3 ms·

Napkin math: So 3.9b / 600m Revenue = 6.5years horizon to breakeven. Assuming no growth plan, they can hollow out the operating costs by cutting staff by 1/4,

Napkin math: So 3.9b / 600m Revenue = 6.5years horizon to breakeven. Assuming no growth plan, they can hollow out the operating costs by cutting staff by 1/4, and offshoring another 1/4. Guessing here, but their aim is a total return of +%30-%50 (~$2bn)over 10 years with relatively low risk vs. indexes or VC plays. It works, but it's like putting a company into a digester.

CivBase 7y ago
Is that 600m revenue or profit?
- swyx 7y ago
  yea dividing by revenue to calculate breakeven is just... not even worthy of the HN School of Business
  - motohagiography 7y ago
    Multiples of revenue is a common valuation number that can imply the length of time an investor will expect they will be able to profit from it. At 66m/y in profit, that's under %2 annual return on their $4bn investment. To strip and flip the company on a 6-7 year timeframe would make sense. They'll probably need a technical CTO advising them on what's essential and what's not. However, take us to school. The opportunity to add value is clear.
ttul 7y ago
I think Sophos has just a touch more to it than that. They have a great deal of product and technology and tens of thousands of customers. TB will be interested in growth here by aligning Sophos with its other security assets. I think Sophos is the jewel in the crown frankly. McAfee was the sausage.
- _xander 7y ago
  If that's the case, the challenge will be retaining the key people responsible for Sophos's 'intellectual capital' and sales relationships. It can be extremely costly to keep people after a PE acquisition in cyber - combination of removing the equity incentives (e.g. stock will eventually vest for the top people, if it hasn’t already) plus being in a very hot market where poaching talent is common plus general erosion in conditions to service the debt from the LBO. The cynic in me thinks TB knows cybersecurity will sell at even more ludicrous multiples in the future (and they’re swimming in dry powder), so they won’t need to care too much about the underlying health of the business. The optimist thinks that TB are the masters of this niche and see synergies I don’t. Source: I’ve done DDs in this space and our firm’s (public) stance is to encourage organic growth over doing deals

CivBase 7y ago

Is that 600m revenue or profit?

swyx 7y ago
yea dividing by revenue to calculate breakeven is just... not even worthy of the HN School of Business
- motohagiography 7y ago
  Multiples of revenue is a common valuation number that can imply the length of time an investor will expect they will be able to profit from it. At 66m/y in profit, that's under %2 annual return on their $4bn investment. To strip and flip the company on a 6-7 year timeframe would make sense. They'll probably need a technical CTO advising them on what's essential and what's not. However, take us to school. The opportunity to add value is clear.

ttul 7y ago

I think Sophos has just a touch more to it than that. They have a great deal of product and technology and tens of thousands of customers. TB will be interested in growth here by aligning Sophos with its other security assets. I think Sophos is the jewel in the crown frankly. McAfee was the sausage.

_xander 7y ago
If that's the case, the challenge will be retaining the key people responsible for Sophos's 'intellectual capital' and sales relationships. It can be extremely costly to keep people after a PE acquisition in cyber - combination of removing the equity incentives (e.g. stock will eventually vest for the top people, if it hasn’t already) plus being in a very hot market where poaching talent is common plus general erosion in conditions to service the debt from the LBO. The cynic in me thinks TB knows cybersecurity will sell at even more ludicrous multiples in the future (and they’re swimming in dry powder), so they won’t need to care too much about the underlying health of the business. The optimist thinks that TB are the masters of this niche and see synergies I don’t. Source: I’ve done DDs in this space and our firm’s (public) stance is to encourage organic growth over doing deals