Proactis Holdings accepts £74.9m offer from Pollen Street Capital and DBAY
(PHD ) has reached an agreement with Café Bidco, a new company jointly owned by Pollen Street and DBAY Advisors, on the terms of a recommended cash offer by Bidco which will value the company at approximately £74.9m on a fully diluted basis.
Under the terms of the acquisition, each Proactis shareholder will be entitled to receive 75p in cash, reflecting a premium of c.79.4% to the closing price of 41.8p per Proactis share on 29 April 2021 which is the last business day prior to the commencement of the offer period.
Proactis’ Directors, who have been advised by finnCap as to the financial terms of the cash offer, told investors that they consider the terms of the offer to be ‘fair and reasonable.’
Proactis announced back on 28 May 2021 that discussions were ongoing between Bidco and DBAY Advisors regarding DBAY's support for, and participation in, the offer for Proactis Holdings. DBAY Advisors currently owns about 25.54% of Proactis's issued share capital.
Cafe Bidco is a new company jointly owned by Pollen Street and DBAY Advisors.
Both Pollen Street and DBAY believe that Proactis has successfully developed a leading position in the business spend management software market with a range of solutions offering a compelling value proposition to its client bases across Europe and North America.
Both consider there to be ‘significant scope’ for increased adoption of business spend management solutions as firms increasingly seek to digitise processes, in particular in the mid-market where such solutions are less highly adopted than amongst larger corporates.
‘As a well-established provider with a footprint in five significant international markets, and a leading core set of software solutions focused on mid-sized companies, Pollen Street Capital and DBAY believe that PHC has the potential to capitalise successfully on this trend,’ it said.
Both Pollen Street Capital and DBAY said they believe that Proactis would benefit from returning to private ownership and that this move would maximise the business’ market opportunity as well as allow it to become a global market leader to mid-sized corporates.
Both groups will provide Proactis and its team with the flexibility to take these long-term decisions to maximise the growth potential of the business, ‘whilst also providing strategic support to develop new growth areas and operational expertise to drive efficiency.’
Commenting on the acquisition, Alan Aubrey, the Chairman of Proactis, said: "Both Pollen Street Capital and DBAY are highly experienced financial and operational supporters of growth focused businesses and we believe the Company will benefit from their considerable financial resources, longer-term approach to value creation, and significant experience in successfully backing high-growth businesses to achieve their full potential.
He added, “We are pleased that Bidco is supportive of the acceleration of Proactis' existing strategy and we continue to believe Proactis will be both nimbler in executing its strategy and able to build a business capable of sustainable longer-term growth.”
Proactis is an international business spend management solution operating in the UK, US, France, Germany and the Netherlands. For the half year ended 31 January 2021, it generated £23.8m of revenue, adjusted EBITDA of £6.2m and £40.8m of annual recurring revenue.
Proactis said the cash offer reflects “a material uplift” in value against the original proposals from Pollen Street Capital and DBAY which provides certainty of cash value to shareholders.
Commenting on the acquisition, Matthew Potter, a Partner at Pollen Street Capital stated: “We believe Proactis would strongly benefit from a return to private ownership, which would enable Proactis to accelerate its plans to capitalise on a clear market opportunity.”
“We know the Proactis business well having been significant investors since July 2019 and are delighted to have the opportunity to partner with both the Proactis management team and Pollen Street Capital to accelerate Proactis's current strategy and unlock the long-term value in Proactis,” said David Morrison, Investment Director of DBAY.
View from Vox
Following the recommended cash offer from Pollen Street Capital and DBAY which has been accepted by Proactis, the company will be valued at around £74.9m on a fully diluted basis.
Both Pollen Street Capital and DBAY believe Proactis Holdings will benefit from returning to private ownership. Both companies say this move will maximise the business’ market opportunity as well as allow it to become a global market leader to mid-sized corporates.
In April 2021, Gartner predicted growth of 19% pa ($123bn) for enterprise cloud apps, thus providing a strong tailwind behind Proactis’s Saas-based B2B spend mgt software.
Shares in Proactis Holdings have increased by nearly 55% in value since the beginning of 2021. The stock was trading flat at 71.3p this morning following the announcement.
Proactis creates, sells and maintains software and services, which enables organisations to streamline, control and monitor all indirect expenditure. Its solutions are used in around 1,100 buying organisations globally from the commercial, public and not-for-profit sectors.
Proactis previously adopted a new go-to market strategy for each of its US, France and Germany territories which is designed to replicate that of the UK and Netherlands.
In its recent FY20 results, Proactis noted that it had made ‘substantial headway’ after seeing the first sales of its mid-market single platform solution in Germany and France.
The group cited a ‘record year’ in new business total contract value ("TCV") after securing an aggregate of £14.6m (FY19: £11.3m), a 29% increase secured in ‘virtually all markets.’
Proactis said this demonstrates ‘the effectiveness of its strategy, the resilience of the business model and the ability of its teams to deliver despite a change in working practices.’
In recent weeks, the company announced that it has signed a 3-year contract with an unnamed major German DIY retailer to provide its business spend management solution.
The business spend management provider said the win represents ‘a strategically important milestone’ as the second new German customer to sign up under that new strategy.
Proactis, whose solutions are used in around 1,000 global buying organisations from the commercial, public and not-for-profit sectors, said the solution will be deployed in Germany initially before being rolled out into new territories through Central and Eastern Europe.
On 10 February, Proactis said it had signed a three-year contract with an oil and gas services business in North America which it said represents “a strategically important milestone.”
While the name of the customer and value of the contract remain undisclosed, the business spend management solution provider said the contract win is significant because the client is the first in North America to sign up under the Group's new go-to market strategy. The contract marks entry into a new significant territory, which is a stated objective for Proactis.
Compelling Valuation Metrics
While it remains undetermined of how much today’s contract could generate, consultancy firm, PMH Capital, highlighted to investors that “we would guess a firm like Experbuy might generate £50k-£100k pa for Proactis – dependent on transactional volumes.”
It added, “Plus, multiply this a few 100x, & you end up with a substantial, high margin & very valuable, recurring revenue stream. bePayd has the potential to be enormous, given its 1st mover advantage in providing cash flow benefits to SMEs within this ‘low value’ space.”
Furthermore, research from PMH Capital suggests Proactis is currently trading at a significant discount to its peers on an EV/Sales multiple of 1.6x, against an average of 6.5x for the sector.
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