Great Hill to Acquire VersaPay

VersaPay is a public company in Canada, so its proposed acquisition by Great Hill, a PE firm, gives us insights into valuations in the A/R Automation market.  This market includes companies such as Billtrust, High Radius, Rimilia, Apruve, and others.  It’s a market I have written about before, but have not given its due.

The A/R Automation Market (really briefly)

I’m not going to do a deep dive into the market, as this post will be more about valuation, but you need to know that as with the A/P Automation market, A/R market participants target different:

• parts of the process from invoice presentment to collections to cash application
• size enterprises

VersaPay appears to have started in payments, added presentment and collections, and recently added cash application.  The company targets companies with $50M to $1 Billion in sales, which it says represents a $5B+ market in North America.

VersaPay Valuation and Metrics

Great Hill is offering to pay C$126 million for VersaPay in an all-cash deal.  The price represents a 47.5% premium to the closing price of the VersaPay Shares on the TSX Venture Exchange on December 12, 2019 and a 64.5% premium to the volume-weighted average price of the VersaPay Shares over the last 30 trading days.  That’s a nice premium, I wish I had owned the stock!

Here are my estimates of VersaPay’s key metrics:

• Expected 2019 Revenue:  C$9 million
• Revenue growth rate about 90% y/y, ARR growth rate is roughly equivalent
• 83% gross margin
• Committed ARR of about C$10 million
• Baseline revenue heading into 2020 of $12 million
• EBITDA for 2019 will be about -C$8 million
• Q3: 1 million invoices delivered representing C$3 billion in spend (so C$3000 per invoice)
• Q3:  310,000 invoices paid worth C$305 million (so about C$1000 per payment–meaning smaller payments, probably via credit card)
• ARC (VersaPay’s prime product that seems to exclude payments) will have about C$6 million in revenue.
• Payport, their payments product will have about C$2M in revenue.

Implications

Great Hill is paying about 14x year-end revenue and about 10x year-end ARR.  Interestingly, because of the detailed metrics VersaPay gives us, the company seems to have a take rate of 6 bps on their ARC product and about 16 bps on the payment product.