It's been a busy year in the private equity space, with countless big acquisitions. There have been some huge deals, especially in the private equity space, with private equity firms leading deals worth billions of dollars or more for publicly traded technology companies.
London-headquartered Permira was a key player, joining Blackstone in acquiring European online advertising group Adevinta for $13 billion, and in October closing on the popular deal in a deal ultimately worth $7.2 billion. Squarespace, a website building platform, has been made private.
But Permira isn't just interested in multibillion-dollar acquisitions. In addition to closing a new €16.7 billion buyout fund last year, the firm has another fund that acquires minority and majority stakes in early-stage, high-growth companies. The company's first investment was in Sweden's Klarna in 2017. Eight years later, Klarna is a fintech giant preparing for an IPO.
“We are still invested in Klarna,” Permira's new co-managing partner and co-CEO Brian Ruder confirmed to TechCrunch. “Generally speaking, with these minority growth strategies, we accept being in these companies for a long time because we cannot control exit. You also have to stay for a certain period of time.”
As 2024 draws to a close, TechCrunch caught up with Ruder to talk about some of these recent deals, as well as Permira's broader approach to the technology sector, AI, and the two people at the top who will share power equally. Ta.
two people at a time
Although many organizations are adopting new leadership models that include collaborative leadership, this idea has been popular within Permira for many years. In fact, Kurt Bjorklund has been co-owner of Permira with Tom Lister since 2008. When Lister steps down in 2021, Permira is left with only one person at the helm. This was an unusual position for a company that employs a co-ownership strategy in most departments. It will be led by a lone leader with investment teams that include technology, services, consumer, climate change, and just healthcare.
“We really like the collaborative leadership model because it also addresses the challenge of loneliness in being a leader. Having a co-inventor really helps,” Ruder said. “What is important in a leadership role is speed in making good decisions. The faster you can make really good decisions, the better decisions you can make. will be delayed.”
Normalcy returned with Ruder and Dipan Patel taking over the co-driver's seat on September 1, and Björklund taking over as executive chairman. Notably, however, in addition to co-managing partners, Mr. Ruder and Mr. Patel also received Permira's new title of co-CEO. Was this a sign that roles were changing, or did it indicate that the title of industry leader was creeping into private equity?Although realistic, the truth is a little more mundane. It's something. It's about clarifying who is actually in charge of things.
“Many other firms have diluted the title 'managing partner,'” Ruder said. “There's basically title inflation across the industry. Some of the companies in our peer group have multiple managing partner pages.”
“Digital backbone”
When TechCrunch spoke with Ruder in 2017, the conversation centered on the growing appeal of private equity to the tech sector. This came on the back of a series of high-profile go-private deals. In the intervening years, Permira itself has acquired a number of publicly traded technology companies in multibillion-dollar deals. These include email security company Mimecast, which Permira acquired for $5.8 billion in 2022, and customer communications platform Zendesk, which Permira took private in the same year in a $10.2 billion deal led by Hellman & Friedman.
Fast forward to today, Permira said its funds have invested approximately $28 billion over the years in 80 technology companies spanning everything from SaaS and cybersecurity to fintech and online marketplaces. Ta. The company is currently led by Ruder, who co-led the company's technology investment team since 2008, and Patel, who was on Permira's technology team from 2009 to 2018 before moving to the consumer side. There is.
So, is Permira really all about technology?
“We've always been a growth-focused private equity firm that's looking to grow at scale,” Ruder said. “It’s not just about technology, but technology, and I mean digital overall, has such an overwhelming share of the overall market that it’s very natural that our 40-year Throughout our history, we've become very technology-centric. The way we say it, we have a core digital backbone that runs through all of our strategies.”
That's why Permira separates its investment strategy by industry, and the mantra that “every company is a software company”, while a cliché, rings truer than ever.
Take Golden Goose, the luxury shoe brand that Permira acquired in 2020 for $1.3 billion. While the company doesn't call itself a “technology company,” technology is central to its operations. The company is benefiting from pursuing a direct-to-consumer (D2C) strategy as part of its efforts to reduce its reliance on multi-brand retailers, and the company credits this new D2C approach with a surge in sales.
“A lot of the company's focus during the investment period with Golden Goose has been online,” Ruder said. “So even accessing online avenues and channels for businesses that we wouldn’t consider a ‘tech’ business is a big part of what we do overall.”
Permira's 2024 deal to take one of the largest technology companies private is another example, and it involves a company that most people have probably never heard of. Adevinta, spun out by Norwegian media group Schibsted in 2019, controls dozens of online marketplaces in Europe and the Americas, but its $9.2 billion acquisition of eBay's advertising business in 2020 The numbers went even higher. There's little question that Adevinta is a digital brand operator. But how such consumer brands acquire new users requires a different level of expertise than, say, deep enterprise technology.
“This is a collection of some of the best classified intelligence assets,” Ruder said. “And the plan is to focus on running each individual advertising business in the best way possible given its geography and industry. I'm building a management team that can do that and We're really happy with the quality of the team we've been able to build with these in mind, and these are markets that will have very high double-digit growth in the long term.”
AI for everything
Unsurprisingly, Permira is also very focused on AI, but is unlikely to invest in pre-IPO giants like OpenAI or Anthropic. Instead, focus on how AI is being applied across your portfolio and learn from it.
Zendesk, for example, was already embracing AI before Permira & Co. went private two years ago, but the proliferation of generative AI is spurring Zendesk into full swing. Earlier this year, Zendesk acquired Ultimate and introduced AI agents. It also acquired Klaus, an AI-powered quality assurance (QA) startup. The company also made a number of senior leadership changes in 2022, including co-founder and CEO Mikkel Svane, who replaced Permira partner Tom Eggemeier. Since then, Zendesk has appointed a new CIO and CFO, as well as new heads of engineering and AI. Shashi Upadhyay joined the company this month from Google.
“Zendesk has allowed us to really enter the world of generative AI,” Ryan Lanpher, Zendesk board member and Permira's new co-head of technology, told TechCrunch. Ta. “We're seeing tremendous adoption from our customer base. Zendesk's traditional customer base was already digital natives and early adopters. Zendesk is one of the fastest growing AI businesses today. I believe that it is.”
You can't talk about AI without mentioning cloud computing. Cloud computing are two areas that are highly synergistic and complementary. In the same way that cloud computing has propelled software and enabled new, larger and more profitable business models, Ruder believes AI will create similar tailwinds.
“We think AI is going to be that next step capability,” Ruder said, adding that this will require businesses to more fully embrace the cloud.
“We see CEOs in every industry asking their CIOs what they are doing about AI,” Ruder continued. “And we're increasingly hearing from these CIOs that they want to do a lot with AI, but their infrastructure isn't ready to take full advantage of it yet. , a wave of massive upgrades that pushes the ongoing on-premises software installed base into the cloud and modernizes data infrastructure and architecture to enable AI in ways not possible in previous waves. I think there are opportunities and pressures.”
square deal
Like Zendesk, website builder Squarespace had already begun implementing AI even before Permira spoke up, recently announcing a new suite of AI-generating tools called “Design Intelligence.”
Permira first announced plans to acquire Squarespace in May at a valuation of $6.9 billion. Shortly after, an advisory firm recommended that Squarespace's shareholders reject the proposal, especially since Squarespace's financial performance and outlook were strong. Ultimately, Permira had to increase its offer to about $7.2 billion.
But about 18 months earlier, Squarespace's market capitalization was about half that, suggesting Permira may have missed a bargain. However, this is not the case for large listed companies such as this one.
“To do a deal of Squarepace's size, the time has to be right for us and for the company,” Ruder said. “Especially in the case of listed companies, it is very difficult to ask the board of directors to do a deal, so you cannot buy them at a low price. That is, of course, unless the company is in financial trouble. , it doesn't make much sense for the board to want to sell. And the quality companies we invest in are rarely in trouble.”
Anthony Casalena, Squarespace's original founder and CEO, is also firmly in place. It seems unusual for a company that has been around for about 20 years to return to the public market, but for a private equity firm not to make changes at the top. But Ruder said here that while some private equity firms focus on rescuing distressed companies, his firm's focus is on sourcing “high-quality assets” that are fundamentally sound. He emphasizes that there are certain things. As such, the majority of investments made from current buyout funds involve founders in some way.
“Our strategy is to find the best product in a really good market and back it up,” Ruder said. “While most private equity firms of our size aim to maximize EBITDA margins in the short term, we believe that the power of compounding behind superior unit economics allows us to generate greater returns. And that approach tends to be very appealing to people who care about where their business is going. That's why we gravitate towards situations where founders are. is.”