move, and he thought selling to a conglomerate would bulletproof the company, and was something of a duty to his shareholders. If the article is to be believed, they did so without being permitted to do due diligence on their buyer.
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