I hear that PE destroys products and culture to make money at all costs, but i don’t get how that can net them back the >$6 billion they paid for a company with <$300 million yearly revenue and negative profit.
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Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
131–140 of 414 posts
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#132Earlier quoted context omitted.
it has to be high enough to give the board enough cover that they're doing their fiduciary duty to existing shareholders
Maybe I'm missing something basic but that still doesn't explain why it's 30% and not 50%. I don't think purely qualitative arguments work here.
Is there a way to search for lawsuits from shareholders when the price per share of going private was less than 30%? There's probably no mathematical model here but more a way for the sale to insulate itself from getting dragged into litigation.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#133Earlier quoted context omitted.
it has to be high enough to give the board enough cover that they're doing their fiduciary duty to existing shareholders
Maybe I'm missing something basic but that still doesn't explain why it's 30% and not 50%. I don't think purely qualitative arguments work here.
If you go much lower, shareholders become reluctant wondering if it's really worth it, or if the board are negotiating hard enough.
If you go much higher, shareholders start to wonder why someone is willing to pay so much for a stock. People start to get cagey and wonder what's going on. The sellers interest is to keep it lower as well.
It's just the region things have settled over time. It's generally enough that the board feel they're doing the right thing, it doesn't spook anyone, and it's what the buyer is expecting.
I don't think there's any more magic behind it, it's just what has become the norm over the years.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#134Earlier quoted context omitted.
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.
I... what? Great-Grandparent> most M&A transactions trend to have a 30% premium above the trading price. I [...] could not find a good explanation to why You> It’s probably just a good rule of thumb. Me> But why is 30% better than 15%? You> The equilibrium appears to be 30% above asking I still don't understand how that's supposed to explain why 30% is the stable value, instead of another, as the GGP was asking. How…
Sometimes complicated dynamical systems have equilibria that just are without a known reason. I can see that once 30% gained a bit of traction is just coalesced into an equilibrium. The common decision making analysis of just looking at what others have done and basing your decisions on that mean that things evolve to wherever “monkey see, monkey do” gains traction.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#135Earlier quoted context omitted.
You have to pay enough to convince everyone to sell. The trading price is the marginal price of buying one more unit of stock, not a representation of the stock price at which every owner will sell.
That explains why there's a premium but not why the premium is ~30%.
If I had to guess based on how small the big players in M&A are (as far as I know), it's probably a handshake rule.
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#136Earlier quoted context omitted.
I... what? Great-Grandparent> most M&A transactions trend to have a 30% premium above the trading price. I [...] could not find a good explanation to why You> It’s probably just a good rule of thumb. Me> But why is 30% better than 15%? You> The equilibrium appears to be 30% above asking I still don't understand how that's supposed to explain why 30% is the stable value, instead of another, as the GGP was asking. How…
The point poorly expressed is that public markets transactions are highly scrutinised, and it is easy for shareholders to be highly litigious toward the directors. The directors therefore have a strong incentive to only accept offers at a normal premium to current price, which seems to be about 30% by back of the cigarette packet maths. Bidders therefore have an incentive to bid around 30% so their bids are more like…
unrelated, i'm trying to figure out where the phrase "back of the cigarette packet math" is more common than saying "back of the napkin math".
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#137> Permira, the global private equity firm
current Squarespace users about to get gouged
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#138I hear that PE destroys products and culture to make money at all costs, but i don’t get how that can net them back the >$6 billion they paid for a company with <$300 million yearly revenue and negative profit.
They gonna increase prices
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#139Earlier quoted context omitted.
> 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.
But can they "sell it for scrap" for more than they bought it in the first place?
Re: Squarespace to Go Private in $6.9B All-Cash Transaction with Permira
#140The gold rush is over - private equity is going to squeeze every little drop from the companies that have been built and we will move on to Web 3.0 - which will be just like web 1.0 - self-hosting, link directories, newsletters, and guestbooks.
I'm already self hosting an e-mail server with no problems in deliverability or receiving. No limitations on aliases. No more artificial limits.
Cyrus-imap + postfix. If I need to scale up, can migrate from sqlite to postgres.