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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

#111

Post by iLoveOncall »

belter wrote: post #66
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.

Going from their financials, Squarespace makes no money: Revenues of $281.1 million for Q1 with Net Income of $0.1 million so it can be rounded to $0. They have debt of $556.9 million so yes, for the founder being able to pass on this pig with lipstick is great. Permira is well known for what was their management approach with AA in the UK, so for the employees this will probably mean massive layoffs soon. https://ww…

This is insane. I can't imagine (and be bothered to look if it's available) how much percentage of this is dedicated to marketing, but it must be a massive part.

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

#112

Post by Jyaif »

komali2 wrote: post #103
jpgvm wrote: post #39

This makes the Google registrar change even worse. I need to get my act together and transfer my .dev domain. :/

Yeah what an annoying one two punch. I was going to transfer everything to cloudflare but apparently cloudflare can't handle .dev domains.

If I read this (hard to find, hard to understand) page correctly, they do.

https://www.cloudflare.com/tld-policies/

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

#113

Post by airstrike »

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?

in Tech in particular, the QE period (post-GFC through covid) with low interest rates has seen massive PE activity. most of the "highest multiple ever" or "highest premium ever" or "highest X" have all happened in this time span

as the current rate hike cycle started, PEs were less willing to transact at higher rates, companies were less likely to transact at lower multiples and M&A markets cooled off

I'm not out of the industry, but from the outside, it seems like most parties are in a holding pattern waiting for the soft/hard-landing that is yet to come. I suspect sellers are still holding their breaths for valuations to go back to where they were

I know of at least two companies in the billion+ range that could have sold at 20%+ premium to their current valuations but walked away thinking those offers were too low, only to see markets melt in the 6-12 months that followed...

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

#114

Post by vessenes »

belter wrote: post #66
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.

Going from their financials, Squarespace makes no money: Revenues of $281.1 million for Q1 with Net Income of $0.1 million so it can be rounded to $0. They have debt of $556.9 million so yes, for the founder being able to pass on this pig with lipstick is great. Permira is well known for what was their management approach with AA in the UK, so for the employees this will probably mean massive layoffs soon. https://ww…

Those numbers don't tell you that Squarespace is a pig with lipstick. It might be one! But, SAAS economics treat the ability to hit near-zero profitability as a feature of the business model, not a problem.

Here's why -- income is taxed, and growth is rewarded, heavily, in the valuation of the company. If every dollar of business you make is worth $6 (Roughly $1.2bn in revenues = $7bn buyout), and every $1 of new business you earn costs $1, then by spending all your cash, you make 5x on it. In the alternative, you can keep $0.78 / dollar, so the net gain versus keeping earnings is $4.22. I like that trade, and I'd make it as the CEO of Squarespace.

What's unusual about SAAS companies is how easy it is to manage this part of the business economics as compared to, say a bean factory. Much of the spend is digital marketing, and sales teams are much easier to scale up and down than say factories.

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

#115

Post by lumost »

cduzz wrote: post #85
rqtwteye wrote: post #74

Earlier quoted context omitted.

Something is really wrong in this market when even a "successful" company like Squarespace deson't manage to be a profitable business.

It sounds like investors invested billions of dollars making a product that makes million dollars per quarter? So from that perspective, was this ever a successful company or just a grand party thrown by the investors? Isn't this just "how it works" ? The vast majority of investors in the railroads lost their money; lots of people lost money running fiber around the world, iridium went bankrupt and lots of people use…

Not all investors are looking for the business to be profitable. NVidia investing in AI companies drives up demand for AI chips. NVidia is simply seeking to create a prisoner's dilemma around AI compute spending. If Nvidia is successful, then most of the money they invest will flow back into their coffers as margin + the forced spending by other parties to keep up.

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

#116

Post by airstrike »

weatherlight wrote: post #51

Private equity will only own about 20% of the company, only 20% of the stock was public to begin with. Why is everyone singing songs of doom and gloom?

private equity will own 100% of the shares but owe the equivalent of [80%] of the value, which is not exactly the same as before. they control the company, so they make decisions

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

#117

Post by hmmm-i-wonder »

npalli wrote: post #92
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.

It's true that PE firms cannot be trusted with a SaaS product. It is also true that most SaaS companies are not profitable for the service they provide at the revenue they derive. This reset, which we will see a lot of since the entire SaaS category has to be re-priced, is the scalable way to clean up companies (why are SaaS employees paid so much?, why are customers paying so little etc..) and put them on a sustaina…

How is untrustworthy companies implementing asset stripping and debt loading a scalable way to put already unprofitable and questionably sustainable companies on a sustainable path? That doesn't square.

Taking a company private CAN indeed counter short term profiteering if done by a group that actually cares about the company but I have yet to see a PE firm provide that.

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

#118

Post by ziddoap »

komali2 wrote: post #103
jpgvm wrote: post #39

This makes the Google registrar change even worse. I need to get my act together and transfer my .dev domain. :/

Yeah what an annoying one two punch. I was going to transfer everything to cloudflare but apparently cloudflare can't handle .dev domains.

I believe they added support for .dev in mid-2023, if I'm not mistaken.

Unfortunately because the domains were just transferred days before this announcement, we're locked in for 60 days.

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

#119

Post by Ekaros »

rqtwteye wrote: post #74
belter wrote: post #66

Earlier quoted context omitted.

Going from their financials, Squarespace makes no money: Revenues of $281.1 million for Q1 with Net Income of $0.1 million so it can be rounded to $0. They have debt of $556.9 million so yes, for the founder being able to pass on this pig with lipstick is great. Permira is well known for what was their management approach with AA in the UK, so for the employees this will probably mean massive layoffs soon. https://ww…

Something is really wrong in this market when even a "successful" company like Squarespace deson't manage to be a profitable business.

Are they actually successful or just succeeded in marketing their brand recognition. Probably with absolutely massive spend... Just how many people are in their market with whatever monthly spend they have.

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

#120

Post by piva00 »

troupo wrote: post #93
rqtwteye wrote: post #74

Earlier quoted context omitted.

Something is really wrong in this market when even a "successful" company like Squarespace deson't manage to be a profitable business.

If you look at the past 10 years (or more) this has been the case with nearly every single poster child of successful US tech company. Look at YCombinator's top/most darling startups. Hardly any of them are profitable or sustainably profitable

Seems like the model has been to sell it to the next sucker all along: an acquisition by a bigger company, the stock market, or just another PE company.

Never to actually create a proper business...

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