Quick Note: Two Takeout Ideas

Increasing the Incremental Odds of an Acquisition

Among all the governance signals we review on a daily basis, severance changes have one of the lowest hit-rates. Even if it’s a “real” signal, e.g. discussions have begun, it can take a lot of time before the news is released. The potential buyer can always get cold feet and back off.

Because of this, it’s important to marry the signal with traditional fundamental work or some broader thematic tailwind. Both of the following changes have enough supporting evidence that the changes are worth highlighting. In our view, the probability of a takeout has increased, but only incrementally.

One is Hubspot HUBS 0.00%↑, and the other is a biotech company in phase 3, which I’m reserving for paid subscribers.

The SaaS Signal

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Hubspot HUBS 0.00%↑ is a $28B market-cap SaaS business that makes marketing and sales tools for mid-market B2B companies, which they define as an enterprise with employees ranging from 2 to 2000.

In the 4/11/25 filing, the severance benefits for officers improved:

Executive Termination and Severance During a Change in Control Period:

If an eligible participant’s employment is terminated by the Company or an affiliate without Cause and for a reason other than the participant’s death or disability or if an eligible participant resigns for Good Reason and such termination or resignation occurs during the Change in Control Period, the eligible participant will be entitled to receive

(i) a lump sum payment equal to the sum of:

(A) the eligible participant’s base salary (or, in the case of the CEO, 1.5 times the CEO’s base salary) at the rate in effect as of the date of termination (or at the rate in effect immediately prior to the Change in Control, if higher) and

(B) the eligible participant’s Target Bonus in effect as of the date of termination (or in effect immediately prior to the Change in Control, if higher),

(ii) subject to the eligible participant’s proper election to receive COBRA benefits, payment of the COBRA premiums by the Company for up to 12 months (or, in the case of the CEO, 18 months) following termination, and

(iii) accelerated vesting of any outstanding equity incentive awards held by the eligible participant as of the date of termination (with any equity incentive awards subject to performance-based vesting being deemed earned at the actual level of performance or, if the actual level of performance is not determinable, at the target level of performance).

In the proxy filed 4/11/25, the Board discussed the reasoning behind these changes:

On April 10, 2025, following a review of peer group severance arrangements with the assistance of Compensia, the Board approved the Executive Severance Plan. The vast majority of our peer companies and other companies with which we compete for talent have in place contractual severance protections for their executive officers and the Board and Compensation Committee determined that having in place reasonable and competitive executive severance arrangements is essential to attracting and retaining highly-qualified executive officers. Our goal in providing these severance payments and benefits is to offer sufficient cash continuity protection such that the eligible executives will focus their full time and attention on the requirements of the business rather than the potential implications for their respective positions.

Indeed, if one reads the proxy filed 4/25/24, there are only details regarding what happens to PSUs upon a change in control, and nothing regarding cash bonuses.

So, the overall severance package has improved for all officers.

Of course, if you’re following HUBS, you know about the Google takeout rumor from earlier in April 2025. It’s probably not a coincidence that the Board decided to clean up its severance and CiC clauses.

My personal read is that a takeout is unlikely due to the tariff-induced economic uncertainty, but it does confirm that HUBS is being actively considered as a strategic target.

The Psychedelic Signal