5 ms·

$271MM in investment and a $250MM purchase price. https://www.crunchbase.com/organization/gilt-groupe#/entity https://www.crunchbase.com/organization/gilt-group

$271MM in investment and a $250MM purchase price. https://www.crunchbase.com/organization/gilt-groupe#/entity https://www.crunchbase.com/organization/gilt-groupe#/entity Does that mean that the investors got all the money and anyone holding common stock was basically screwed?

hkmurakami 11y ago
Yes. The preferred will get the payout. If there were any holders of debt (which is senior to preferred -- his is why the yield on preferred shares of mega corps are higher Than the company's bonds), they will get paid before the preferred. Execs will renegotiate their compensation contracts with the acquirer and likely have fairly lucrative contracts (often happens to sweeten the deal).
- harlanlewis 11y ago
  There may be a carveout in place, providing a modest return that would otherwise be consumed entirely by investors eating first. http://blog.drosenassoc.com/?p=70 http://blog.drosenassoc.com/?p=70
- tacoss 11y ago
  It's not so much to "sweeten the deal" as it is to make sure the execs don't flee, leaving the acquirer with an organization that they have no idea how to run.
nikcub 11y ago
A 1x liquidity preference is standard, but it is common now to see larger multiples - especially in high-value later stage rounds, where the preference to those investors would also be stacked before earlier investors. So, yes, I doubt common holders got much here, it is also possible that earlier investors didn't get much either. For founders and employees this is usually made up with a separate bonus or earn-out from the acquiring company - which has been the source of conflict of interest claims from investors in some of these deals (where the acquisition price is much less than the 1x preference but the founders get a separate payout/earnout/signing bonus).
- wslh 11y ago
  I am in a similar situation in another acquisition and would love to receive your feedback, mainly if we (the common stockholders) should make a "sanity check" with a lawyer or completely forget about the issue. The company was acquired recently and has some debt, so they returned money to the preferred stockholders, our common stock "was cancelled and extinguished" and one of the directors received 1 million.
  - mattzito 11y ago
    You're always welcome to consult a lawyer, but odds are there won't be much you can do. It's not uncommon to wipe out common shareholders where the preferred stock and other debtholders take all the money out of the acquisition. It's also difficult to weigh in without knowing the specifics, and even then the specifics from your perspective might be very different from the perspective or facts the board is running with. I realize the director receiving 1 million may seem unfair (and it may even BE unfair), but it might also be whatever his/her agreement is with the company.
    - Animats 11y ago
      Talk to a lawyer. If a director, not an investor, got money out and the shareholders didn't, that may be a breach of fiduciary duty. Directors have a responsibility to the shareholders.
      - mattzito 11y ago
        So, I think you probably meant to reply to the GP, and yes, directors have a fiduciary duty, but I suspect the director was also an investor or preferred shareholder. Straight-up malfeasance is pretty rare in cases with professional investors, as there are lawyers involved and people who know what's going on.
  - nikcub 11y ago
    Matt has covered it in his reply which i'll second - there isn't a lot you can do. The people affected tend to talk about it, which is why you hear these stories a lot. I've been surprised by the number of exits that are portrayed as 'successful' in the media actually left founders and employees with little or nothing after preferences.

hkmurakami 11y ago

Yes. The preferred will get the payout. If there were any holders of debt (which is senior to preferred -- his is why the yield on preferred shares of mega corps are higher Than the company's bonds), they will get paid before the preferred. Execs will renegotiate their compensation contracts with the acquirer and likely have fairly lucrative contracts (often happens to sweeten the deal).

harlanlewis 11y ago
There may be a carveout in place, providing a modest return that would otherwise be consumed entirely by investors eating first. http://blog.drosenassoc.com/?p=70 http://blog.drosenassoc.com/?p=70
tacoss 11y ago
It's not so much to "sweeten the deal" as it is to make sure the execs don't flee, leaving the acquirer with an organization that they have no idea how to run.

nikcub 11y ago

A 1x liquidity preference is standard, but it is common now to see larger multiples - especially in high-value later stage rounds, where the preference to those investors would also be stacked before earlier investors. So, yes, I doubt common holders got much here, it is also possible that earlier investors didn't get much either. For founders and employees this is usually made up with a separate bonus or earn-out from the acquiring company - which has been the source of conflict of interest claims from investors in some of these deals (where the acquisition price is much less than the 1x preference but the founders get a separate payout/earnout/signing bonus).

wslh 11y ago
I am in a similar situation in another acquisition and would love to receive your feedback, mainly if we (the common stockholders) should make a "sanity check" with a lawyer or completely forget about the issue. The company was acquired recently and has some debt, so they returned money to the preferred stockholders, our common stock "was cancelled and extinguished" and one of the directors received 1 million.
- mattzito 11y ago
  You're always welcome to consult a lawyer, but odds are there won't be much you can do. It's not uncommon to wipe out common shareholders where the preferred stock and other debtholders take all the money out of the acquisition. It's also difficult to weigh in without knowing the specifics, and even then the specifics from your perspective might be very different from the perspective or facts the board is running with. I realize the director receiving 1 million may seem unfair (and it may even BE unfair), but it might also be whatever his/her agreement is with the company.
  - Animats 11y ago
    Talk to a lawyer. If a director, not an investor, got money out and the shareholders didn't, that may be a breach of fiduciary duty. Directors have a responsibility to the shareholders.
    - mattzito 11y ago
      So, I think you probably meant to reply to the GP, and yes, directors have a fiduciary duty, but I suspect the director was also an investor or preferred shareholder. Straight-up malfeasance is pretty rare in cases with professional investors, as there are lawyers involved and people who know what's going on.
- nikcub 11y ago
  Matt has covered it in his reply which i'll second - there isn't a lot you can do. The people affected tend to talk about it, which is why you hear these stories a lot. I've been surprised by the number of exits that are portrayed as 'successful' in the media actually left founders and employees with little or nothing after preferences.