Divvy and Four Other Firms Bought, and More (The Week-in-Review, May 01—07, 2021)
Divvy is being acquired for $2.5 billion in cash and stock, while four other Utah firms purchase other companies (or are sold themselves) in an M&A heavy week for Utah’s business community.
{NOTE: The totals above do not include an additional $150 million in RSUs (Restricted Stock Units) provided as incentive awards to certain Divvy employees. Nor does it include $125 million in cash being held in escrow for operational costs that will be provided to Divvy at the close of the merger.}
Seeking Alpha explains that Palo Alto, California-based Bill.com provides
“… software-as-a-service, cloud-based payments products, which allow users to automate accounts payable and accounts receivable transactions, as well as enable users to connect with their suppliers and/or customers to do business, manage cash flows, and enhance office efficiency.”
Conversely, Divvy
“… combines expense management software and smart corporate cards into a single platform (allowing its customers to) get real-time visibility into their company spend and flexible controls that prevent teams from ever going over budget.”
Additional Thoughts & Info on the Divvy Acquisition
So why does this deal make sense to both parties? Apparently, adding Divvy’s products/services allows Bill.com to effectively double the size of its Total Addressable Market (TAM) to 6 million U.S.-based SMBs. (That’s a roundabout way of saying the same thing for Divvy as well.)
But how much do SMBs in the North America spend annually? The Bill.com investor presentation references Mastercard research that says those same SMBs spent ~$25 trillion in 2018; of that annual spend, a small slice is available as fees for the combined Bill.com/Divvy, especially for those firms that use corporate payment and credit cards.
Yowza!
Under terms of the merger agreement, Divvy shareholders (namely CEO, Blake Murray) and institutional and strategic investors have agreed to six-month lockup agreements for 75% and 40% of their shares, respectively.
Additionally, over 950,000 Bill.com stock options (aka, RSUs) are being issued to certain Divvy employees as incentives to retain them as Bill.com employees.
These RSUs will vest over three years, with nearly 636,000 set aside for Blake. However, no “strike price” (aka, purchase price) for these RSUs was disclosed.
In other words, in four months, Divvy’s perceived value has rocketed upward by over 56% in just four months. That’s insane, and awesome, at the same time!
Bottom line, major kudos to CEO Blake and all members of Team Divvy.
Utah Investors “Getting Paid” Too
One more thing about the Divvy acquisition — several Utah-based investors (or those with serious ties to the state or the company) will also get paid as a result of the Divvy acquisition, some of which have been disclosed while others have not.
According to various news announcements and media reports, Pelion led Divvy’s $10.5 million Series A round of funding in May 2018 and has participated in every funding round since then, including the January 2021 Series D round of funding.
Additionally, some notable Angel Investors from Utah (or those with deep ties to the state) also participated in that Series A funding round, including
Divvy also announced just six months earlier (December 2017) that it had closed a $7 million Seed round of funding with said investors not disclosed, although at least one source says a major seed investor was none other than Mike Murray, father of Divvy CEO, Blake.
Bottom line — props also to these earliest investors for having the vision and foresight of Divvy’s potential.
Four Other Acquisitions this Past Week
In addition to the Divvy acquisition, at least four other Utah firms were either acquirors or the acquiree. Here’s a short breakdown.
Minimal terms about the transaction were disclosed. However, here is what I can report.
Avetta provides supply chain risk management software that is used to help manage over 3.5 million workers employed by 70,000 suppliers of over 100 hiring clients. {Sorry that’s a mouthful; it’s just how Avetta describes itself.}
Pegasus complements Avetta in that its cloud-based workplace management solution “delivers insights, connects networks, and (helps) keep workforces safe on site.”
Post-merger Avetta expects to become the global leader in supply chain risk management and compliance solutions with over 4 million workers “managed” globally.
Apparently, one of the reason for zero disclosure about financial terms of the pending acquisition are these facts:
For what it’s worth, by my experience most private equity firms tend to hold their cards pretty close to the vest when it comes to disclosing the amount of money they pay for acquisitions, unless such deals are $500 million or higher.
That said, my best guess is that Avetta/WCAS will pay somewhere between $150 million to $250 million for Pegasus.
Specialized Communication Services Acquired by Crestone Services Group
A “telecom infrastructure service provider” with operations in Utah and Nevada, Specialized was formed in mid-2004.
No terms about the transaction were disclosed.
SLC-based Cairn Real Estate Holdings Unveils Residential Real Estate Roll-up Plan as it Buys Frisco, Texas-based JP & Associates Realtors
Salt Lake City-based Cairn Real Estate Holdings is a joint venture between Aperion Management (a New York-based private investment firm) and Rick Davidson (the former global CEO of Century 21 Real Estate).
Atlas has offices in eight markets in the U.S., “transacts over $1 billion in real estate annually, and manages more than 4,500 residential units.”
Financial terms of the transaction were not released.
Other News Items of Note from This Week
I also felt there were three other News Items worth noting from the breaking news announcements that hit my radar this past week from Utah’s business community, news items I thought you might find worthwhile if not also intriguing.
Case in point —
One of Utah’s Largest Coal Producers has Management Shakeup
If Sandy, Utah-based Wolverine Fuels isn’t on your radar, maybe it should be.
As one of the state’s largest extractors of bituminous coal, Wolverine has over 825 employees and can “produce” between 11—13 million tons of coal annually.
Wolverine is majority-owned by private equity fund, Galena Private Equity Resources Fund, which itself is part of Geneva, Switzerland-based Galena Asset Management.
Great Reporting on Plans for Post-Prison Development at the Point of the Mountain by the Salt Lake Tribune’s Tony Semerad
If you care at all about Utah’s economy, then you have probably been paying attention to the still emerging long-term plans for the economic development that’s planned to occur where the Utah State Prison currently sits Draper, Utah in the southern portion of Salt Lake County.
ICYMI: The Impact of the NFL Draft on Utah’s Colleges
Consider this a postscript, but on Wednesday I published my take on the direct sales sports industry in Utah with an article titled — The NFL Draft: Utah Edition.
So if you haven’t read this yet, I invite you to check it.
And if you like it, I hope you’ll feel free to share it with your friends/fellow fanatics. Thanks.
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David Politis is a Marketing Mercenary, which is a fancy way of saying that organizations and individuals hire him to solve their marketing problems. To learn more, please feel free to visit David’s LinkedIn Profile or the website for his business: The David Politis Company. If you have a story idea for him (or would just like to connect), you can reach him at me@davidpolitis.com.
