M&A (2)
Even $20 billion was a bargain, if you considered what the company would be worth down the line.
The problem was that I was short $16 billion against what I had on hand. The money I had earned after all this struggle only came to $5 billion, and now I needed to make another $16 billion on top of that.
Even with my regression, that was an impossible stretch.
And yet...
It was an opportunity to seize the largest company in the world.
In my previous life, it had been something I couldn’t even dare to imagine. Now, it was sitting right there, within reach, if I only stretched out my hand.
If I were asked to list the reasons it wouldn’t work, I could probably come up with a hundred. But if that had been enough to stop me, I wouldn’t be sitting here now.
Whether it was possible or not was a question for later.
What I needed now was the courage to grab the opportunity standing right in front of me.
When I finished thinking it through, I opened my mouth.
“Fine. But I have a few conditions.”
Apparently Alex hadn’t expected me to accept, because he looked at me in surprise. David did too.
“A $2 billion deposit, and the remaining $18 billion paid one year later. The condition is that you step away from management immediately after the contract is signed.”
If we signed first and I could just turn the remaining $2 billion into nine times that amount within a year, the problem would be solved.
“It seems you can’t pay the full amount up front.”
“Isn’t a deposit usually ten percent of the sale price?”
Just as real estate deals had a contract date and a closing date, huge M&A transactions like this were usually signed first, with payment coming later.
And in that process, it was common enough for financing to fall through and the deal to collapse.
Of course, if you had the money, paying in full right away was always best.
“That’s a different matter if you’re demanding that I step down from management immediately.”
“Either way, you’d be stepping down eventually, wouldn’t you?”
Because we had already secured 51.16 percent of the shares.
After thinking for a moment, Alex spoke again.
“A $5 billion deposit. Then $7.5 billion in six months, and another $7.5 billion one year from now.”
“A $5 billion deposit?”
“Didn’t you just say there are plenty of places to invest in the market? At the very least, you’d need to recover what you’ve invested before you can put it somewhere else.”
I let out a quiet sigh to myself.
The deposit had gone up, and the deadline had shrunk. Raising $7.5 billion within six months was one thing, but I didn’t even have the $5 billion deposit on hand.
“I think that’s more than enough concession.”
Alex had a point. From his perspective, he couldn’t just sit around twiddling his thumbs until the remainder came in.
“Since you’re being so generous, couldn’t you be a little more generous?”
“What do you mean?”
“A $4 billion deposit. I’ll pay $8 billion in six months, and the remaining $8 billion one year from now. However, the seller won’t be allowed to cancel the contract, and you’ll step away from management immediately.”
“So you don’t even have the $5 billion.”
I shrugged.
“It just takes me a little time to raise the funds.”
“And if you can’t raise them by then?”
“Then I’d have to forfeit the deposit, as is customary.”
In the event a deal fell apart, the buyer usually surrendered the deposit, while the seller returned twice that amount.
But because this involved control of the company, there were usually all kinds of clauses meant to keep either side from backing out in the first place.
Alex nodded.
“Fine.”
David quickly said, “Then we’re agreed on these terms. I understand there won’t be any further changes or additions.”
If we tried to add another condition here, it would mean the negotiation was dead.
Alex didn’t object, and David revised the contract accordingly. Once the draft was finished, the other side’s lawyer reviewed it.
Alex signed first, then David and I signed after him. We each took our own copy of the contract.
I let out a breath of relief inside.
Was that finally over?
“Thank you for the good deal.”
I held out my hand again. This time, Alex took it.
Looking at me, he asked, “Why Cooloud, of all companies?”
It was, objectively, an audacious acquisition. I had bought a company worth $100 billion for only $5 billion.
Sure, I had forced a bargain by exploiting its weakness, but that still left me with a $16 billion debt.
And it wasn’t as though I could immediately start milking profits out of it; on the contrary, I’d have to pour even more money into it.
One wrong move, and Continue Capital would be driven straight into bankruptcy. I had gone through with the acquisition while accepting that risk.
Now that the contract was done, there was no need to hide anything anymore.
“Because it’s a good company. I’m planning to grow it into the best company in the world from here.”
He probably couldn’t even imagine how large this company would eventually become. If he had known, he would never have sold his stake, no matter what.
“The problems with Primus Fund, the fraud at Thomas Motors, and even the fact that Rolf was lying—how did you uncover all of that?”
I gave him the same answer I’d given Rolf.
“I was lucky.”
Alex smiled faintly.
“Lucky, huh... Ah. One last thing. What are you planning to do about Rolf Buchi?”
In a way, he was the person who had suffered the most because of Rolf. It was only natural that his feelings toward him would be awful.
“Well. Don’t you think the truth will come out eventually?”
◇◇◇◆◇◇◇
The acquisition contract was done, but that didn’t mean everything else was finished.
In M&A, the acquisition itself was only the beginning. What came after was what really mattered.
David took over the documents and records related to the company. Just as promised, Alex handed everything over neatly—files, data, contracts, all of it.
After that, the four of us gathered in the hotel room with Syd and started discussing restructuring plans.
People tended to think of restructuring as layoffs first, but in practice it meant reforming the entire management structure.
Of course, that usually meant people would lose their jobs in the process.
There were two ways to invest in a company.
One was to put in money and stay out of management entirely. The other was to intervene aggressively in management and personnel, changing the organization’s culture from the inside.
The first method was basically just a change in shareholders, so it wasn’t a big deal. The second was different.
Some companies used that process to improve their fundamental health and leap forward. Others were ruined by it.
When venture capital firms invested in startups, they usually advised and supported management rather than meddling directly in it.
Startups each had their own corporate culture, and if you clumsily tampered with it, you could damage their competitiveness or provoke key talent into leaving.
That was why we had taken the first approach with the companies we’d invested in so far, but this time was different.
This wasn’t an equity investment; it was an M&A, and worse, it had been hostile.
If we were going to replace the CEO, then everything from personnel to organization had to be overhauled.
The three most important positions in any company were the CEO, COO, and CFO.
In Cooloud’s case, Alex Preston had served as co-CEO and CFO, while Rolf Buchi had been co-CEO and COO.
Rolf Buchi had basically just been a figurehead anyway, and Syd had been the one handling everything behind the scenes, so his removal wouldn’t create much of a problem.
The developers all trusted and followed Syd, so there wouldn’t be any backlash there either.
The real issue was the sales team and the finance team.
That side had been firmly under Alex Preston’s control, and his people were all over it. There was no way we could keep them as they were.
Fortunately, I had a rough idea of who should stay and who should go.
That was because Cooloud would eventually become the largest company in the world, and I knew it well. Besides, Silicon Valley was a place where hiring and firing were both relatively free.
The personnel issue was settled. Next came the business restructuring.
If we simply kept doing the same business as before, there wouldn’t be much of a problem. But Syd had a different idea.
“We should stop worrying about the Big Three and just go our own way.”
Alex had focused on stable management.
So from the company’s earliest days, Cooloud had partnered and cooperated with the Big Three, advancing its business without stepping on their toes.
AMZ’s ZWS, NS’s Azure, and Guble’s Big Storage were all rivals keeping one another in check, so they didn’t share the data stored in one another’s clouds.
Cooloud, however, had secured access to that data through partnerships with them.
For example, suppose Company A and Company B were working together.
If Company A used ZWS and Company B used Azure, Cooloud could access both systems with their consent, pull data from each cloud, and analyze it in real time.
That was Cooloud’s greatest strength. But Syd was saying we should abandon that advantage and head down an independent path instead.
“That would save some money.”
Right now, the biggest chunk of Cooloud’s expenses went straight to the Big Three.
David raised a concern. “Wouldn’t that put us in an adversarial relationship with the Big Three? We might see customers defect.”
That was the sensible view.
But it was the kind of thing someone said because they didn’t understand the performance of Mimir or Syd’s skill. I did understand, though.
Syd said confidently, “We just need to move all the data over to Cooloud’s servers.”
Using a particular company’s cloud didn’t just mean storing information there.
It meant using every program that company provided.
Because of that lock-in effect, switching away from an existing cloud was never easy.
“There’s nothing that can keep up with Mimir’s algorithm. And there are a lot of services we built but never launched because we were worried about the Big Three. If we roll those out, customers won’t have much choice but to use Cooloud anyway.”
I sided with Syd.
“There might be some customer loss, but I doubt it’ll be large. Still, the Big Three will probably start pushing back harder from now on.”
“Their services are trash anyway.”
Syd was probably the only person who could say something like that to the Big Three cloud companies. Of course, if anyone had the right, it was him.
“From here on out, it’s your company. Do whatever you want. Once the restructuring is done, I won’t interfere with management at all.”
“Hehe.”
David looked a little unconvinced, but I wasn’t worried at all.
Cooloud only truly began to grow after Alex and Rolf stepped down and Syd became CEO.
Some people were good only when they were given instructions. Others were at their best when they were allowed to do what they wanted. A beast only reveals its true worth when the leash comes off.
I handed Syd a set of documents.
“Ah, sign this.”
“What is it?”
“A stock transfer agreement. I’m transferring ten percent of Cooloud’s shares to you.”
Not stock options—actual shares. That would raise Syd’s stake from 20 percent to 30 percent.
Syd’s eyes widened as he looked at me.
“Are you really allowed to just give away company shares like that?”
“They’re my shares. I can give them away if I want.”
“Well... I guess that’s true.”
Syd signed the papers I handed him.
Ten percent was worth roughly $10 billion at present, but if I thought of it as an investment in the future, it didn’t feel expensive at all.