Accel KKR-backed Basware announced its plan to acquire Glantus, a public Irish company in the audit recovery and accounts payable automation business. I wrote about Glantus (here) when it went public in mid-2021.
Glantus’s Valuation at IPO
At its IPO, Glantus had an equity valuation of €42 million, or 5x revenue and 20x EBITDA. In 2021, this was low for an Accounts Payable Automation software vendor, but high for an audit and recovery business. (Audit and recovery was about 70% of Glantus’s revenue at IPO.) The questions then were:
- whether Glantus could grow organically, which the company had not shown the ability to do, and
- could Glantus transition to subscription software revenue from the gain share revenue typical of audit and recovery vendors?
It turns out Glantus was not able to grow organically. The company grew subscription revenue, but not as fast as the transactional revenue of its audit business deteriorated. This transactional revenue declined by 40% in 2022.
Glantus’s Valuation at Acquisition
As you can see, Glantus’s stock price stumbled pretty much out of the gate. The company, by its admission, had a tough 2022. Its revenue shrank 3% versus 2021, its employee base grew by 25%, and the company swung from an adjusted EBITDA profit of €3.1M in 2021 to a loss of €1.8 million in 2022. The company was forced to float more shares, restructure debt payments, and eventually cut headcount. The stock tanked. That’s when Basware swooped in.
Basware’s offer for the stock is about €21M or 1/3 to 1/2 of the IPO price, though this represents a 67% premium to the stock price before the announcement. Because of Glantus’s considerable debt, the total EV for the business is approximately €34.5 million. This EV represents a little over 3x 2022 revenue and a little under 3x expected 2023 revenue. The company has swung back to an adjusted EBITDA profit (unclear what the EBITDA projection is for 2023), but free cash flow will be minimal. For comparison, the largest US player in recovery audits (PRGX) sold at the end of 2020 for about 1.3x revenue and 7x EBITDA. So Glantus sold for a higher multiple than PRGX, but Glantus now has €5 million in subscription revenue.
In buying Glantus, Basware gets:
- an “add-on” audit and recovery service to cross-sell to its substantial AP customer base
- a few customers to cross-sell its AP solution to
- €5 in subscription revenue and €13 million in expected revenue from US, UK, and Ireland which further diversifies Basware revenue away from Scandinavia
Basware buys Glantus after some of the hard work of turning the company around has already been undertaken (the company cut about 35% of the peak workforce) but before the stock price had taken off. It may be pretty good timing.