Put another way, losing money on a PE deal is terrible. Losing money on fewer than half of one's VC investments is positively great. When FanDuel sold, it didn't have enough upside left to justify pure venture capital. It was a distressed sale whose alternative was closing down shop. In this timeline, employees got a few more years of cash salaries. On the net, they did better with KKR et al than they would have without.
I think most of their employees would have easily been able to get jobs elsewhere.
As it is, I don't really understand why, and I feel it's overly negative (though I expect to understand why I'm wrong once you explain it more fully).
I'm not disagreeing with your statement, but "toxic" is a strong word and I'd like for you to elaborate.
I just really object to how casually OP waved off people losing their jobs.
The same person at a later time (or someone who has obvserved that trauma second hand) can sometimes form a calm, rational, politically correct depiction of the issue for you.
If you demand the latter, you will learn much slower, because you are rejecting the best available information on what things are traumatic to people.
Employees staying onboard under the assumption that their equity, which is part of their total comp, may yet be worth something - that brings on a serious opportunity cost. If someone stays at FanDuel making $160k/yr + $0 in common stock options versus $350k/yr at Google, that's a shame. If 100+ employees do it, it's tens of millions of dollars of opportunity cost.
That kind of position at Google is one of the hardest to get in the industry. While I wouldn't label this attitude as "toxic", the idea that people from any random startup can just go get a $350k job at Google if it fails is detrimental to this industry. I doubt most of those working for FanDuel (or anywhere else, really) could clear that bar. Not to mention, Google has a limited capacity to absorb people, so the more who apply the higher the bar gets.
PE wants to incentivize leadership, but the concept of 'founder' and all that means, is somewhat beyond.
That said - KKR etc. definitely want to incentivize company leaders to make money, and might likely put in significant bonuses for CEO's in the event of an acquisition.
But yes ... PE entities may care less about this.
But note that it will also be a 'hit' to KKR's reputation in this area. You can be dam sure that future mid-stage entities are going to think twice about the terms of the deal.
https://en.wikipedia.org/wiki/Corporate_raid
Wikipedia has a nice overview of the topic of this thread:
https://en.wikipedia.org/wiki/History_of_private_equity_and_...
and of course KKR was the most famous corporate raider in America:
https://en.wikipedia.org/wiki/Barbarians_at_the_Gate:_The_Fa...
And yes - as part of the acquisition, it's usually loaded up with debt, which is the weird reason why a company should always take on debt (if they are cash flush, then 'raiders' can borrow money to buy the company and load up up with debt since there is room for it).
If you mean 'reputation' - well - yes, if you sell to a known 'raider' well, then they'll do as they please.
As far as 'spending on their own interests' - well that actually can create problems as minority shareholders can sue.
To put it another way, founder friendly private equity is not really a thing and venture capital is a philosophy that is rare outside Silicon Valley (though it has become more common in the last decade or so). Venture capital is playing long odds based on possible future value, private equity seeks to buy current assets at a discount. This sort of outcome would be a hit to a venture capital firm's reputation. It's not an unexpected outcome when private equity invests.
[1]: https://en.wikipedia.org/wiki/Kohlberg_Kravis_Roberts