Dennis is correct in his comment that "'to acquire' is not the same thing as 'bought.'" But unless there are some very ghastly skeletons in Ancestry's closet turned up by further due diligence, I think it's a done deal. Ancestry hasn't been a public company since 2012, so there are no regulatory hurdles for Blackstone to jump over. And the only significant remaining minority stakeholder, Singapore's government-run investment fund, seems to be all-in for the deal.
Ancestry took a US$1.9 million loss in 2012 when they were acquired by a group led by the European private equity firm Permira Advisers LLP and the company was taken private. That restructured ownership arrangement included Permira Advisers as major investors, existing Ancestry management, and Boston-based growth equity firm Spectrum Equity. That deal was completed 28 Dec 2012 for approximately US$1.5 billion.
In June and July 2013, respectively, Ancestry appointed two new members to its strategic Operating Committee. One had spent 21 years at Hewlett-Packard, then nine years at Symantec, retiring as Group President of the Consumer Business Unit. The other had been President of Consumer Applications at AOL, CEO of a company called Hightail, and an advisor to Silver Lake Partners LLC (see the future Silverlake connection below).
At year-end 2015, Ancestry announced they had sold "approximately one million DNA kits in 2015; DNA kit sales more than doubled in Q4 year-over-year." A mere augury of the volume to come in the next few years. During the period 2012 to 2015 they acquired Fold3, Find A Grave, Archives.com, and spun-off their newspaper-archival component, Newspapers.com, to add to their genealogy-related online properties. The spin-off of Newspapers.com retained at least an integral marketing partnership agreement, but Ancestry seems to have begun counting separate Fold3 and Archives.com subscribers as Ancestry subscribers...if not also Newspapers.com subscribers.
There are numbers to back-up the notion that their core subscription model, the rates of converting new DNA testers to subscribers, and the subscriber churn rates didn't, at least for 2012 through mid-2019, net-out to increases that even remotely kept pace with the DNA boom. For Q3 2013 they showed 2,175,000 subscribers of Ancestry.com branded websites; as of mid-2019, they stated "Ancestry has more than 3 million paying subscribers across all its family history websites"...which would mean they were counting distinct Fold3 and Archives.com subscribers. But even if the 3 million were Ancestry.com only, that means the net growth rate of subscribers for the seven-year period 2013-2019 was a cumulative 27.5%--equating to a 3.93% annualized average--while the number of DNA tests sold grew 1,300%.
A press release appeared on 1 Apr 2016 titled, "Silver Lake and GIC Announce Strategic Investments in Ancestry." The first paragraph of the press release reads, in part: "Following the transaction, Silver Lake and GIC will hold equal minority ownership positions in Ancestry, while other current investors--the Permira funds, Spectrum Equity and Ancestry management, including President and Chief Executive Officer [name redacted] and Chief Financial and Chief Operating Officer [name redacted]--will remain as meaningful equity investors in the company and, along with GIC, will continue to own a majority of the company." Silver Lake Partners LLC is a U.S. private equity firm, and GIC is Singapore's government-run equity and investment fund.
In the Blackstone deal--real particulars of which I'd love to see, but likely never will--GIC remains the only significant minority investor, and one can't assume whether or not their participatory share stays the same or decreases, but it almost certainly won't increase. All the other equity stakeholders go away: Permira, Silver Lake, Spectrum Equity...and certainly any Ancestry management that have more than token equity. Blackstone's not forking over a total value of $4.7 billion to retain any ghosts of business past.
I'll bet a 20-spot--given the core subscription business has been relatively flat for the better part of a decade, and the golden-calf of DNA test sales climbed into the tank starting in mid-2018 as far as sales growth and projections go--that there will be a nearly immediate housecleaning of upper management once Blackstone assumes control. Other than the "lederhosen or kilt" marketing campaign, strategic planning for the company has looked tepid, at best.
Can't mention names, but the then-CEO--who had come to the company after being COO and then president of Match.com--resigned on 12 Sep 2017 with no replacement named and no defined continuity plan in place. Following, a press release stated that the chief financial officer would "assume the role of interim CEO as the company conducts a search for a permanent replacement." He remained in the role for seven months. The current CEO held that same position for a year at toy maker Mattel, and then in April 2018--purely coincidental: the very month we can point to as the start of the industry-wide decline in DNA sales growth--hung her nameplate on the door of the big corner office at Ancestry. As of the start of 2018, they were rolling in the dough. Consumers were all but throwing money at AncestryDNA, and the sales growth projections indicated that 20 million DNA test sales were realistic by end-of-year. Fast forward almost two-and-a-half years, and they've logged about 18 million.
One year ago, in August 2019, Ancestry decided to, as a Bloomberg article described it, turn "to a well-tested private equity play for taking cash out of a company: topping up on debt. [They are] looking to pull out more than $900 million from the company through a special dividend mostly funded by new borrowings. They are also seeking approval for another one-time distribution before year-end."
I don't know if the planned special dividends eventually went through or not; as a privately held firm, they don't have to disclose that. But the intent at the time was to issue a new seven-year loan to the tune of $1.15 billion: $910 million for shareholder dividends and $600 million to pay off some existing debt. The plan was then to use excess cash flow to pay down the new debt.
However, as we know, that cash flow, which looked like a shiny jewel from 2015 through part of 2018, had started to look a bit tarnished. Oh, sales and revenue were still coming in, but the growth projections had taken a nasty turn. If the 2019 deal went through, Ancestry said the total debt load would be about 5.5 times a measure of earnings. Moody's and S&P, who typically use conservative criteria for those kinds of calculations, estimated the ratio at 7 times or higher rather than 5.5. Both those two companies lowered their outlook on Ancestry.com in response to the dividend/debt plans and the slowdown in revenue growth that had been happening since mid-2018.
In fact, that Blackstone is valuing Ancestry so highly makes me believe it's possible that the 2019 "cash extraction by debt-topping" never came to fruition, or at least not at the levels Ancestry wanted.
So there's been no real stability at the very top of Ancestry for three years, and equity reliance has been on the ephemeral DNA golden calf. I won't attempt to hazard any guesses about what we'll see over the upcoming year or two, but I don't believe Ancestry will vacate its core operation: genealogy subscription services. It's a solid revenue stream, if monolithic, and you don't kill something that brings in $600 million annually with very little in the way of R&D costs and human overhead. It's essentially an IT shop and server farm.
What they're going to do about DNA, well, I could see at least three realistic outcomes, none of which I'll prognosticate about...because I'll ultimately be wrong.
But I do think it's safe to say that, on the DNA front, medical, wellness, and pharmaceuticals will be the base drivers, not DNA for genealogy. For the time being, they'll no doubt continue to sell the $79 microarray test...with probably a lot of up-sell effort to what I expect will be a whole exome sequencing option very soon. And exome sequencing doesn't really do anything at all for genealogy. That said, however, whoever Blackstone puts into the senior roles may finally hearken to our pleas of the past few years and bring Ancestry's DNA tools up to at least on-par with the competition. We see how well the business strategy of the last few years has not worked, so things will definitely be changing.
Edited: Just in case anyone might get the wrong idea, where I wrote [name redacted] was me removing a living person's name, not a G2G moderator adjustment. I'm trying to adapt...