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

SummaryIn 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.TakeawaysPublic 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.Chapters00:00 Introduction04:04 Understanding Take Private Transactions08:28 Analyzing the Smartsheet Case Study15:53 Transaction Dynamics and Investor Strategies20:44 How Fairness Opinion Works23:28 Initiating Acquisition Conversations29:18 Advisors in Take-Private Transactions31:48 Do's and Dont's for Potential Acquirers37:33 Impact of Take-Private Transactions on Employees45:41 Erik Morton's Hypothetical Simple Exit Waterfall51:38 ConclusionConnect with Christian & In/organic PodcastChristian's LinkedIn: https://www.linkedin.com/in/hassold/In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcastIn/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featuredConnect with E20 guest, Erik Morton on LinkedInhttps://www.linkedin.com/in/erikimorton/Episode Referenceshttps://investors.smartsheet.com/news/news-details/2024/Smartsheet-to-be-Acquired-by-Blackstone-and-Vista-Equity-Partners-for-8.4-Billion/default.aspxhttps://www.wsj.com/articles/smartsheet-to-be-taken-private-by-pe-firms-in-8-4-billion-deal-7296758c Hosted on Acast. See acast.com/privacy for more information.