Why did Bill.com pay $2.5B for Divvy? – TechCrunch

As expected, Bill.com buys Divvy, the Utah-based corporate spend management startup that competes with Brex, Ramp, and Airbase. The total purchase price of roughly $ 2.5 billion is well above the roughly $ 1.6 billion value after the cash that Divvy committed during its $ 165 million funding round in January 2021.

Divvy’s growth rate shows that the company failed to sell due to underperformance.

According to Bill.com, the transaction is $ 625 million in cash, with the remainder of the consideration in the form of shares in Divvy’s new parent company.

Bill.com also announced its quarterly results today: The first quarter included revenue of $ 59.7 million, which exceeded expectations of $ 54.63 million. The company’s adjusted loss per share of $ 0.02 also beat expectations, with Street anticipating a sharper deficit of $ 0.07 per share.

The better than expected results and acquisition news combined helped add more than 13% to Bill.com’s after-hours trading value.

Thankfully, Bill.com released a deck that has a number of financial metrics for buying Divvy. This way we can better understand not only the value of the unicorn in the exit, but also its competitors, against whom we can now apply a number of metrics. Let’s unpack the deal this afternoon to get a better understanding of Divvy’s huge exit and worth of richly funded competitors.

Division by the numbers

The numbers below are from the Bill.com deck of the deal, which you can read here. Here are the key numbers that matter to us:

  • “~ $ 100 million in annual sales,” calculated using the company’s March results multiplied by 12. That brings Divvy sales for March 2021 to approximately $ 8.3 million.
  • “> 100% year-over-year sales growth,” recalculated based on the company’s March results. So we can’t be sure that growth was above the 100% mark in the first quarter of 2021. It’s good if the final quarter of the first quarter is still generating a triple-digit growth rate. It also lets us know that the company didn’t have more than $ 4 million in revenue as of March 2020.
  • “~ $ 4 billion annualized TPV” or total payment volume. Again, this is an annualized March number.

This allows us to rate the company somewhat. Divvy sold for 25 times its current sales rate. This is multiples at the software level, meaning the company is either making incredibly high gross margins or has had to pay Bill.com a multiple premium to buy the company’s future growth today. I suspect the latter is more than the former, but we will have to look for more data if Divvy shows up in Bill.com results after the contract is closed. Those dates are a couple of quarters away.

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