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This is when it all changed …
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[Walter Soyka] “I wouldn’t read too much into the sale. Buy and hold is not the private equity model. It is the destiny of all PE-acquired companies to be sold in order to return money to investors.
Carlyle holds The Foundry in an investment fund, which buys, (hopefully) improves, and then sells stakes in companies. If they don’t sell the companies they buy at significant multiples (in this case, 75 million euros to 200 million euros), fund investors cannot realize the gains that make PE so attractive.”
I understand all of that and agree…. but having personally been on the receiving side of numerous acquisitions my own experience has been that it has been a positive thing 0% of the time. No, not all acquisitions are bad, of course not. But the success rate of acquisitions is not all that stellar and in particular, when company A is sold to company B, company A has no standing what so ever inside B. Internally, believe me, this is a true Master/Slave relationship. There is a clear head of the dog and it’s not the company that just got bought. Any strategic plans and directions just got tossed and who knows what’s going to shake out.
About the only thing I can say with certainty is I’m not springing for Modo 901 until I see where the dust settles.
…. and anyway, this is really what I’m looking for
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[Craig RussillRoy] “May as well be AJA so they can battle BMD ;-)”
That would interesting.
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[Walter Soyka] “Carlyle holds The Foundry in an investment fund…(in this case, 75 million euros to 200 million euros)….”
Not euros. POUNDS.
[Craig RussillRoy] “expects to realise £200m from the sale….Carlyle Group is said to want to realise its investment of the company, which employs 270”
[edit: corrected in a later article to 370]
Keep an eye on those numbers. They’re huge. That’s US$314 million give or take, plus 370 employees, which means as much as another $30-40 million or so a year in payroll + benefits. By my math, that rules out EVERY company in this industry but one.
It definitely rules out AJA. I don’t know what kind of money they have laying around, but aja.com says they have “over 200” employees. They’d need a LOT of money laying around in order to nearly double the size of their company.
It rules out BMD too. I don’t know the size of the company or its bags of cash, but my guess is that DaVinci and eyeon COMBINED were more like 10% of what Carlyle wants for The Foundry, and probably not much more than 10% in personnel either.
The other issue is business model. Carlyle thinks they’ve nearly tripled the value of The Foundry in 3 years. It seems unlikely that there’s enough upside for another investment group to say, “Yeah, we can make a lot more than $300 off this thing in a buy-to-sell in the next 3-5 years.” Eventually, somebody’s going to have to say, welp, the equity is the equity. I need this to pay for itself out of income.
Compare this to Grant Petty’s approach at BMD. It’s clear that BMD isn’t needing to create a bunch of incremental dollars from software sales. Quite the contrary. Just the idea of decoupling DaVinci software from hardware tells you that he’s playing a longer game.
Sure, there’s a hardware upsell for the DaVinci control surface, but that’s trivial compared to how much he’s leaving on the table with ridiculously capable software for free.
For hardware, his pattern is even more clearly to let the air out of the tires on margins. That’s how he buys Teranex, and takes $75,000 standards converters to sell them for $1995, while making them smaller and quieter, and adding features and formats. The exact OPPOSITE of what’s required for monetizing a deal the scale that The Foundry is gonna be.
While BMD’s website doesn’t say, I wouldn’t be surprised if they’re also a smaller company than the 370 people at The Foundry. It’s one thing to say “But nobody predicted they’d make a camera” when I rule this out, but it’s another thing to say that they’d want to spend $300 million for the privilege of adding another 370 employees. Not gonna happen.
The last time there was a deal of this scale in this industry was Avid buying Pinnacle for $300 million in 2005, right? That didn’t go all that well in the end. Besides, a lot of that deal was in stock.
Otherwise, you have to go back to Macromedia by Adobe for $3.75 billion, but that was ALL stock.
So that means you’re looking at a publicly traded company as the only kind of precedent for a deal this scale.
Apple won’t bite on this one because there’s no chunky jewelry or apparel. Maybe if The Foundry made giant ugly hats. No wait. Those would cover the ugly headphones. Maybe giant ugly shoes? Parachute pants?
Avid’s out for reasons cultural and financial. Autodesk could conceivably do it, but I don’t see it. They’re in pretty rough shape, and are going to have to do some major restructuring just to hit current targets. Analysts are downgrading their stock. Nobody’s going to take that as part of a deal, and I can’t imagine that Autodesk wants to spend that kind of cash on anyone but themselves for now.
You know who I like? Adobe.
Adobe is the ONLY one I can see doing it, because they DON’T need to spin equity into another equity deal, and they don’t need to make incremental dollars. They need Nuke et al to add incremental VALUE.
It’ll give more people more reasons to sign up and stay signed up. Nuke could really cement Adobe’s place all the way to the end of the production pipeline, past where they now end with After Effects.
Thinking about Macromedia as an all stock deal, Lord knows Adobe’s stock is valuable enough to throw around. Their stock has nearly TRIPLED since the Macromedia deal, from $27 to $77 give or take, and has been skyrocketing of late. And Adobe has the payroll resources.
The big burst of energy behind their latest stock surge — in addition to, ahem, a terrific quarter for CC adoption, sorry haters — is their $800 million acquisition of Fotolia, a stock media company.
Did I mention that Fotolia was a cash deal? Fotolia was a cash deal. Adobe had $800 million in cash. They spent it all in once place. On Fotolia. For $800 million.
Who knows? Adobe could have another $300 million cash already tied up in a bow. That suddenly sounds like not all that much money. But as sharply as their stock is climbing, and as quickly as analysts are raising their targets, a deal sweetened with stock could be a pretty sweet deal indeed.
The stock makes sense to me, in that it looks to my beady, bloodshot eyes like Adobe will be partly monetizing Fotolia by selling you stock media from inside your CC apps, and as noted, I don’t see $300 million cash to be extracted from Nuke and its kin in the next few years.
That’s also why I think after Adobe, you’re pretty much looking at another investment group, right? And there you run into my quandry about how much more juicy equity goodness you can suck out of The Foundry.
That means it HAS to be monetized through new sales…unless you’re a company whose cashflow is reliable enough without sales per se, but needs to keep adding value to make long-term commitments attractive to both existing and new customers. You also continue to burnish your well-established track record for exactly this kind of relentless value addition.
So it’s not my prediction by any means, but if I was Adobe, I’d have made this deal already.
Which is why I’m not Adobe. LOL They’ve made their fortunes by ignoring advice from idiots like me.
But no kidding, I love this. Make the deal by the end of the year, unless it’s better for taxes to do it in January. But no dilly-dallying. You need time to give everybody a couple days off before working around the clock for next few months to add a new wing to the NAB booth.
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Interesting. Yea, I figured there was no way AJA or BM could even come close in buying them but Adobe could but my bets are still on Autodesk. The product family, sans Modo, is a perfect fit for what Autodesk currently sells, as is the volume and price points.
While I’d LOVE to have Nuke, Modo, Mari et.al. bundled in with my subscription, IMHO I think The Foundry product offering is a pretty far stretch for the market that Adobe currently sells and focuses on. Adobe sells to millions of customers with products in the hundreds of dollars. The Foundry sells to a few thousand customers with products in the thousands of dollars. Very different sales channel. Plus it is a very different market. I’m not sure the elasticity of the market would work such as dropping the price of Nuke to that of AE. You drop the price by a factor of 10 I’m not really sure you pick up 10x the volume so what’s the point?
Either way it will be interesting to see what happens.
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[Tim Wilson] “Apple won’t bite on this one because there’s no chunky jewelry or apparel. Maybe if The Foundry made giant ugly hats. No wait. Those would cover the ugly headphones. Maybe giant ugly shoes? Parachute pants?”
Priceless! 🙂 Going to pre-order a pair of iRun shoes with built in phone capability, if such product does exist. Imagine that Apple logo lighting up when a call is coming in.
[Tim Wilson] “dobe is the ONLY one I can see doing it, because they DON’T need to spin equity into another equity deal, and they don’t need to make incremental dollars. They need Nuke et al to add incremental VALUE.
It’ll give more people more reasons to sign up and stay signed up. Nuke could really cement Adobe’s place all the way to the end of the production pipeline, past where they now end with After Effects.”
Question is, would After Effects still exist in this scenario? Regardless, this would add value to the CC model but still prefer an off ramp. I just feel subscription only lacks options. Just my two cents.
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[Tim Wilson] “Nuke could really cement Adobe’s place all the way to the end of the production pipeline, past where they now end with After Effects.”
[David Mathis] “Question is, would After Effects still exist in this scenario?”
I think so. After Effects and Nuke excel in different areas.
Walter Soyka
Designer & Mad Scientist at Keen Live [link]
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
@keenlive | RenderBreak [blog] | Profile [LinkedIn] -
[Tim Wilson] “Apple won’t bite on this one because there’s no chunky jewelry or apparel. Maybe if The Foundry made giant ugly hats. No wait. Those would cover the ugly headphones. Maybe giant ugly shoes? Parachute pants?
“I know Tim’s joshing us. But fashion fantasy aside, I still think the watch thing is NOT as much about fashion or “wearables” as a category as people are imagining. Sure there’s a big dollop of that in play. Why not? Apple has always been focused on design and industrial excellence via fit and finish – but I still think there’s a more fundamental understanding beneath the watch.
It creates an access point for EVERYTHING else that Apple does thats fully present on the user.
It takes the portal for the data you use to operate your life out of the dark recesses of your pocket or purse and lands a display on your wrist for instant access and even some basic interaction..
I used the example before, the first time in a group of business people is sitting at lunch when one a woman with an early iWatch gets a wrist alert and glances down to see that her next appointment arrived early and excuses herself from the table – every other executive at that table will want to be just as “connected at a glance” – and they ALL will want the same style of integrated wrist worn terminal.
The fashion makes you notice it – but the functionality is what will make so many humans strap one on each morning.
(Be nice. I know the temptation for joking will be HUGE after that last line. Resist it, please. ; )
Know someone who teaches video editing in elementary school, high school or college? Tell them to check out http://www.StartEditingNow.com – video editing curriculum complete with licensed practice content.
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[Walter Soyka] “I think so. After Effects and Nuke excel in different areas.”
That’s exactly my point. There are millions of people who know the actual answer to this, rather than my armchair observations, but it seeeeeems to me that a large part of the use of After Effects in mainstream movie and vfx-ish tv making ends with a handoff to Nuke. There’s something of an overlap in the feature sets, but they’re more commonly used together than not, I think.
Not unlike, say, mocha’s tracker or Resolve’s grading. These aren’t either/or products for After Effects. Certainly part of why Adobe bought SpeedGrade, even though there are color tools in both Premiere and After Effects. They all have room in the ecosystem, and perform unique, invaluable functions.
I do get the appeal of this for Autodesk, though, but I think their toolset actually has more of an overlap with Nuke, making it less attractive. I also don’t see them having that kind of cash or high-value stock….but I would also be extremely surprised to discover I’m right about any important aspect of this. LOL Fun to talk about tho….
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[Tim Wilson] “That’s exactly my point. There are millions of people who know the actual answer to this, rather than my armchair observations, but it seeeeeems to me that a large part of the use of After Effects in mainstream movie and vfx-ish tv making ends with a handoff to Nuke. There’s something of an overlap in the feature sets, but they’re more commonly used together than not, I think. “
Ae gets Hollywood glory for design elements like HUDs and FUIs (fantasy user interfaces), but it is also quietly used for comp work in movies, TV, TVCs, etc.
Why? Because Ae has unparalleled design tools, because Ae has a huge user base, because Ae has an astonishing third-party ecosystem, and because layer-based compositing is just plain easier for simpler and/or image-driven shots.
Nuke gets Hollywood glory for complicated comps and VFX work.
Why? Because Nuke has unparalleled compositing tools, because Nuke has a huge user base among professional compositors, because Nuke has an astonishing third-party ecosystem, and because node-based compositing is just plain easier for complex and/or multichannel or data-driven shots.
With so much in common, why doesn’t Ae move upmarket more, or why doesn’t Nuke move downmarket more?
1) Ae is cheap and Nuke is expensive.
2) Simple comps are harder to manage as nodes. You have to explicitly combine inputs together (gross). You have to manage what the viewer is actually showing you. You have to be able to answer this: “To premultiply or not to premultiply; that is the question.”
3) Complex comps are harder to manage as layers. You can’t branch a layer stack. All the disadvantages of nodes in (2) become advantages in (3).
4) Layers are a natural way of thinking for anyone who has ever used Photoshop, Illustrator, or an NLE. Flow graphs probably do not elicit the “I know this” reaction (“I know this” reaction [link]) unless you grew up with a soldering iron in your hand, so you need to become a specialist to use them.
5) Ae likes to think of images as images, but Nuke likes to think of images as data. This is an oversimplification of a lot of concepts, but Ae natively thinks in gamma-adjusted, pre-multiplied RGBA, and Nuke thinks in an arbitrary number of linear channels. This pays huge dividends in compositing CG.
Other corners of the internet are abuzz, aruging that BMD’s Fusion move or the emergence of open-source compositor and Nuke knockoff Natron have The Foundry on the ropes. These positions are ignorant of some important strengths of The Foundry and Nuke:
1) Nuke was actually built by studios to do real work. Nuke developers continue to work hand-in-hand with teams doing real work. There’s a pretty decent chance that a new feature you may see this year was refined in beta on last year’s summer blockbusters.
2) Nuke is a platform with enormous second-party extension opportunities. It’s totally customizable and TD-friendly. The degree to which you can script Nuke to tie it into your pipeline is insane. You can write your own tools, with a heterogeneous accelerated image processing kernel (Blink) built in. All of this is actually documented [link], too. (Eyeon, now BMD, I’m looking at you!)
3) The Foundry leads the industry in commercializing R&D. There, I said it. Their work bridging 2D and 3D with things like Model Builder and deep compositing support are unrivaled.
TL;DR — horses for courses. Adobe and The Foundry have some overlap (I didn’t even get into Ps/Il/MARI/Mischief), but I’d agree with Tim that they are not running on the same track.
Walter Soyka
Designer & Mad Scientist at Keen Live [link]
Motion Graphics, Widescreen Events, Presentation Design, and Consulting
@keenlive | RenderBreak [blog] | Profile [LinkedIn] -
Great synopsis.
[Walter Soyka] “4) Layers are a natural way of thinking for anyone who has ever used Photoshop, Illustrator, or an NLE. “
Ironically, I think nodes are actually a natural way of thinking for anyone who’s driven a complex production switcher, like any large Grass Valley or Sony. There you have a complete upstream/downstream workflow that is very akin to nodes.
I think also nodes works best on a single-shot basis, while layers works best for a timeline of several shots back-to-back. That’s evident by some of Stu Maschwitz’s DV Rebel and ProLost posts about doing complete show grading in AE.
– Oliver
Oliver Peters Post Production Services, LLC
Orlando, FL
http://www.oliverpeters.com
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