Twilio is enlisting bankers from Qatalyst Partners to help defend the company against activist investors, sources familiar with the matter report. Legion Partners and Anson Funds are pressing Twilio's board to sell either the firm or one of its two divisions. Last year, Qatalyst provided advice to Twilio for the $3.2 billion acquisition of Segment, which is part of the section that the activists would now like the company to dispense with.
Twilio, a cloud software developer, has hired Qatalyst Partners, an investment bank owned by Frank Quattrone, to help with its defense against activist investors, according to two individuals familiar with the matter. Qatalyst, which had served as advisor to Segment when Twilio acquired it in 2020 for $3.2 billion, has been working on the matter for months, the sources said. Qatalyst is usually associated with aiding companies in selling themselves, but this time its focus is on the company's activist defense.
The two sources refrained from being named out of confidentiality. Twilio specializes in helping companies interact with customers and employees through mobile devices. Twilio shares dropped by as much as 1.8% in Wednesday's morning trading, though they eventually regained their losses.
An activist firm based in Los Angeles, Legion Partners, took a stake in Twilio earlier this year and proposed that the company revamp its board and strategy. Sagar Gupta, who had been leading Legion's engagement, left the firm in October to increase Anson Fund's similar stake.
Twilio shares have gone up by 45% this year, yet this follows a miserable 2022 which saw them lose over 80% of their value. They are currently 84% down from their record in early 2021 and the company's revenue growth rate fell from 30% in the same period last year to just 5% in the most recent quarter. Activist groups have suggested that Twilio at least sell its underperforming data and applications business, which includes Segment.
The CEO of Twilio, Jeff Lawson, stated last week that the company would cut down 5% of its staff, with the majority of the layoffs impacting the Segment business. This follows a corporate reorganization in 2021 that involved reducing 17% of the workforce.
Given its M&A repute, Qatalyst's involvement with Twilio does not necessarily indicate that the company is about to be sold. A spokesperson for Twilio declined to comment while Qatalyst did not respond to a request for comment.
Qatalyst has been responsible for a few of Silicon Valley's major quick deals, such as Microsoft's $28.1 billion LinkedIn purchase, Salesforce's $29.2 billion Slack buy, Block's $22 billion Afterpay acquisition, Cisco's pending $29.6 billion Splunk acquisition and Adobe's purchase of Figma. Qatalyst's activist practice is led by Peter Michelsen, who was previously part of Goldman Sachs' activist advisory group.
Michelsen's LinkedIn page states that he provides guidance "on matters like activism defense, proxy fights, contested situations, defense preparedness and complex ESG matters" to Qatalyst's clients. ESG is an abbreviation for environmental, social and corporate governance. — CNBC's Alex Sherman contributed to this report.
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