In another “Thank you private equity for making this company worse” moment, it’s been reported that Native Instruments has entered preliminary insolvency in a German court, threatening the future of iZotope, Plugin Alliance, and Brainworx. This means that the court has appointed an administrator who is responsible for restructuring the company and any sale of its assets going forward.
How We Got Here
Native Instruments has been here before. The company 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.
But It Gets Worse
Francisco Partners brags about the $50 billion in capitol that it’s raised and 186 companies that it’s invested in (see their site), so you would think that a cash injection into a small music company would be a no brainer. Surely there’s plenty of cash laying around when you’re raised $50 bil.
That’s not how private equity works though. They try to spend as little of their own cash as possible, usually using an investment bank or other partners to do the heavy financial lifting.
So instead it tried to sell off NI to two other PE firms – Bain Capitol (who did something similar with its Guitar Center investment a few years back) and Bridgeport Holdings. Reportedly when Bain backed out of the deal NI had no choice but to enter preliminary insolvency.
The Good News
NI is in “preliminary” insolvency, which means that it’s business as usual until the administrator determines a course of action. The company’s core business is strong, and apparently it was its investments in iZotope and Plugin Alliance that brought on the financial trouble. No doubt acquisitions where encouraged by Francisco Partners.
For now all your products will continue to work, but don’t expect any major updates or new products until the company gets restructured or the parts are sold off.
Private Equity is just another piece of financial engineering that does nothing for end users and only serves the few people who’s pockets are already full. We’d all be a lot better off if they didn’t exist.