For the M&A market, 2022 has been a lackluster year, with fewer deals happening compared to last year amid growing uncertainties in the market. Coupa Software Incorporated (NASDAQ: COUP), which provides business spend management solutions, is the latest to jump on the M&A bandwagon even as the year-end approaches.
The company this week said it has signed an agreement to be acquired by private equity investment firm Thoma Bravo for $8 billion. After strengthening its foothold in the market in recent years, Coupa has what it takes to continue expanding under the new leadership. All along, Coupa constantly maintained stronger profitability than widely expected, which is a testament to its successful business model.
Stock Rallies
Shares of the San Mateo-headquartered tech firm, which helps customers keep track of corporate spending, surged soon after it reported third-quarter results on Monday, marking one of the biggest single-day gains. The rally came as a major boost to COUP, which has been on a losing streak for quite some time. Currently, it is trading slightly below the 52-week average.
Read management/analysts’ comments on quarterly reports
Revenues advanced 17% to $217 million in Q3 and topped analysts’ forecast, aided by a 20% growth in subscription revenue. Despite the strong top-line growth, adjusted earnings dropped to $0.15 per share from $0.31 per share last year. As a result of the pending Thoma Bravo deal, the management withdrew the fiscal 2023 guidance it had issued earlier. Also, it will not be holding the usual post-earnings conference call this time.
Commenting on the buyout, Coupa’s CEO Rob Bernshteyn said, “For more than a decade, we’ve been building an incredible Business Spend Management Community and have proudly cemented our position as the market-leading platform in our category. We’re looking forward to partnering with Thoma Bravo and accelerating our vision to digitally transform the Office of the CFO. While our ownership may change, our values do not.”
77% Premium
As per the deal, the company’s shareholders will receive $81 per share in cash, which represents a 77% premium to the stock price prior to the announcement. On obtaining the regulatory green signal, the transaction would close in the first half of 2023. The deal, which has been unanimously ratified by Coupa’s board of directors, needs to be approved by the company’s shareholders.
After completion of the acquisition, Coupa will retain its name and brand, but the stock will cease to trade on the Nasdaq stock market. For long-term investors, it won’t look like a lucrative deal because the deal price is less than the long-term average and sharply below the peak of February 2021. But those who bought the stock more recently would be happy with the price being offered.
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Reports of Coupa changing hands were doing the rounds for some time, but earlier bids failed to become definitive agreements. It is expected that as a private entity, the company would grow at an accelerated pace under its new owners.
COUP ended the last trading session up an impressive 27%, and continued to gain in after-hours trading.