Acquired Distaste: 8 Companies That Lost Their Luster After Being Bought Out
Diane Bullock
The corporate acquisition is the end game for many a small company. When manufacturing a product of, by, and for the people, even the noblest startups have dollar signs in their eyes once the market value hits nine digits. So when the inevitable buyout commences, the starry-eyed dreamers are replaced with the pursed-lip marketers, and bottom lines start trumping top priorities. As a result, the topflight product -- once lovingly manufactured out of the inventor's own garage -- takes a dive in both quality and cachet when it hits the assembly line overseas.
Here are eight examples of businesses that lost their luster after being bought out. Instagram
Set the filter on Instagram's appeal to sepia: Its ubiquitous aged photos have lost more burnish since the even more ubiquitous social network bought it out for an unprecedented $1 billion in cash and stock. After it began as a digital alternative to your parents' photo album, Instagram exploded in popularity as an iPhone (AAPL) app and then as an Android (GOOG) app. But once it joined forces with the privacy-optional Facebook (FB), not only did users balk at the ownership language in its Terms of Service, Twitter cut integration ties. While midday snapshots of chicken cacciatore aren't disappearing quite yet, the poultry is beginning to show its age. Odwalla
To a group of socially conscious pals hand-squeezing juice from a backyard shed and touting slogans like "from nature to nourishment" and "goodness grows here," a deal with the Coca-Cola Company (KO) would seem like one made with the devil himself. So in 2001, when Odwalla sold its all-organic brand to the king of high-fructose corn syrup for $181 million, its superfoodie fans were left scratching their dreadlocks. As a result, longer shelf-life requirements turned freshly squeezed into flash pasteurized. And Odwalla doesn't seem particularly proud of the acquisition, either. It's a fairly crucial chapter the company conveniently left out of its good story. Flip Video
An affordable HD handheld camcorder that can record two hours of footage without a cassette? Such technology would have blown away consumers... prior to smartphones. But it was only a year before the 2007 launch of the first iPhone that the original Flip camera -- then the tongue-twisting Pure Digital Point & Shoot Video Camcorder -- dollied into frame, and in standard definition to boot. A doomed acquisition at the start, Cisco Systems (CSCO) bought Flip Video in 2009 for a ridiculously high $590 million, just as iPhone and Android devices were starting to shoot video in HD -- that aside from, you know, the millions of other things a similarly sized device could do. Two years later, Cisco officially declared Flip to be a flop. Hotmail
In 1996, we were barely freed from the shackles of dial-up when Hotmail emerged onto the pre-Twitter webscape. A year ahead of Yahoo Mail (YHOO) and a grueling eight before Gmail, Hotmail represented many folks' first foray into Web-based email. It wasn't long before Hotmail proved to be a hit with users longing to break out from bloated desktop email clients like Microsoft Outlook (MSFT). Naturally, Redmond wanted to corral the same users it was driving away and acquired Hotmail in December 1997 for $400 million. Unfortunately, with its sluggish development, lax security, and frequent downtime, the glimmer was gone from the Microsoft-led Hotmail and it soon played second-fiddle to Google. Flickr
Like Hotmail before it, Flickr introduced a Web 2.0 staple that we now take for granted: photo sharing. Big, bright, and free, Flickr in 2003 was a godsend to bloggers who needed hotlinkable Web space for their funny George Bush photos. Its popularity among point-and-shooters caught the eye of Yahoo, which acquired Flickr in 2005 for a paltry $35 million. But rather than giving it space to develop like a Polaroid picture, forced integration into Yahoo's scattered and ill-defined business model led to a quick fade. And because profits were lower than other Yahoo departments, there was little to no innovation that would've kept it ahead of Facebook (FB), Instagram, Picasa, and countless other online storage outfits. Omgpop
Who doesn't love a good doodle break? Well, if you ask Draw Something users after Zynga's (ZNGA) acquisition of Omgpop, quite a few. In 2012, social gaming company Omgpop rallied millions of mobile Monets with Draw Something, Omgpop's answer to Pictionary, and drew the eye of the company behind Words With Friends, Zynga's answer to Scrabble. But after Zynga plunked down $180 million for the touchscreen Etch-a-Sketch, the already scandal-embroiled parent company began losing more value, having hitched its wagon to the IPO-fumbling Facebook. Ben & Jerry's
Little did anyone know the carefree, halcyon days of hacky sack and ultimate frisbee were numbered for the two lucky schlubs behind America's most creatively named ice cream. Founded in late-'70s Vermont by two lifelong buddies, Ben & Jerry's once represented a business of true hippie mentality: a down-home, hormone-free treat made by a company who worked with Fair Trade-certified and organic suppliers and donated heavily to charity. (To think, they almost made bagels, instead!) But the bloom was off the Cannabis indica by the time the cold, multinational Unilever (UL) bought the company for $326 million in 2000. Jobs and plants were downsized, veteran employees were replaced with Unilever personnel, and the parent company's performance management system was instilled. Talk about bringing someone down from a sugar high. Tom's of Maine
A little further up New England is Tom's of Maine, also founded in the '70s by another duo, Tom and Kate Chappell. Rounding out the Trader Joe's shopping list, Tom's of Maine manufactured personal care items free of animal testing or harsh chemicals that were environmentally unfriendly. Even the company's current no-no list includes peroxides, gluten, artificial colors or fragrances, and the unpronounceable phthalates. But after Colgate-Palmolive's (CL) acquisition of Tom's in 2006 for $100 million, hippies with a chemistry degree have noticed some decidedly unnatural ingredients in Tom's products, such as titanium dioxide and zinc chloride -- both of which have been linked to some pretty nasty health problems. And that's to say nothing of its recent switch to plastic packaging.
