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Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

investors.squarespace.com

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Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#41

Post by lotsofpulp »

blackhawkC17 wrote: post #14

It must be nice for the founder to pocket $2 billion in cash from selling his company. For users, on the other hand, I'll hardly trust a PE firm with a SaaS product. There's just too much incentive to jack up prices to service the debt taken to acquire Squarespace, and cut costs on customer support and building new features.

What is the source for the $2B figure?

The most recent SEC filing shows the founder owns 2.8M class A shares, and there are 88M shares of class A shares outstanding and 48M shares of class B shares outstanding.

I do not see why they would pocket 28% of the sale price.

https://d18rn0p25nwr6d.cloudfront.net/CIK-0001496963/5ba2ffc...

https://investors.squarespace.com/news-events-financials/inv...

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#42

Post by pclmulqdq »

dartos wrote: post #17
pclmulqdq wrote: post #11

Earlier quoted context omitted.

What R&D was Squarespace doing over the last 10 years?

All software companies have R&D going on constantly. “How do I push this user metric” “How do we increase conversion” “How can we increase conversion for our customers” “Can square space be easier to use”

Software people massively over-classify their work as "R&D" when most of it is basically the equivalent of tuning or plumbing. R&D involves at least a little bit of the "R" part, which usually means some risk that the work is worthless. If you are just doing the development part, which is what you are doing when you ask the question "how do I push this metric?", private equity is usually happy to fund that.

I generally wouldn't classify those (except for maybe the last one if you are developing fundamentally new user interfaces) as actually being R&D.

I also know that the IRS classifies software development as R&D, but we all know those are not the same thing in reality.

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#43

Post by skhunted »

Karellen wrote: post #37
dannyw wrote: post #5

Earlier quoted context omitted.

It’s probably just a good rule of thumb. 10%? Go away. 20%? You can certainly negotiate it up to 30%. 30%? There’s considerable value here, and threats to walk away will be felt. 40%? Why, when you can get it to 30%?

Why is that a better rule of thumb than, e.g. 5%/10%/15%/20%?

Becuase it is the one that the system has evolved to consider the rule of thumb. The equilibrium appears to be 30% above asking and, and least local to our time period, appears to be stable.

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#44

Post by bdavisx »

dpflan wrote: post #22

Has the trend of PE owning things increased in the last decade? Has PE gotten more money in the past years so that they can hoover up companies?

The tax cuts passed during the Trump admin have funneled a lot more money to people who were already rich.

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#46

Post by coldpie »

itsoktocry wrote: post #32
blackhawkC17 wrote: post #14

It must be nice for the founder to pocket $2 billion in cash from selling his company. For users, on the other hand, I'll hardly trust a PE firm with a SaaS product. There's just too much incentive to jack up prices to service the debt taken to acquire Squarespace, and cut costs on customer support and building new features.

> There's just too much incentive to jack up prices to service the debt taken to acquire Squarespace, and cut costs on customer support and building new features. So what's the best ownership structure? Public companies have their issues (short-term thinking), acquisitions have their issues (getting closed down)... I mean, cutting costs and upping prices isn't awesome for the customer, but do you have more faith in a…

What evidence do you have that the new owners are interested in making Squarespace profitable or sustainable? PE firms are the "selling the car for scrap" of business acquisitions.

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#47

Post by pclmulqdq »

ThrowawayTestr wrote: post #16
pclmulqdq wrote: post #11

Earlier quoted context omitted.

What R&D was Squarespace doing over the last 10 years?

Their website builder and templates I imagine

What part of a website builder and template engine is fundamentally new and uncertain?

Squarespace certainly does a lot of development, but "R&D" (especially when it comes to things that PE firms will cut) usually means completely new stuff with significant uncertainty in terms of revenue impact.

If Squarespace, for example, had been a significant contributor to HTML standards to make website rendering easier, I would be unhappy about a loss of R&D.

Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira

#48

Post by matco11 »

berkeleyjunk wrote: post #2

It is interesting how most M&A transactions trend to have a 30% premium above the trading price. I have tried to investigate why but could not find a good explanation to why this number is so prevalent.

It’s a “control premium”. The way the theory explains it is that you are making an offer to acquire control of the company, so you pay a control premium above what others are willing to pay on normal transactions in the market. In practice, how big of premium the acquirer pays is influenced by considerations specific to the history of the company, the shareholder base, its share price history, etc. …but theory and practice do link together, and you can trace the historical trend of control premia paid have changed over time, or even how they change from country to country.
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