M&A of the month: Bottomline technologies acquired by Thoma Bravo for $2.6 billion

M&A of the month: Bottomline technologies acquired by Thoma Bravo for $2.6 billion

Volker Schloenvoigt
May 30, 2022

Bottomline Technologies is a primary provider of business payment solutions. Founded in 1989, they have amassed a large array of clients and case studies over the years. With 25 offices globally and an impressive claim to having helped companies in over 92 countries, Bottomline is no small fish on the international stage. Although not a flashy-fintech firm that often dominates our headlines, they are still a noteworthy player in today’s payments ecosystem.

As the said ecosystem has developed over time, so too has Bottomline. Historically focused on helping migrate enterprises away from pre-printed paper cheques, they now deliver modern tech solutions ripe with automation and digital innovation. Their offerings focus on aiding the management of all payment processes related to things such as cash handling, fraud, and securities.

Additionally, Bottomline offers the solution “Universal Aggregator IQ” (something that we at EDC often refer to as a Payments Hub). This is not a new concept – the idea of a Payments Hub was developed over 20 years ago. They sought to consolidate the complex range of payments involved with the functioning of a modern financial institution and help to reduce the related costs (and headaches). However, when first launched, Payments Hubs struggled to take off. It wasn’t until recently, with the massive increase of potential payment partners and the raised complexity of regulation (i.e., ISO20022), that financial institutions have started to see these solutions as a necessity.

In October 2021, Bottomline announced that, in discussion with Clearfield and Sachem Head Capital Management, new board members had been appointed. As a result, the board of directors rose to 11. With it came a fresh new set of strategic voices aimed at creating additional shareholder value. Prior to this move, Bottomline had experienced waning quarterly profits. In fact, in the 36 quarters leading up to this news, Bottomline was in the red for 31 of them.

As a result, and with new faces on the Board, strategic extremities were within the realm of possibility. When probed about a potential sale around that time, the (former) CEO Rob Eberle stated that “everything is on the table”. The guessing game was cut short in December 2021 though, when Bloomberg broke the news that Bottomline was working with Deutsche Bank on a potential sale. Since then, the stock market has viewed Bottomline favourably and the company ended 2021 with a revenue increase of 10% and subscription revenue up 15%.

Since then, on May 132022, Bottomline announced the completion of an acquisition by investment group Thoma Bravo for $2.6 billion. Thoma Bravo has over $103 billion in assets under management, nearly all of which fall under the umbrella of software and technology companies.

Whilst the drums of acquisition and investing interest beat for the latest and greatest payments-related Fintech, companies like Bottomline are often too easily dismissed. Yes, the upside of striking gold with the right payments gateway, for example, is a tempting and frequently lucrative endeavour for many investors. But there is an intrinsic risk that is regularly swept under the rug.

Fintech partnerships are seen as an interchangeable commodity for many large businesses and financial institutions. Sticking with the gateway analogy, shopping around and getting the best contract from the ever-growing array of competition is a given. We, at EDC, regularly find ourselves giving aid and advice in situations like this. For a payment gateway, this can be a scary prospect. Yes, the selling point of being ‘plug and play’ (fast integration and a quick time to market) is powerful. But it also plants a dangerous seed in the minds of their clients: “As this gateway was easy to integrate with then surely it is equally easy to replace them?”.

Having any client, be it large or small, pulling the plug is an unpleasant prospect that can result in some damaging impacts that ripple through young Fintech firms. Hence, it is in many technology businesses’ interests to prove themselves as irreplaceable. This is the case for companies like Bottomline. Their solutions and integrations do, admittedly, require a slightly longer duration of set-up before being up and running. But once they are operational, they can routinely find themselves deeply embedded within their clients’ payments environments, managing the connection between siloed departments and numerous precious processes. This produces a harder situation for the client to shop for a new partner to deliver the same solution. As a result, these working relationships often span many years and provide extra safety for companies like Bottomline. A pleasant prospect for any investor, such as Thoma Bravo in this instance.

What Bottomline will do with their new funding is yet to be seen. Will they expand their solution offerings, try to reach new markets, or breach into the B2C space? These questions remain to be unanswered for now. With a new CEO at the helm (Craig Saks), it is still likely that former strategic boundaries shall be explored. In any case, from the perspective of many investors that are all too hung up on which new Fintech is gathering the most conversational buzz, Bottomline’s acquisition should prove to be a reminder that there are still two sides to this coin. Heads, the flashy Fintechs that either make it or break it. Tails, the sturdy back-office firms such as Bottomline. Need there be a more cliché reminder for which coin face never fails?

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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