Key Takeaways

  • Bending Spoons funded early growth by redeploying 100% of free cash flow into acquisitions before introducing bank loans around 2017.
  • The company maintains a 9% blended cost of debt, fully hedged through maturity in 2031 at roughly 2.5 times cash earnings.
  • Unlevered returns on acquired assets consistently exceed 25%, leaving a wide margin of safety above borrowing costs.
  • Rising interest rates help disciplined acquirers because depressed software valuations create bigger discounts than higher loan coupons take away.

The Real Margin of Safety in Tech Acquisitions

Most software rollups depend on rock-bottom interest rates to make math work on spreadsheets. When debt costs climb from 4% to 9%, their margins disappear. Luca Ferrari built Bending Spoons around a different economic reality.

Ferrari started funding acquisitions around 2017 with basic Term Loan As before moving into larger institutional debt facilities. Rather than relying entirely on outside equity or cheap floating debt, Bending Spoons disciplined its balance sheet early. As Ferrari explained, “Free cash flow, the reinvestment of free cash flow, had always been a thing for us. We have redeployed pretty much 100% of our free cash flow toward acquisitions.”

By reinvesting operational cash flow and pairing it with fixed debt structures, Bending Spoons achieved massive scale on minimal dilution. “Actually, when we IPOed, we had only, quote unquote, only raised about half a billion dollar in primary equity and we were at roughly 20 billion in valuation,” Ferrari noted.

Hedging Duration and Beating the 9% Hurdle

Debt becomes toxic to rollups only when maturities arrive before assets generate enough cash to clear them. Bending Spoons insulated its balance sheet against rate volatility by locking in terms for the long run.

“The blended cost is about 9% give or take and it is fully hedged, so increases in interest rates would not impact our cost of debt,” Ferrari said. “It matures in 2031. So we are in a position to pay it back completely before maturity. We are currently at two and a half times debt approximately.”

A 9% interest rate sounds steep to venture-backed founders accustomed to free money. But the absolute cost of capital matters far less than the spread between borrowing costs and cash yields. “Our returns unlevered historically have been pretty high, consistently above 25%, again unlevered,” Ferrari explained. “So whether we pay 9% or 12%, of course I would rather pay 9, but it does not break the model.”

Why Expensive Capital Creates Cheaper Targets

When rates rise, financial buyers panic and venture rounds dry up. That creates the ideal buying environment for cash-rich operators. Soft market conditions compress price multiples across the software sector.

“The second aspect is typically when interest rates go up the value of assets goes down,” Ferrari pointed out. “And so as a serial acquirer, I think we are more likely to benefit more from the lower valuations than the higher debt.”

If you generate 25% unlevered returns on assets purchased at a 40% discount, paying an extra three points on your bank loans is an easy trade. The math favors the operator who can fix tech stacks and extract cash, not the financial engineer hunting for low coupons.

What to Do With This

Review your product's unit economics this week. Calculate your unlevered return on invested capital across your core products by stripping out debt and marketing subsidies. If your cash return falls below 20%, focus on fixing pricing power and gross margins before you consider debt financing or corporate expansion.