An entrepreneur who played a key role in Trade Me's first big-money deal says the restructure revealed this morning could have been a lot worse. In fact, he's encouraged by events.
Lance Wiggs - today director of the Punakaiki Fund - advised Sam Morgan in 1999 when the Trade Me founder was negotiating with Australian publisher Fairfax, which ultimately bought the site in a deal worth around $700 million.
Fairfax later floated Trade Me on the NZX. UK-based private equity outfit Apax Partners bought it in April last year for $2.56 billion and installed a new CEO, Norway-import Anders Skoe.
The modus operandi of private equity outfits is often to buy a company, whip a company into shape then onsell it or return it to the stock exchange. And like many private equity deals, Trade Me's was reportedly highly-leveraged with the auction site's debt rising from a net $122m to a reported $1b.
Wiggs duly expected Apax to take to Trade Me with a "sharp pair of scissors" looking for places where cuts could be made.
Overnight, Trade Me spokesman Logan Mudge denied a tip-off that "mass layoffs" were underway.
But he did allow that a restructure was underway. "We're in the midst of some changes to our structure in order to deliver great products and value for our customers," Mudge said.
"Overall our headcount of approximately 600 will not change.
"But it does mean that some roles will change and a very small number of people may leave Trade Me if we can't find a new role for them."
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Skoe put Trade Me's staff at 650 in an interview with the Herald last year. Some went when Trade Me sold LifeDirect back to its original owner, Mark Solomon, in the New Year. The financial advisor took on 15 of 18 staff working in the division.
"The new owners will of course have different perspectives on what is important for Trade Me, and that will reflect how the company is structured and the number of staff," Wiggs said this morning.
"They will want to balance a thirst for growth with steady and growing cash flow.
"Growth drives the future exit value of the company, and cash flow ensures they pay down debt - and investors- along the way," he added.
"I'm encouraged that the owners have not made deeper cuts, which means that they still see growth as the main goal," Wiggs said.
"We can only hope that they maintain the integrity and community of the site as they drive towards their objectives."
When asked about a complaint that costs had increased for sellers, TradeMe's Mudge said, "Like all businesses, we review the pricing, packages and offers we provide to our customers. We believe we provide great bang-for-buck with what we offer."
More broadly, Mudge inferred that change was the new normal for the company.
"We continually assess how we're organised internally to make sure we're best set up to take on the challenges and opportunities in front of us.
"Change is inevitable in our industry. If we're going to be relevant and useful to Kiwis we need to evolve how we work and what we do," he said.
New tech boss
Trade Me also recently raided Air New Zealand's ranks to hire its new chief technology officer, Paolo Ragone.
Ragone has previously worked on product and innovation at eBay, held the position of CTO at the eBay-owned Gumtree Australia, and most recently as CTO, general manager technology at Air New Zealand.
He will start at Trade Me at the end of May, replacing Simon Young, who has joined Peter Beck's smart-cow startup, Halter.