Why did Bill.com pay $2.5B for Divvy?
As anticipated, Bill.com is procuring Divvy, the Utah-essentially based entirely company spend administration startup that competes with Brex, Ramp and Airbase. The total like label of spherical $2.5 billion is considerably above the firm’s roughly $1.6 billion publish-money valuation that Divvy predicament all the diagram by its $165 million, January 2021 funding spherical.
Divvy’s command price tells us that the firm did no longer promote due to this of performance weakness.
Per Bill.com, the transaction involves $625 million in money, with the comfort of the dignity coming within the manufacture of stock in Divvy’s recent guardian firm.
Bill.com moreover reported its quarterly outcomes this day: Its Q1 incorporated revenues of $59.7 million, above expectations of $54.63 million. The firm’s adjusted loss per part of $0.02 moreover exceeded expectations, with the aspect road gazing for a sharper $0.07 per part deficit.
The greater-than-anticipated outcomes and the acquisition recordsdata blended to remove the worth of Bill.com by higher than 13% in after-hours trading.
Fortunately for us, Bill.com launched a deck that provides just a few monetary metrics touching on to its like of Divvy. This is able to maybe maybe moreover simply no longer most efficient enable us to greater label the worth of the unicorn at exit, but moreover its opponents, in opposition to which we have a predicament of metrics to bring to earn. So, this afternoon, let’s unpack the deal to carry out a higher working out of the entire exit and the worth of Divvy’s richly funded opponents.
Divvy by the numbers
The following numbers come from the Bill.com deck on the deal, which you would read right here. Right here are the core figures we care about:
- “~$100 million annualized revenue,” calculated utilizing the firm’s March outcomes multiplied by 12. That puts Divvy’s March, 2021 revenues at spherical $8.3 million.
- “>100% revenue command YoY,” all over again calculated by leaning on the firm’s March outcomes. So, we are able to’t guarantee that that its stout Q1 2021 command used to be over the 100% save. Soundless having its most modern Q1 month generate a three-decide command price is correct. It moreover lets us know that the firm did no higher than $4 million or so in March 2020 revenue.
- “~$4 billion annualized TPV,” or complete price quantity. Again, right here’s a March number annualized.
This lets us label the firm considerably. Divvy offered for spherical 25x its recent revenue price. That’s a instrument-level multiple, implying that the firm has either incredibly stable disagreeable margins, or Bill.com needed to pay a multiples-top price to just like the firm’s future command this day. I believe the latter higher than the extinct, but we’ll ought to scout for further recordsdata when Divvy exhibits up in Bill.com outcomes after the deal closes; that recordsdata is just a few quarters away.