Private equity firms want to outsource password manager LastPass
The private equity arm of Elliott Management and Francesco Partners will spin off popular password manager LastPass after privatizing its owner, Boston-based software group LogMeIn, for $ 4.3 billion.
LastPass faced backlash from its users in March after the free version of the service, which generates long, complex passwords and stores them securely, was prevented from working on just a smartphone or computer. Millions of users of the free LastPass service were effectively forced to pay up to $ 36 a year to continue using the password tool on more than one device.
Bill Wagner, CEO of LogMeIn, says the plan to outsource LastPass wasn’t related to the backlash over the paywall, and 75% of the password manager’s revenue now came from corporate clients. âIt’s about unlocking the value of this company,â says Wagner. âWe’re balancing the investment in different products and by splitting that brings real focus, a dedicated management team, and additional investment. I think this will be a very valuable company in the years to come. “
Wagner says LastPass had no plans to change its pricing or paywall after parting with LogMeIn, which is now focused on remote work tools like GoToMeeting. âI think it will end up offering more features and more innovation without raising the price. So that’s not the game plan for LastPass, âsays Wagner.
LastPass has grown its user base by 5 million to 30 million since Elliott Management and Francesco Partners acquired LogMeIn in August 2020, despite backlash and competition from other password managers like the open source Bitwarden project and commercial competitors like Dashlane.
Wagner says LastPass has grown by over 50% on average over the past three years, and while recognizing the backlash from restricting access to free users, he claims customer ratings have rebounded since then. “Our test was what effect this would have on customer retention rates, and of course we saw some people leave LastPass and switch to competitors, but more than we expected they went to premium customers,” says Wagner. “We still have tens of millions of free users and I don’t expect we will move away from a free product.”
LastPass was acquired by LogMeIn for $ 110 million in October 2015 and the private equity arm of Paul Singer’s hedge fund, and Francisco Partners offered LogMeIn shareholders a $ 4.3 billion cash deal to make the software company private. Elliott is better known as one of the most powerful activist investors in the world, but has been making tech buyouts through its Silicon Valley subsidiary Evergreen Coast Capital since 2015. Francisco Partners is best known for its majority stake in the controversial Israeli spyware developer NSO Group until February 2019, but it also holds an extensive portfolio of software companies.