The world was all atwitter yesterday about Twitter hiring a Morgan Stanley banker as its head of corporate development. Did that mean an IPO was coming soon? Cynthia Gaylor does have IPO experience and helped take Facebook and LinkedIn public. But actually, her hiring says more about Twitter’s M&A ambitions than its IPO dreams.
If Gaylor had been hired as Twitter’s CFO, that would’ve been more of a sign that the microblogging site was on the road to going public. The CFO usually takes a leading role in a company’s IPO efforts, like choosing bankers. Twitter’s current CFO is Mike Gupta, who was hired last December and was the treasurer at Zynga, which went public.
Facebook hired former Genentech CFO David Ebersman to fill that same post at the social media company in 2009. He helped shore up Facebook’s management with people who had extensive executive experience. And Ebersman was the main person at Facebook who chose the firm’s IPO bankers and handled other aspects of going public.
Corporate development, however, is responsible for a company’s M&A strategy. Other companies, particularly in the tech world, have developed in-house M&A capabilities so they don’t need to rely on outside bankers as much when doing deals. Google and Microsoft, for instance, normally don’t use bankers when it comes to M&A. At Morgan Stanley, Gaylor worked on Google’s purchase of AdMob and Amazon.com’s acquisition of Zappos.
That’s not to say Gaylor’s hiring isn’t at all related to an IPO. Many companies do deals before they go public to gain scale or expand into other businesses. That helps establish the company into its most desirable form before it makes the move to go public. In March, Dropbox acquired the mobile app Mailbox, expanding outside its core file sharing business. Dropbox has been talking to bankers about its upcoming IPO, sources say.
Twitter has been doing a steady flow of deals in the last few years. In February, Twitter acquired Bluefin Labs, which analyzes social media commentary about television shows and ads. In January, it acquired Crashlytics, which creates technology to fix crashes on mobile apps.
Gaylor’s hiring may mean that Twitter wants to buy more companies, and possibly on a more ambitious scale, to make the social media firm more attractive for an IPO. And her IPO experience is obviously useful. But that could also mean that an IPO is coming later rather than sooner. Twitter co-founder Jack Dorsey told Bloomberg a few days ago that the company “is not even thinking” about an IPO right now.
Of course, the other theory is that Twitter will tap Gaylor’s expertise to buy companies using the money raised from an IPO, which could mean a public offering is coming sooner rather than later.
There will be lots of parsing of what it all means. Twitter will go public and has studied such a move, according to sources, so it’s more a question of timing. Some Twitter employees were able to cash out when BlackRock bought $80 million worth of shares a few months ago. There are probably no shortage of investors that would be willing to make a similar move as BlackRock, meaning Twitter doesn’t have to be in an IPO rush.
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