PopCap Balked at $5 Million Microsoft Buyout

[RobfromtheGulag]

I'm glad they're doing their own thing. I loved Insaniquarium (freeware & premium versions) and Plants vs Zombies. But with a large corporation at the helm I imagine we'd get something like mainstream games -- a factory pressed game every month or two with very little quality behind it.

 

[WhiteTigerShiro]

I don't really understand why companies feel the need to buy other companies. What is it that PopCap does that Microsoft couldn't do itself?

Companies don't buy other companies to do things that they can't do. They buy their infrastructure.

All companies have employees, facilities, established chains of command and supply, etc. Buying a company instantly adds these assets to your company.

I get that. But let's say PopCap is worth $100m. That means its employees, facilities, supply chains, etc. are collectively worth $100m. If another company has $100m that it could use to buy PopCap, why can't it just use that $100m to buy its own employees, facilities, supply chains, etc.?

I guess they're just playing the market. Offering less for a company than it's really worth in order to get the stuff cheaper than it otherwise could. Like with Microsoft's $5m offer.

It's the same reason that many people prefer to buy a PC instead of buying the parts and building their own. Starting-up a new dev team requires time and effort on top of the money, and just because you get a dev team put together doesn't mean that they will function well together. By buying a team that's already going, you've skipped an entire step. Same way that when you buy a PC, you save yourself the headache of figuring out which parts will go together the best; because someone already did the legwork for you.

 

[hyperdrachen]

I don't really understand why companies feel the need to buy other companies. What is it that PopCap does that Microsoft couldn't do itself?

It's named pop-cap and owns the rights to several popular titles. Brand recognition is worth money, and getting a cut of the future profits simply by signing your name on the checks is a pretty cherry buisness idea. What I really don't get is why some of these companies are in such a hurry to sell.

One minute your a company with 200 employees bringing in a millions in profit a year.

The next your the same company, but under the umbrella of a company that's going to force you to layoff employees at the first sign of shareholder dissastisfaction.

 

[oktalist]

I get that. But let's say PopCap is worth $100m. That means its employees, facilities, supply chains, etc. are collectively worth $100m. If another company has $100m that it could use to buy PopCap, why can't it just use that $100m to buy its own employees, facilities, supply chains, etc.?

I guess they're just playing the market. Offering less for a company than it's really worth in order to get the stuff cheaper than it otherwise could. Like with Microsoft's $5m offer.

It's the same reason that many people prefer to buy a PC instead of buying the parts and building their own. Starting-up a new dev team requires time and effort on top of the money, and just because you get a dev team put together doesn't mean that they will function well together. By buying a team that's already going, you've skipped an entire step. Same way that when you buy a PC, you save yourself the headache of figuring out which parts will go together the best; because someone already did the legwork for you.

It's already been pointed out that the important factor is the time it takes to get a team up and running. A pre-existing team can start raking in money for their new owner immediately, and there's also inflation to consider. And also the risk involved if a new team doesn't "gel".

But on the subject of the "effort" required to start up a team... I would think that the people whose job would be to go to the effort of getting a new team set up would not be the same people who decide whether to start a new team or buy one preexisting from another company. For those people, effort and money are the same thing. Effort is just something that they pay other people to make for them. So I would have thought that the cost of the effort involved in setting up such a team would be factored in to the price of PopCap.

Having said that, I would also kind of expect the value of the advantage of having a preexisting, low-risk-for-setup team would be factored in to the price of PopCap, so we're back to my original question. In my example, the $100m pricetag for PopCap included the value of all the advantages inherent in buying a preexisting team rather than starting one from scratch, for example, $25m for the employees, facilities and supply chains, another $25m the value of the PopCap brand awareness, $20m to cover the time and effort of setup that you would have to go through if you were starting an equivalent team from scratch, $20m to cover the fiscal advantages of the team being able to start work immediately, and $10m to cover the risk of setting up an equivalent team from scratch. So that means a buyer has a choice of two equally good solutions, that cost the same as each other. They might as well flip a coin to decide between them.