> It would never have been enough, not for Williams nor the board, for Sierra to have levelled out as, say, a boutique producer of high-quality adventure games.
Why not?!?
It seems like everyone in this story - Roberta, people who love games, (most especially) the employees who lost their savings, and even Ken - would be happier today if they had continued earning an honest profit doing what they did best. The scramble for more, more, MORE undid them all.
There's wisdom in the proverb "the love of money is the root of all evil". This story is a cautionary tale.
No. An unprecedent fraud undid them all. And nobody saw it coming. It took two insiders to roll over before anything came to light (ref: Cendant).
As many people point out, the CEO has some level of fiduciary duty to investors. If you refuse an offer with a 40% or so premium, you are going to be facing down lawsuits.
Finally, while Roberta was enjoying her position, Ken really wanted to quit all of the CEO crap. Finding a CEO to hand things over to is just as fraught as a buyout and probably more likely to bump into bad actors than a buyout.
Put it all together and there really was no good reason to refuse the buyout. If the purchasing company hadn't been a fraud, we'd be lauding the decision to sell instead of castigating it.
> As many people point out, the CEO has some level of fiduciary duty to investors. If you refuse an offer with a 40% or so premium, you are going to be facing down lawsuits.
I think a simple way to avoid this is to ask for a all-cash offer. Naturally it will be either non-existant or much smaller value. If the offer is still good, it is not a problem to accept it.
The problem here was that the sellers were accepting stock as a payment, which was garbage.
I don't think that would tell them much. All-cash requires that the acquiring company either have that cash on hand, go into (further?) debt, or sell new shares to the public to raise the money. Legitimate M&A deals that are in part or even entirely in stock are very common. A refusal to accept anything but an all-cash deal would certainly weed out a fraudster like this one, but it would also eliminate a host of good deals, too.
> Put it all together and there really was no good reason to refuse the buyout.
He claimed he did it to secure Sierras financial future, but didn't see it as an issue when CUC refused to share its financial data.
It might be a hindsight thing, but it seems that at least nowadays larger companies spend a lot of time going over finances and other economic data before they agree to that kind of deal.
> If the purchasing company hadn't been a fraud
They could have been completely honest and still been in a state where the buyout itself would have been enough to break both. Wouldn't be the first time a company overextended itself.
re: Ken and the ceo -- Ken is desperate for people not to understand Ken is an idiot. The article even points out everyone at Sierra told him not to do it.
It’s hard to turn down the prospect of making your and all your employees/shareholders investments pay off. In fact, many of them would probably angry if they heard you did that. The potential for an exit is one reason they worked for you and not bigco who pays more. And you didn’t get whatever success you had by ignoring opportunities that presented themselves.
Was it F-you money for most employees, though? Sure, it was a 60% premium over the current stock price, in CUC stock which promptly dropped after the announcement.
So I suppose if you were sitting on 300k in equity it was now worth 480k, but it's not like going from illiquid paper wealth to a liquidity event...and given the company's growth trajectory it seemed likely at the time that it would get there in a year or two on its own, without a (risky) acquisition.
Dunno, doesn't seem like a slam-dunk case of F-you money to me.
Alright, but the founders here were already liquidly rich from their IPO? At lease one of the execs (Roberta) was super opposed.
They didn't do it for the personal money, they did it because they thought their shareholders would sue them, at least in part, for turning out a deal that was too good to be true.
He should just have asked for all-cash transaction. I think it is fair. If they don't want to sell the company stock and buy the company with cash, or at least make an offer, then there is likelihood that there is some kind of fraud going on.
Easy to say in hindsight, but using stock to pay for a merger is common. Most companies are not carrying a big chunk of their value in cash (it’s not capital-efficient). Therefore buying anything sizable for cash will require the combined company to take on debt. So a stock-for-stock merger can result in a combined company that has a safer balance sheet. If the acquiree believes the merger is a good idea, they might consider owning stock in the merged entity to be a good thing. If nobody is offering them a competitive offer in cash, they don’t have much leverage to ask for it anyway. Even if you value the stock offer with some discount for risk, it can still be attractive.
It need not be a pure debt transaction, the combined company can sell stock to the public rather than the shareholders of the old company who may suddenly feel the need to liquidate.
This is why with my personal companies, I've always avoided issuing shares or giving equity to employees. It handcuffs you.
Note that I'm not saying that others who don't avoid those things are wrong -- they're not at all. They just have different business goals and priorities than I.
You're taking the right angle with greed (1 Timothy 6:9-11). But I think it goes beyond that:
> Williams wasn’t a game designer, but a visionary who saw the company always moving forward, leading the market with other genres, other software, online worlds connecting every kind of person. That Sierra is instead remembered, basically entirely, for these 2D adventure games from the eighties and nineties is, he says, because the company was killed.
With respect to Ken, I think his ambition outstripped his ability. He prided his company on being something it wasn't, and himself being something he wasn't either. Sierra had to be something big, he had to be something big; his favored fraudster knew exactly how to exploit that self-illusion. In reality, Ken's own wife hints that Ken was struggling as CEO even before selling, e.g. failing to see through people, over-relying on lieutenants when making decisions, etc.
For all the talk of murdering Sierra, I find it interesting Ken doesn't name the culprit. Not the fraudster or his cronies. I think that's because Ken is the one who let them in his house.
Maybe you've also read his self-published autobiography, but his character flaws are front and centre. He's explicit about his vanity and overconfidence, painfully honest about personal snubs from Gates etc. He comes across as a permanent outsider, just one of those people who never acts on any feedback. So I think he knows.
If you loved the company, it's a very interesting book.
> He prided his company on being something it wasn't
To be fair to Sierra, some of their final acts were publishing Half Life, Homeworld, and an expansion for Diablo. They may well have become an enormous publisher if not for the CUC mess.
Re: homeworld, it was one of the greatest games of the 1990s and I remain delighted that it received sequels and a refresh. I have nothing but fond memories of the series and still play it regularly
It's a pretty amazing combination of greed and stupidity.
> “They hated it,” he remembers of the board’s reaction. “Because we were on a roll. We were unstoppable at that point.” If it was an acquisition where Sierra would retain control, that’d be one thing, but a merger with three major developers under a parent with no software experience? "It was beyond bad inside Sierra."
Fundamentally, dude took stock. Which, unlike cash, made him and the shareholders dependent on ongoing competent execution, from a coupon company that was going to merge multiple software companies and magically continue shipping excellent software. When people asked what expertise does a coupon company have at shipping multiple types of software, it turns out the real answer was their expertise was selling to greedy fools. Pretty good expertise!
Ken ambitions killed Sierra, Ken wanted that G5. This https://www.youtube.com/watch?v=sr9_GfeoCjk [Tropic Thunder Tom Cruise Dancing to Flo Rida Low] is an accurate reenactment of how Walter Forbes lured Ken Williams into selling
Or, to combine your and the OPs points: if you take your company public, you will have to live by the rules of "the love of money". It's also the love of money that ultimately led to Sierra (the more creative company) being killed in favor of Davidson/Blizzard (the more business-savvy company) while they were owned by CUC and then Vivendi.
Seems like it depends on which translation of the Bible you're using. I personally prefer 'the root of all evil', which looks like it's the King James version (and perhaps others)[1].
"Scripture" can be proverb. There's a whole bit of the Christian Bible helpfully labeled "Proverbs", is there not?
I was intrigued by the idea (elsewhere in the thread) that the root difference is translation from the vulgate vs translation from Greek, though I don't have the background to evaluate the claim. Regardless, absent really good reasoning I'll defer to the KJV, for reasons of historical importance and literary quality. So many phrases in the NIV (and other modern versions) set my teeth on edge.
Thanks for that. It's been decades since I took Biblical Greek, but I still recognize a couple of words! I don't see the justification for the NIV's addition of "all kinds".
The translation process would have gone:
1) root of all evil is greed [eliminate non-English articles]
2) greed is root of all evil [swap to SVO syntax]
3) greed is the root of all evil [add required English article]
4) The love of money is the root of all evil ["translate" the vocabulary word into simpler terms]
There simply isn't any more faithful way to render that thought. You could stop at step three, but the KJV's genius lies in what a small vocabulary it uses. (I just checked: "greed" appears nowhere in the KJV, so the word was on the hit list.) The goal was to make the text understandable to the broadest audience possible - the vast majority of whom, at the time, were uneducated. That the translators were able to maintain that constraint while also creating something of incredible literary power is awe inspiring.
If you want to break it down a bit further, the phrasing in step three puts two stressed syllables ("greed is") together, which can be awkward, while the final version puts the verse into an iambic pattern (unstressed syllable preceding a stressed syllable), which rolls off the tongue much easier. The word "evil" then reverses that, which breaks the rhythm and calls attention to the end of the thought. (And, maybe, if you want to get especially literary or theological about it, provides a subtle commentary on the nature of evil.) It's so good.
It's a reference to Ecclesiastes (5:10) and Diogenes (Lives of Eminent Philosophers, VI.2 stanza 50), both probably well known by Timothy and the jews he was evangelising among. I'm not sure whether Diogenes used the word philargyria and can't be bothered to try and dig it up, but I think it's a rather literal translation of Ecclesiastes which has something like 'o-heb kesep', 'he who loves silver'.
Hebrew and aramaic doesn't have a word that directly translates to greed, but the meaning of philargyria is related to money rather than the metal and Ecclesiastes obviously describes 'love of silver' as a form of addiction and that's what Paul (or whoever actually wrote the epistle) had in mind when he wrote to Timothy and the jews he hung around with.
Thanks. I knew about the Old Testament reference, but not the Diogenes one. New Testament references to extra-scriptural texts are fascinating, and (in my experience, at least) mostly ignored in exegeses by biblical scholars within religious traditions.
Why not?!?
It seems like everyone in this story - Roberta, people who love games, (most especially) the employees who lost their savings, and even Ken - would be happier today if they had continued earning an honest profit doing what they did best. The scramble for more, more, MORE undid them all.
There's wisdom in the proverb "the love of money is the root of all evil". This story is a cautionary tale.