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

As expected, Bill.com is having a see Divvy, the Utah-essentially based corporate spend management startup that competes with Brex, Ramp and Airbase. The complete purchase value of round $2.5 billion is substantially above the firm’s roughly $1.6 billion publish-money valuation that Divvy living during its $165 million, January 2021 funding round.

Divvy’s enlighten price tells us that the firm did not sell attributable to performance weakness.

Per Bill.com, the transaction entails $625 million in money, with the remainder of the respect coming within the execute of stock in Divvy’s new father or mother firm.

Bill.com furthermore reported its quarterly results on the present time: Its Q1 included revenues of $59.7 million, above expectations of $54.63 million. The firm’s adjusted loss per part of $0.02 furthermore exceeded expectations, with the avenue attempting ahead to a sharper $0.07 per part deficit.

The better-than-anticipated results and the acquisition records mixed to lift the associated price of Bill.com by extra than 13% in after-hours trading.

Fortuitously for us, Bill.com launched a deck that affords a need of financial metrics pertaining to to its purchase of Divvy. This may perhaps occasionally seemingly perhaps well also simply not handiest enable us to better realize the associated price of the unicorn at exit, however furthermore its competitors, against which we bear a living of metrics to bring to undergo. So, this afternoon, let’s unpack the deal to fabricate a higher working out of the mammoth exit and the associated price of Divvy’s richly funded competitors.

Divvy by the numbers

The next numbers near from the Bill.com deck on the deal, which that you’ll want to be taught here. Here are the core figures we care about:

  • “~$100 million annualized earnings,” calculated the exercise of the firm’s March results multiplied by 12. That puts Divvy’s March, 2021 revenues at round $8.3 million.
  • “>100% earnings enlighten YoY,” but again calculated by leaning on the firm’s March results. So, we are succesful of’t guarantee that its full Q1 2021 enlighten changed into over the 100% mark. Restful having its most contemporary Q1 month generate a 3-figure enlighten price is lawful. It furthermore lets us know that the firm did no extra than $4 million or so in March 2020 earnings.
  • “~$4 billion annualized TPV,” or complete price quantity. Again, here’s a March number annualized.

This lets us value the firm a little bit. Divvy equipped for round 25x its most up-to-date earnings price. That’s a tool-level lots of, implying that the firm has both extremely collect contaminated margins, or Bill.com needed to pay a multiples-top price to make a choice out the firm’s future enlighten on the present time. I suspect the latter extra than the primitive, however we’ll bear to scout for added records when Divvy shows up in Bill.com results after the deal closes; that records is a pair of quarters away.

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