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My Thoughts on a Go Daddy Buyout

June 27, 2011Domain Registrars, Domaining, Domainnamewire, go daddy buyout, GoDaddy, kkr, silver lake partnersComments Off on My Thoughts on a Go Daddy Buyout

What a Go Daddy sale would mean.

If the chatter is to be believed, The Go Daddy Group could announce a multi-billion dollar buyout sometime this week.

While neither Go Daddy nor the buyers will confirm or deny this, it’s typical for bankers involved in the deal to leak news like this. It helps bring other potential suitors to the table and puts pressure on the buyers to close the deal.

Go Daddy has been shopping itself around unofficially for a while. Word is that President Warren Adelman has been giving presentations at financial conferences off an on over the past couple years. And then there was talk last Fall about the company holding an auction.

When you look at the company’s growth, it’s no surprise investors are interesting in acquiring this cash machine. I talked to Ryan Corder, Go Daddy Senior Director of Finance, last year and he told me the company expected $140M-$150M in operating cash flow for 2010 on sales of $940M-$950M.

Not bad for a company that grossed $4.3 million less than a decade ago in 2001.

And the synergies with other business services companies are beautiful.

Selling the company makes sense on a lot of fronts. Bob Parsons has had a wild decade growing the company. Although he isn’t the day-to-day guy behind the company any more, it may be time for him to cash out. He’d become a real billionaire overnight (right now he’s a paper billionaire). It would also provide an exit for employees, some of which have significant stock options.

On the flip side, a buyout from Silver Lake Partners and KKR & Co might not be the best thing that ever happened to employees and customers. These guys look at one thing — their return on investment. Sure, Go Daddy cares a lot about the bottom line. But new investors would scrutinize everything, like multi-million dollar holiday parties.

And employees might not reap the upside when the investors try to sell the company in the future. Just ask former Skype employees what they think about Silver Lake Partners right now.

But don’t be surprised if Parsons negotiates some “cultural” aspects to this deal to make sure he can keep throwing parties and rewarding his employees.

In fact, don’t be completely shocked if Parsons decides at the last minute to pull the plug on a deal altogether. It seems that happened last Fall. Remember, other than employee pressure for an exit, there are no outside investors pushing this along.

© 2011.

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