The digital transformation space, when it comes to business process automation, is known to be somewhat comparable to a sea with a couple of big fish surrounded by shoals of smaller ones minding their own automation business. But at a first glance over the last couple of months, we can safely draw two important conclusions: one, the small fish are starting to gulp each other up and become bigger and bigger, and two: most of them are US-based.
The US automation food chain – or how big tech is getting bigger
One of the US companies that saw an extensive line of M&A activity since 2019 debuted was Corcentric. The e-procurement company currently serves more than 6,000 customers representing industries including manufacturing, transportation, wholesale/distribution, retail, healthcare, and financial services.
After securing a USD 200 million credit facility revolver from Bank of America and JPMorgan Chase, Corcentric announced it was planning the acquisition of Determine, a US SaaS source-to-pay and enterprise contract lifecycle management solutions provider. In early April, as forecasted, Corcentric had purchased nearly all Determine assets for the originally agreed upon amount of USD 32 million.
The transaction is expected to close within the second quarter of 2019. The parties believe this transaction will bring significant value and opportunity to the combined business and its collective customers and prospects, as the key benefits include revenue growth opportunities though the creation of a one-stop shop providing access to the full spectrum of procure-to-pay, along with the opportunity to add robust incremental service offerings on to the Determine Cloud Platform. So the basis of the acquisition is the combining of both companies’ infrastructure with technological growth in mind.
Almost subsequently and in the same spirit of tech advancement, but not discounting the geographical expansion agenda into the European space, in February 2019, Corcentric also announced the acquisition of British e-billing provider Netsend. As Netsend offers electronic billing, invoicing, and document distribution services to the FTSE 100 and global blue-chip companies in over 50 different countries, the acquisition marked Corcentrics expansion into the global e-billing market as a SaaS provider.
We are still waiting to see what is on the agenda for Corcentric in Q2 of 2019 and as the year progresses, but with two fintechs such as Netsend and Determine under its belt, the company is definitely on the rise when it comes to SaaS document process automation, and not only in the US market. All aside from the simple arithmetic of not even putting a dent so far in the USD 200 million it secured for expansion in late 2018. To be continued.
Meanwhile, in early March, US-based commercial payments solution provider FLEETCOR has signed an agreement to acquire AP automation provider Nvoicepay. The addition of Nvoicepay to the FLEETCOR Corporate Payments portfolio enabled the company to manage full disbursement of accounts payables for businesses, and the platform’s business-to-business payment platform allows FLEETICOR customers to pay 100% of their supplier invoices electronically, FLEETCOR representatives have stated. The M&A agenda developed after the company reported a 11% increase in their 2018 revenue.
Mergers are also a thing of the present in the US spend management front, as cloud-based travel and expense management company Certify, and AI and machine learning-focused fintech Chrome River announced merging their invoice management technologies. Chrome River is initially said to operate separately, but will collaborate on investing in technology like artificial intelligence, machine learning, analytics and reporting. The merger also adds Chrome River to Certify’s other brands, like Nexonia, Tallie, Abacus, and Captio.
Banks didn’t shy away from the M&A game either, as early in January 2019, MUFG Union Bank has announced the acquisition of supply chain finance platform Trade Payable Services from GE Capital. Although terms of the transaction were not disclosed, according to MUFG, the TPS platform supports relationships with GE suppliers worldwide. Upon closing of the transaction, GE suppliers will have the opportunity to transition to a new program with MUFG over the course of 18 to 24 months.
The anticlimactic ripple effect – Tradeshift vs Basware
One of the most talked about acquisitions as we dived into 2019 was definitely the rumour that cloud-based business network and platform for supply chain payments Tradeshift (that last year surpassed a USD 1 billion valuation after raising USD 200 million, with less than ten years of being active) would acquire Finnish household name in the e-invoicing sector Basware, for no less than USD 669 million. This stirred quite a bit of interest at the time, for If Tradeshift had managed to finance the deal it would have removed one of its major rivals from the e-invoicing and supply chain finance management market, and subsumed a blue chip Basware customer base that includes ABB, McDonalds, Heineken, Toshiba, and Toyota.
However, less than two months after the `money talks`, Basware had announced that it had terminated all negotiations with Tradeshift over its possible takeover offer. No conclusive reasoning was offered, leaving much to speculation, but Tradeshift had informed Basware that it will be unable to proceed given conditions in the capital markets. Arrowgrass Capital Partners (a significant Basware shareholder) also confirmed ceasing discussions, in a note saying that the irrevocable undertaking that it signed with Tradeshift to accept an offer for the approximately 25% of Basware shares that it owns, (were the offer to be made by 28th February 2019 at a price of at least EUR 46.5 per Basware share) had terminated. The whole affair resulted in Basware entering a ‘standstill agreement’ with Tradeshift until early November 2019.
While others mandate e-invoicing. Looking outside the US
Currently, e-invoicing in the US is characterised by multiple technical standards, formats, and networks, three-corner e-invoicing models and point-to-point connections. Nevertheless, a country-side unified mandatory standard has not been reached thus far. An e-invoicing memorandum was issued by the Office of Management and Budget in September 2015, where all government agencies were to transition to electronic invoicing for all federal procurements by the end of the 2018 fiscal year, yet nothing materialised itself so far. According to Basware, true change (in the US) needs to be driven by the market. Australia should constitute a good model in this regard, considering that, as in the US, in the land Down Under there is no government mandate for e-invoicing. A group of organisations who understand the benefits of e-invoicing have joined together with a common goal to create interoperability within their market.
As Europe is just beginning to mandate e-invoicing in countries such as Italy or Croatia, and several projects in this sense are being developed across Portugal, Poland, Sweden, or Norway, the mergers and acquisitions haven’t boomed on the old continent. Meanwhile, emerging markets will always have a place on the M&A long lists, no matter the time of reference, as trade finance efforts are continuous and longstanding in this geography. To this effect, in mid-February, Nigeria-based Access Bank has announced merging with Diamond Bank for trade finance facilities. Access Bank officials have stated that, after the merger, the bank would attract more opportunities such as trade finance from international partners. The resulting entity, which will maintain the brand name Access Bank, but with Diamond Bank colours, will have 29 million customers, 13 million of which are mobile users.
What we should keep an eye out, though, is the North American market, that continues to announce acquisition plans in the business process automation landscape as Q2 progresses. Just at the beginning of April, Canada-based document automation specialist INTEGRIM has acquired AP automation solutions provider Logikia.
As the small fish get bigger and bigger, we should safely expect that there would be less fish in the sea altogether. But as nature has a way to regulate and balance itself out, the present world will never run out of small goldfish bursting with flair, a keen eye for disruptive technology, and a knack for good investments to balance out the reef.
About Alexandra Constantinovici
Alexandra is a Content Editor at The Paypers, specialising in B2B payments and fintech, as well as lending, e-procurement, e-billing, supply chain finance, e-invoicing and accounts payable automation. A passionate writer, Alexandra has an extensive background in journalism – as a graduate of Journalism and Communication studies –, as well as editing, publishing, and marketing. Together with the team of editors, she strives to bring forward the latest trends for our readers, while investigating and sharing with our community the upcoming innovative industry shifts.
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