Countless large private equity purchases have occurred this year. Private equity firms have led over a dozen billion-dollar take-private acquisitions for public tech businesses.

London-based Permira helped Blackstone acquire European online ads business Adevinta for $13 billion and took Squarespace private for $7.2 billion in October.

But Permira likes more than billion-dollar acquisitions. The company holds minority and entire investments in early-stage, high-growth startups and closed a €16.7 billion buyout fund last year. The fintech behemoth Klarna, poised to IPO eight years after its first investment, was in Sweden in 2017.

TechCrunch reported that Permira’s new co-managing partner and co-CEO Brian Ruder said, “We’re still invested in Klarna.” For minority development strategies, you don’t control the exit, so we stay in the long-term. We also have to be in these companies for a while.”

Ruder spoke with TechCrunch at the end of 2024 about these purchases, Permira’s strategy for the technology sector, AI, and having two people in charge.

2-by-2

Co-leadership has long been popular at Permira, unlike many other companies. Since 2008, Kurt Björklund and Tom Lister managed Permira. In 2021, Lister resigned, leaving Permira with one boss, an uncommon situation for a company that co-heads most investment teams, including technology, services, consumer, and climate, with healthcare run in isolation.

We enjoy the co-leadership model because it helps with leadership loneliness. A co-ideator helps, Ruder added. Fast decision-making is crucial in any leadership capacity, and the faster you can make solid decisions, the better. Without co-ideation, I’ll take longer to agree.”

 Ruder and Patel not only co-managed Permira but also became co-CEOs. Did the job evolve, or were industry leadership titles entering private equity? Reality is more ordinary but realistic. This clarifies who manages things.

Ruder noted that the position of ‘managing partner’ has been diluted at many firms. The industry has title inflation. Some peer firms have multiple managing partners.”

Core of Digital Transformation

Numerous high-profile take-private deals preceded this. Permira has acquired several public IT companies in multibillion-dollar deals throughout the years. Permira estimates that its funds have invested $28 billion in 80 technology companies, including SaaS, cybersecurity, finance, and online markets. Ruder, who co-directed Permira’s tech investment team from 2008 to 2018, and Patel, who managed the technology team from 2009 to 2018, are in charge of the company.

Has Permira become tech-focused?

The firm has become tech-centric over its 40-year history because tech—digital across the board—is the majority of that market. Our digital backbone underpins all of our strategies.

Although it is not a tech company, it relies on technology. As sales have increased, direct-to-consumer (D2C) tactics are helping the corporation reduce its dependence on multi-brand retailers.

After acquiring eBay’s classifieds business for $9.2 billion in 2020, Schibsted’s 2019 spinoff Adevinta owns dozens of online marketplaces in Europe and the Americas. Adevinta operates digital brands, but expanding its user base demands a skill set different from that of sophisticated corporate IT.

The goal is to run classifieds businesses optimally for their area and vertical. After building a management team that can achieve that, I’m pleased with the quality of the team. Long-term, double-digit growth markets.”

Integrating AI into Everything: The Future of Technology

Despite its concentration in AI, Permira is unlikely to invest in pre-IPO giants like OpenAI or Anthropic. Instead, it focuses on and learns from how its portfolio uses AI.

Before Permira & Co. took it private two years ago, Zendesk already used AI, but generative AI has pushed it. Ultimate was bought by Zendesk this year to add AI agents. Klaus is an AI-enabled QA startup it purchased. Co-founder and CEO Mikkel Svane was replaced by Permira partner Tom Eggemeier in 2022. This month, Zendesk hired Shashi Upadhyay from Google as head of engineering and AI and a new CIO and CFO.

“With Zendesk, we have lent into the generative AI world,” Zendesk board member and Permira’s new tech co-head Ryan Lanpher told TechCrunch. Customer adoption is high. Ancient Zendesk customers were digital natives and early adopters. We think Zendesk is one of the fastest-growing AI companies.”

All AI discussions must include cloud computing, two complementing fields. Ruder believes AI will offer a tailwind as cloud computing did for software, permitting new business models with more extensive scale and margins.

Ruder added, “We think AI is going to be another step function like that,” requiring organizations to embrace the cloud.

CEOs are asking CIOs about AI across all businesses, Ruder said. Many CIOs say they’d like to use AI more, but their infrastructure isn’t ready. There’s a lot of opportunity and pressure for a significant upgrade wave to drive that on-premise software install bases into the cloud, updating data infrastructure and architectures to support AI in a way that didn’t happen before.”

Fair Bargain

As with Zendesk, Squarespace already adopted AI before Permira, offering a suite of “design intelligence” generative AI capabilities.

In May, Permira announced a $6.9 billion acquisition of Squarespace. Squarespace’s financial performance was improving, and its prognosis was bright. Therefore, an advisory company advised shareholders to reject the offer. In the end, Permira offered $7.2 billion.

But 18 months ago, Squarespace’s market cap was half that, meaning Permira lost out on a deal. But significant, publicly listed companies like this don’t work that way.

Ruder stated, “To make a transaction at the scale of Squarespace, it’s got to be the right time both for the company and us.” Public companies are hard to buy at the low end because boards won’t transact. If the corporation isn’t in trouble, those boards shouldn’t sell. And we invest in strong businesses that are rarely in distress.”

Original Squarespace founder and CEO Anthony Casalena is also staying. Private equity firms would likely want to shake up the top of a 20-year-old company returning to the public market. But Ruder emphasizes that while some private equity firms focus on saving troubled companies, its concentration is on buying “quality assets” that are healthy. Consequently, most of its current buyout fund investments involve the founder.

“We think we can generate better returns through compounding and great unit economics, but many private equity firms on our scale focus on near-term EBITDA margins,” Ruder said. This approach appeals to those who are concerned about their companies. As a result, we favor founder-led circumstances.