Divvy is Getting Bought for $2.5 Billion by Bill.com

David Politis -

Turns out the rumors were true:

Divvy is getting acquired for $2.5 billion in cash and stock by Bill.com (NYSE:BILL).

Downloaded from the Bill.com investor presentation, downloaded 06 May 2021

Under terms of the Bill.com news release distributed yesterday (after trading on Wall Street closed), Lehi, Utah-based Divvy has agreed to be purchased for 1.875 million shares of Bill.com and $625 million in cash.

{NOTE: The totals above do not include an additional $150 million in RSUs (Restricted Stock Units) provided as incentive awards to certain Divvy employees. Nor does it include $125 million in cash being held in escrow for operational costs that will be provided to Divvy at the close of the merger.}

Although the proposed merger is already approved by both parties and is expected to close by September 30, 2021 (the end of Bill.com’s 2022 first quarter), it must still pass muster by the U.S. Securities & Exchange Commission as per terms of the Hart-Scott-Rodino Anticompetitive Measures Act.

Some of the highlights from the Bill.com investor presentation include the following data points:

  • ~$100 million:  Annualized Divvy revenue
  • Over 100%:  Divvy’s Year-over-Year revenue growth
  • Over 7,500:  Number of Divvy SMB customers (Small-to-Medium-sized-Businesses)
  • Over 400:  Divvy employees
  • 115,000:  Bill.com customers, including accounting firms and financial institutions
  • Over 800:  Bill.com employees

According to Yahoo! Finance, Bill.com had ~$183.59 million in revenue over the past 12 months.

Seeking Alpha explains that Palo Alto, California-based Bill.com provides

“… software-as-a-service, cloud-based payments products, which allow users to automate accounts payable and accounts receivable transactions, as well as enable users to connect with their suppliers and/or customers to do business, manage cash flows, and enhance office efficiency.”

Conversely, Divvy

“… combines expense management software and smart corporate cards into a single platform (allowing its customers to) get real-time visibility into their company spend and flexible controls that prevent teams from ever going over budget.”

Additional Thoughts & Info on the Divvy Acquisition

So why does this deal make sense to both parties? Apparently, adding Divvy’s products/services allows Bill.com to effectively double the size of its Total Addressable Market (TAM) to 6 million U.S.-based SMBs. (That’s a roundabout way of saying the same thing for Divvy as well.)

But how much do SMBs in the North America spend annually? The Bill.com investor presentation references Mastercard research that says those same SMBs spent ~$25 trillion in 2018; of that annual spend, a small slice is available as fees for the combined Bill.com/Divvy, especially for those firms that use corporate payment and credit cards.

Yowza!

Under terms of the merger agreement, Divvy shareholders (namely CEO, Blake Murray) and institutional and strategic investors have agreed to six-month lockup agreements for 75% and 40% of their shares, respectively.

Additionally, over 950,000 Bill.com stock options (aka, RSUs) are being issued to certain Divvy employees as incentives to retain them as Bill.com employees.

These RSUs will vest over three years, with nearly 636,000 set aside for Blake. However, no “strike price” (aka, purchase price) for these RSUs was disclosed.

Also, as reported in the inaugural edition of Deseret Business Watch, Divvy landed a $165 million Series D round of funding on January 5, 2021, a financing that valued the company at $1.6 billion.

In other words, in four months, Divvy’s perceived value has rocketed upward by over 56% in just four months. That’s insane, and awesome, at the same time!

Bottom line, major kudos to CEO Blake and all members of Team Divvy.

Utah Investors “Getting Paid” Too

One more thing about the Divvy acquisition — several Utah-based investors (or those with serious ties to the state or the company) will also get paid as a result of the Divvy acquisition, some of which have been disclosed while others have not.

Top among these is Pelion Venture Partners of Cottonwood Heights, Utah.

According to various news announcements and media reports, Pelion led Divvy’s $10.5 million Series A round of funding in May 2018 and has participated in every funding round since then, including the January 2021 Series D round of funding.

Additionally, some notable Angel Investors from Utah (or those with deep ties to the state) also participated in that Series A funding round, including

Divvy also announced just six months earlier (December 2017) that it had closed a $7 million Seed round of funding with said investors not disclosed, although at least one source says a major seed investor was none other than Mike Murray, father of Divvy CEO, Blake.

Bottom line — props also to these earliest investors for having the vision and foresight of Divvy’s potential.

NOTE:  This article was originally published by Deseret Business Watch. A few minor editorial changes have been made with this version to better match the current Silicon Slopes writing style.