SPAC’s the Ticket for Billtrust
We view the SPAC merger-IPO alternative as a significant opportunity for select mature private companies seeking access to public market capital.
Headlines have Pershing taking flack on its Universal Music deal as alarmists fret over the more than 300 new SPACs that launched this year into an already heated M&A market.
Meanwhile, digital invoicer Billtrust which went public via SPAC earlier this year and beat its expectations with a 35% revenue growth for Q1-21 v. Q1-20 and is gaining recognition as an overall winner in the public equity market as well as the B2B accounts receivable automation and integrated payments business.
Dilution tied to the sponsor is often cited as a high cost for a SPAC-track IPO. It seems like the SEC’s issue on warrants as a liability has subsided. We expect more overall refinement as SPACers fill the queue and underwriters become impatient to collect their deferred IPO commissions.
A closer look at Billtrust shows that its SPAC deal may have been worth the ticket price for a growth company ready for the public equity market.
Billtrust was generally thought to be available in 2019 even before its eventual SPAC merger partner raised $250 million that June. Discussions launched in late 2019 led to a deal signing late 2020 and de-SPAC IPO in January 2021.
The merger valued Billtrust at $1.1B, nearly 10x adjusted 2020 revenue for the Adjusted EBITDA break-even (after addback of stock-based compensation) with projections of 20% growth in net revenue and a long-term target for 25%+ Adjusted EBITDA in its investor presentation.
That was a 10-bagger for Bain Capital before the stock popped 20% upon the merger announcement. There have been some bumps along the way, but the $10.00 stock is now up 50%. Billtrust shed $30 million of accrued dividends and $44 million of debt along that way.
Payments processor Repay Holdings had done a SPAC merger mid-2019 and positioned itself to scoop up CPS Payments late last year and for the just-inked deal to pay nearly $500 million for PE-backed Electronic Payment Providers by the end of this month. There are plenty of other situations where SPAC deals have been a way for senior management to stay more focused on the business and have increased certainty of completion than the traditional IPO route.
It is pretty clear that not all SPACs are created equal just as not all IPOs and LBOs aren’t. What seems likely is that there will be plenty of SPAC deals that work well. Creative approaches are sure to emerge as dealmakers adapt as they must. We view this as a net positive for private companies weighing their choices for liquidity and growth capital.