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Twilio hired Qatalyst to advise on defense against activist investor group

Jeff Lawson CEO, Twilio

Scott Mlyn | CNBC

Cloud software developer Twilio has hired Qatalyst Partners, the investment bank founded by Frank Quattrone, to advise on its defense against a group of activist investors, according to two people with knowledge of the matter.

Qatalyst, which previously advised Segment when Twilio purchased it for $3.2 billion in 2020, has been working on the activist matter for months, one of the the people said. Qatalyst launched an activist practice the same year as the Segment deal. While Qatalyst has typically worked to help companies sell themselves, this assignment is focused on the activist defense situation, said these people.

Both sources asked not to be named due to confidentiality. Twilio’s technology makes it easier for companies to communicate with customers and employees through mobile devices.

Twilio shares slipped as much as 1.8% in Wednesday morning trading, before paring back losses.

Legion Partners, an activist firm based in Los Angeles, took a stake in Twilio earlier this year and began pushing the company to overhaul its board and strategy. Legion’s engagement was led by Sagar Gupta, who left the firm in October for Anson Funds, where he amassed a similar stake.

Twilio shares have gained 45% this year, but that follows a miserable 2022, during which the company lost more than 80% of its value. The stock is 84% off its record reached in early 2021. Annual revenue growth slipped to just 5% in the most recent quarter down from over 30% in the same period last year and over 60% in the third quarter of 2021.

The activist groups have told Twilio it should at least sell an underperforming unit, its data and applications business, which includes Segment. Twilio CEO Jeff Lawson, who co-founded the company in 2008, said last week that the company would lay off 5% of its employees, with the deepest cuts inside the data and applications unit.

The downsizing followed a corporate reorganization earlier this year that included layoffs amounting to 17% of Twilio’s staff.

Qatalyst is best known for its mergers and acquisitions practice rather than shareholder defense. One of the people familiar with the matter said the bank’s current involvement with Twilio is not a precursor to a sale of the company.

A spokesperson for Twilio declined to comment. Qatalyst did not respond to a request for comment.

Qatalyst was founded in 2008 by Quattrone, who stepped down as CEO in 2016 but remains executive chairman. The firm has advised on some of Silicon Valley’s largest recent deals, including Microsoft’s $28.1 billion acquisition of LinkedIn, Salesforce’s $29.2 billion purchase of Slack and Block’s $22 billion acquisition of Afterpay. Qatalyst also worked on Cisco’s pending $29.6 billion acquisition of Splunk and Adobe’s purchase of Figma, which is awaiting regulatory clearance.

Qatalyst’s activist practice is helmed by Peter Michelsen, who was hired in June 2020 from Goldman Sachs‘ activist advisory group. Michelsen says on his LinkedIn page that he advises “Qatalyst’s clients across all technology sectors on matters including activism defense, proxy fights, contested situations, defense preparedness and complex ESG matters.” ESG stands for environmental, social and corporate governance.

— CNBC’s Alex Sherman contributed to this report.

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