I’m sure you’ve heard me rant on about private equity funds that acquire companies only to sell them off for parts just to ensure their investors make a profit. These PE companies generally don’t care much about the users of the acquired company’s products, which is a shame since it usually means that a good brand first falls into decline, new products and updates dwindle, and eventually it goes away completely. This is something that I very much worried about when it was announced that Native Instruments had entered into insolvency in late January.
Let’s Back Up
In a previous post I explained, “The company (Native Instruments) had a rocky financial period in 2019 and it was an investment from private equity firm Francisco Partners in 2021 that brought back stability to the company. So much so, in fact, that Native then went on a spending spree, rolling up audio software companies iZotope, Plugin Alliance, and Brainworx.
But almost from the time that Francisco Partners took over, customers began to complain about service going downhill, products going stale, and an increased focus on pricing and packages.
This is exactly what private equity companies do. They only care about extracting profit from their investment and could care less about the company’s customers. Thousand of companies across every industry have been effected this way since the 1990’s by these PE companies.”
Francisco Partners bought Native during covid, when sales were roaring since everyone was locked down at home looking for something to do. It amazes me that the company was shocked a few years later when sales returned to pre-covid levels and it saw it’s investment tanking.
Now you’d think that a company with reported $50 billion in raised capitol would pitch in a few dollars to get Native over the financial hump, but that’s not how private equity works. Instead it tried to sell off NI to two other PE firms – Bain Capitol and Bridgeport Holdings. Reportedly when Bain backed out of the deal NI had no choice but to enter preliminary insolvency.
The Good News
NI, iZotope and Plugin Alliance customers have been on pins and needles every since, wondering what was going to happen to their software.
The good news is that appears there are a number of companies that are willing to acquire NI and maybe keep it going. In a statement today, Native Instruments CEO said, “We are currently in an active M&A process (Mergers and Acquisitions) that is progressing well, with strong interest from multiple parties with deep roots in audio and technology. We see a clear path to achieve our goal to provide continuity for creators, customers, and partners.
As part of the restructuring process, Native Instruments GmbH and a number of our German entities will shortly be moving through expected legal steps, including transitioning from “preliminary insolvency” into formal “insolvency” proceedings where applicable. These are expected steps in the process we are working through.“
What He Didn’t Say
There’s nothing concrete here except that several “parties” have an interest in acquiring NI (and with it iZotope, Plugin Alliance, and Brainworx). Does that mean larger music-oriented companies that could efficiently run NI? Does it mean other PE companies? When is this going to happen? What happens to producers and customer service in the meantime?
We don’t know. All we know for sure is that the company is likely to be acquired at some point.
So many musicians, artists, engineers, songwriters, and producers rely on these products every day, and the longer the uncertainty continues, the more likely they’ll begin to look for alternatives. That means that even if the company is acquired, it might be too late to save it if the process takes too long.
I’ve gotten some pushback about my stance that private equity is what gives financial engineering a bad name. Now is the time to prove me wrong.
