E20: The How: Taking Smartsheet Private for $8.4 Billion with Erik Morton

Summary

In this episode of the Inorganic Podcast, Christian and Erik delve into the complexities of take private transactions, using Smartsheet's recent acquisition as a case study. They discuss the economic challenges facing public companies, the lifecycle of a business transitioning from public to private, and the strategic considerations for boards contemplating such moves. The conversation highlights the importance of fairness opinions and the intricate dynamics of investor strategies in these transactions. In this conversation, Erik and Christian delve into the complexities of take-private transactions, focusing on the negotiation dynamics, the role of advisors, regulatory considerations, the impact on employees, and the financial structuring that influences investor returns. They use the Smartsheet deal as a case study to illustrate these concepts, providing insights into the motivations behind such transactions and the implications for all parties involved.

Takeaways

• Public companies face unique challenges that may lead them to consider going private.
• The lifecycle of a business includes transitioning from public to private ownership.
• Smartsheet's acquisition is a significant case study in the current market.
• Initiating acquisition conversations requires careful preparation and strategy. The Smartsheet deal features a go-shop provision allowing for additional bids.
• Advisors play a crucial role in take-private transactions, including bankers and consultants.
• Regulatory dynamics can complicate interactions between buyers and sellers.
• Employees in public companies face different equity compensation structures when taken private.
• Investor returns are influenced by the capital structure and debt servicing costs.
• The liquidity of equity compensation differs significantly between public and private companies.

Chapters

00:00 Introduction

04:04 Understanding Take Private Transactions

08:28 Analyzing the Smartsheet Case Study

15:53 Transaction Dynamics and Investor Strategies

20:44 How Fairness Opinion Works

23:28 Initiating Acquisition Conversations

29:18 Advisors in Take-Private Transactions

31:48 Do's and Dont's for Potential Acquirers

37:33 Impact of Take-Private Transactions on Employees

45:41 Erik Morton's Hypothetical Simple Exit Waterfall

51:38 Conclusion

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Connect with E20 guest, Erik Morton on LinkedIn

https://www.linkedin.com/in/erikimorton/

Episode References

https://investors.smartsheet.com/news/news-details/2024/Smartsheet-to-be-Acquired-by-Blackstone-and-Vista-Equity-Partners-for-8.4-Billion/default.aspx

https://www.wsj.com/articles/smartsheet-to-be-taken-private-by-pe-firms-in-8-4-billion-deal-7296758c

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