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

Original Article ↗ Hacker News Discussion ↗

Control Premium and the “30% Rule”

  • Many comments focus on why M&A deals often happen at ~30% above market price.
  • Explanations given:
    • “Control premium”: buying full control is worth more than marginal public-market shares.
    • Delaware case law (Doft, 2004) is cited as embedding ~30% as a standard adjustment in appraisals; boards fear lawsuits if they accept much less.
    • Market convention and “tipping-like” norms: once 30% is standard, lower looks suspicious, higher looks overpaying.
  • Some criticize these as circular (“it is what it is”), but no rigorous alternative model emerges.

Why Squarespace Attracts Private Equity

  • Squarespace has >$1B annual revenue, near-zero net income, but strong operating cash flow.
  • Very high sales/marketing spend suggests room to cut and turn it into a cash machine.
  • PE playbook discussed: reduce headcount, cut “R&D” and marketing, raise prices, slow innovation, possibly offshore support/engineering.
  • Lock‑in and migration cost (for both hosting and domains) make price hikes feasible.
  • Founder’s multibillion-dollar cash-out is noted; some see it as “selling the pig with lipstick.”

User and Domain Owner Reactions

  • Many came to Squarespace involuntarily via the Google Domains sale.
  • Anger at timing: transfers completed days before this deal, triggering a 60‑day transfer lock.
  • Strong migration intent to registrars like Cloudflare and Porkbun, particularly if prices rise.
  • Worries about data sharing across the acquirer’s portfolio and future upsell/ads.

Debate on Private Equity’s Role

  • One camp: PE “gut-and-strip” — load on debt, slash staff and quality, hike prices, sell or bankrupt; examples like Red Lobster, Sears, Toys“R”Us mentioned.
  • Other camp: PE often improves poorly run firms, focuses on sustainable profitability once growth stalls; Dell and Hilton cited as successes.
  • Research referenced: LBO targets tend to show higher productivity but also more job destruction and slightly lower earnings.
  • Consensus: outcomes vary; public perception is driven by high-profile failures and visible layoffs.

Broader Market and Web Implications

  • Discussion of shrinking number of public companies, heavier IPO regulation, and rise of PE as main buyer.
  • Concern that public markets no longer share upside with ordinary investors; “billionaires funding billionaires.”
  • Some see this as an opportunity to:
    • Build new Squarespace competitors.
    • Return to a more “web 1.0” style: self‑hosting, small personal sites, federated social tools.
  • Others argue centralization, user skill gaps, and platform power (Google/social networks) make a broad web‑1.0 revival unlikely.

Knock-on Effects

  • Anticipation that Squarespace’s large ad spend (notably podcast/YouTube sponsorships) may shrink if growth marketing is cut.
  • Expectation of price increases and reduced support/feature velocity, especially for small-business customers.