Inseego Corp. - INSG
When unwinding a decade-old acquisition is the only way to move forward.
A headline from an old idea of mine crossed my screens the other day: turns out that they had now finally finished unwinding a decade-old acquisition that at the time was supposed to “accelerate the corporate vision” and be otherwise transformative for the company. That acquisition had originally perked up my interest in the company the first time around, so perhaps there was a reason to take another look today. The CEO who had that vision is now gone of course, but has kindly left that mess for others to clean up.
In general, I spend far too much time looking at acquisitive companies; in my experience, many companies use acquisitions as a way to hide problems lurking in their own businesses, specifically the lack of growth.
Another reason would be that integrating what can be two disparate businesses where each has its own particular employee culture across different continents and time zones can be a challenge even for the most efficient and knowledgeable management team.
In the case of this next company, they entered into an acquisition a decade back when revenues were about to contract by 30%, and paid an amount that at the time appeared to be a downright bargain for a diverse set of international assets in the hot and growing SaaS industry.
Despite the higher margins and better multiples those kinds of revenues typically command, the company recently finished unwinding that acquisition in order to get back to its roots of providing hardware solutions for the mobile workforce. This company has been losing tens of millions of dollars each and every quarter for over a decade now and selling what used to be their only profitable segment appears unlikely to change that. Will this sale help them focus on what used to be their only business? Or is it simply a stop-gap measure where the proceeds will be used to reduce their leverage and provide some breathing room as they double-down on their ever-more-competitive and dwindling core business?