Well it turns out, if you want to take a company private, you better be willing to spend some massive dolla bills. Which is why Permira, the private equity overlord on Wall Street just sweetened it’s pre-existing takeover bid to take website-builder-turned Saas-darling Squarespace private (aka the one company that turns every boutique girl’s dream of selling over priced baby “bows” online a reality). 

(Source: Reuters) 

In short, Permira is looking to drop a whopping $7.2 billion to put Squarespace in its back pocket, which is about $700,000 more than their last offering back in May of this year. Initially, Permira’s first move knocked the doors down as they offered Squarespace $44 a share, valuing the company at about $6.5 billion. 

However, according to Squarespace, the offer was pretty much equivalent to showing up to a first date with a bouquet of gas station roses - nice, but not exactly flattering. This had proxy advisory firm ISS (aka the nosy neighbor of corporate America) getting their Simon Cowell on as they told shareholders to vote “no” on the original idea. 

(Source: Giphy) 

But, but, but…

Permira being the “I get what I want” type, came back with a 36.4% premium over Squarespace’s pre-deal price. Whereas today, following yet another blissful rejection from Squarespace, they’ve just come back with a new offer that’s 5.7% premium over their previous bid, because, you know, what’s an extra few million, amirite? 

(Source: Wall Street Journal) 

That’s multiple times Permira has shoved money in Squarespace’s face… so with that, why the extreme determination to take the company private?

Well let’s rewind shall we? For those not in the know, Squarespace went public in 2021 with dreams of grandeur and a $6.5 billion valuation. Spoiler alert: Wall Street wasn’t exactly rolling out the red carpet. Shares initially tanked harder than your favorite startup’s NFT project - but once 2022 rolled around, Squarespace grew a bit of hair on its chest with one hell of a purchase.

(Source: Domain Name Wire) 

The purchase? Google’s domain services who at the time had about 10 million domains under management. This one little acquisition (well, not little considering it was a nice $180 million price tag for Square) has been propping up the company's subscriber numbers like AI has been propping up Nvidia. See: Nothing makes private equity types drool more than “recurring subscription revenue”

(Source: Giphy) 

However, while the company has been raking in revenue from small businesses and individuals who need websites but can’t code their way out of a paper bag (all while shares have skyrocketed 45% YTD)... there is a catch to Squarespace's current fundamentals: Profitability. 

(Source: Giphy) 

Sure, Squarespace is growing, but it’s also bleeding cash like a Silicon Valley unicorn on a Red Bull bender. The company’s operating income dropped 43% in Q1 thanks to their “let’s throw money at everything” approach to product development and marketing. And while they’re technically still profitable, their rising expenses and the looming specter of an economic downturn have got some analysts sweating bullets.

(Source: Simply Wall Street) 

But when it comes to Permira? They aren’t fazed at all. If they pull off this buyout, they’ll take Squarespace private and escape the clutches of quarterly earnings calls and short-term stock swings. Translation: they can spend like there’s no tomorrow without some hedge fund bro yelling at them on CNBC. (Looking at you, Cramer). 

(Source: CNBC) 

So clearly, while Permira’s not exactly buying a company that’s rolling in profits, they’re betting big on Squarespace’s long-term growth without dealing with “shareholder accountability”. Which in simple terms is the Grade A playbook for private equity: buy low, fix it up, and sell high—or in this case, milk the recurring revenue model for all it’s worth.

The bad news is that the ISS is still recommending investors to vote against Permiras bid citing “the sale process does not maximize value for shareholders”. But of course, shareholders can do whatever the frickity frack they want… 

(Source: Reuters) 

So now the question remains: Will they take the deal or hold out for more? Only time will tell, but it’s obvious that the love affairs with the digital revolution aren’t slowing down anytime soon. Especially when you throw AI into the mix. 

However, as we all await to see what direction shareholders will lean towards, while others may scour the financial media for any clues to capitalize on this Squarespace takeover…

(Source: Giphy) 

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(Source: Giphy) 

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Stocks.News holds positions in Google as mentioned in the article.