{"id":153473,"date":"2025-03-24T10:34:30","date_gmt":"2025-03-24T10:34:30","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/finance\/silver-lake-and-davidson-kempner-face-off-over-ecommerce-start-up\/"},"modified":"2025-03-24T10:34:30","modified_gmt":"2025-03-24T10:34:30","slug":"silver-lake-and-davidson-kempner-face-off-over-ecommerce-start-up","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=153473","title":{"rendered":"Silver Lake and Davidson Kempner face off over ecommerce start-up"},"content":{"rendered":"


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Two of Wall Street\u2019s most aggressive investment firms are battling over the control of a troubled ecommerce start-up, underlining how even companies buckling under high interest rates and a weakening economy remain prime targets for creative financiers.\u00a0<\/p>\n

Vacasa, a publicly traded vacation rental marketplace once worth billions, last week accepted a sweetened buyout offer worth around $200mn from Casago, a small competitor whose bid is in partnership with Vacasa\u2019s longtime private equity backer, Silver Lake.<\/p>\n

But the Casago deal price of $5.30 per Vacasa share in cash is far less than the $5.75 now on offer from Davidson Kempner, a well-known credit hedge fund who last year lent $30mn through a convertible bond to the cash-strapped Vacasa. <\/p>\n

The tussle for control of Vacasa<\/a>, which is now heading for a tense shareholder vote, is a case study in how start-ups funded in the era of low interest rates and high valuations are now caught in the small print of rounds of successive financial engineering, leaving them at the whims of their clashing heavyweight Wall Street patrons.<\/p>\n

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Silver Lake<\/a> \u2014 which boasts assets under management exceeding $100bn and has made multibillion-dollar windfalls in deals involving tech giants Dell and Broadcom \u2014 led growth equity financings for Vacasa in 2019 and 2020 which raised more than $400mn. It was joined by two other private equity firms in those investments, Riverwood Capital and Level Equity, and the trio have remained the three largest Vacasa shareholders.\u00a0<\/p>\n

When the Oregon-based Vacasa went public in 2021 with a blank cheque company sponsored by TPG, the deal valued the company\u2019s equity at $4.5bn. <\/p>\n

But even at that upbeat moment, the rentals company still projected that heavy marketing and other spending would lead to several years of cash deficits. After a post-pandemic travel lull hit the business, the company\u2019s market cap crashed below $50mn last year, and in August, Davidson Kempner lent Vacasa the $30mn through the convertible bond. <\/p>\n

Davidson Kempner <\/a>manages nearly $40bn and has deployed a so-called \u201cloan to own\u201d strategy in high-profile situations involving the likes of retailers J Crew and Neiman Marcus where in both it swapped its debt positions into reorganised equity during Chapter 11 bankruptcy restructurings.\u00a0<\/p>\n

The convertible bond pays an 11.25 per cent interest rate and came with the right to appoint two directors to the company\u2019s board. Importantly, if the convertible bond was fully converted into equity, it would represent around a quarter of Vacasa\u2019s shares outstanding.<\/p>\n

When Vacasa tasked its independent directors with securing a sale of the company, the convertible bond proved a sticking point \u2014 and Davidson Kempner made matters difficult, the company said in regulatory filings. <\/p>\n

The firm controls about 20 per cent of the shares eligible to vote between its existing 7 per cent holding of common shares and the portion of the shares underlying its convertible bond it is allowed to exercise under change of control restrictions.<\/p>\n

Regulatory filings reveal Vacasa\u2019s board has long been wary of the firm. As a large creditor, Davidson Kempner \u201chad different economic interests\u201d than unaffiliated stockholders, the filings noted, and \u201cwas particularly well-positioned to act opportunistically and profit from a decline in the company\u2019s liquidity position\u201d.\u00a0<\/p>\n

When Vacasa said that it had struck a deal in December with Casago at $5.02 a share, the two Davidson Kempner directors on the Vacasa board were the only ones to reject the deal, and subsequently resigned. <\/p>\n

Since then, Casago \u2014 backed by Silver Lake, Riverwood and Level Equity \u2014 and Davidson Kempner have faced off against each other over the ownership of Casago, culminating in the competing bids 45 cents a share apart. <\/p>\n

When Vacasa selected Casago as the winning bid despite its lower price, it said the offer came with \u201csuperior certainty of signing and closing\u201d compared with Davidson Kempner\u2019s. <\/p>\n

Davidson Kempner for its part has accused the Vacasa board of improperly favouring Silver Lake, writing in a letter on Monday that the company directors have conducted a \u201cflawed process and fail[ed] to establish a level playing field.\u201d<\/p>\n

Silver Lake, Riverwood and Level Equity, together currently own around 35 per cent of Vacasa shares, assuming the convertible bond conversion. Crucially, they have agreed to roll over their stake in the merged Casago-Vacasa entity. <\/p>\n

In contrast, Davidson Kempner had said in the original 2024 Casago negotiations that it would only carry over its equity stake if it could also hold on to the convertible bond \u2014 a condition rejected by Vacasa.<\/p>\n

People close to Davidson Kempner told the Financial Times that the Silver Lake-led trio\u2019s continuing shareholding in Vacasa post-buyout explained their preference for the cheaper Casago deal, where they would participate in future upside.<\/p>\n

Adding to the transaction\u2019s complexity, Vacasa\u2019s shareholders during its time as a private company are owed periodic payments for tax savings related to those private shares. Those shareholders include the Silver Lake-led trio. <\/p>\n

These holders of the so-called \u201ctax receivable agreement\u201d- or TRA \u2014 agreed as part of the Casago deal to waive their right to an accelerated change of control payment of around $80mn, though the present value of the TRA if Vacasa stayed public was perhaps $15mn. The waiver leaves more cash for a buyer to pay to all shareholders.<\/p>\n