Private equity continues to extend its reach in the IT software world in 2022 with Vista Equity Partnersunveiling today its plans to acquire tax calculation and compliance automation software standout Avalara for a whopping $8.4 billion.
The deal is expected to close in the second half of 2022. When completed, Avalara’s shares will no longer trade on the New York Stock Exchange, and Avalara will become a private company operating under the Avalara name.
Monday morning Avalara’s stock was trading just above $92 per share, down about 3.5 percent from its $95.55 close Friday.
“For nearly two decades, Avalara has ambitiously pursued its vision to automate global compliance, making tax less taxing for businesses and governments around the world,” said Avalara CEO and co-founder Scott McFarlane, in a statement. “We are pleased to partner with Vista and will benefit from their expertise in enterprise software as we build and improve upon our cloud compliance platform.”
Avalara will leverage Vista Equity financial benefits to refine its go-to-market strategy, expand its international workforce, streamline its systems architecture, and continue to pursue M&A opportunities.
Chapman said the company has a large number of referral partners, including many system integrators, with Avalara’s goal in 2022 to add more qualified partners to its partner program and increasing the overall percentage of the company’s revenue coming via the channel.
Why Avalara Is Worth $8.4 Billion
Founded in 2004, the Seattle-based software company provides cloud-based compliance solutions for various transaction taxes. Its mission-critical platform serves customers in a variety of markets including retail, manufacturing, hospitality, and software.
As of June 30, the company had approximately 20,110 customers worldwide with offices around the U.S. as well as in Brazil, Europe, and India.
The company develops tax calculation and compliance software that works with point-of-sale applications, ecommerce software and other systems used by customers to automatically calculate and charge sales taxes on customer transactions.
Avalara’s software is already integrated with many commercial applications including Microsoft Dynamics and NetSuite ERP applications, Shopify and Adobe Commerce ecommerce software, Intuit QuickBooks accounting software and Zuora’s subscription management application.
The company provides customers with Avalara Compliance Cloud applications through more than 1,200 partner integrations that manage the flow of data between Avalara’s platform and customers transactional and financial systems. Earlier this year Avalara launched a low-code development platform and AP’s that partners and customers use to link Avalara’s software with third-party and custom applications.
Terms Of The Acquisition
Under the terms of the agreement, Vista Equity will acquire all outstanding shares of Avalara common stock for $93.50 per share in an all-cash transaction valued at $8.4 billion.
The per share purchase price represents a premium of 27 percent over the company’s closing share price as of July 6, 2022.
The deal has already been approved by Avalara’s board of directors.
Avalara said its success is built up on an extensive partner network; a large tax content data and repository to help customers stay up to date on dynamic tax rules and regulations; and its cloud-native multi-product tax compliance application portfolio.
Avalara Earnings Report Today
In addition to announcing its acquisition by Vista Equity, Avalara also unveiled today its second quarter results. In the quarter ended June 30 the company generated total revenue of $209 million, representing 23 percent year over year growth.
However, Avalara reported a net loss of $56 million for the quarter, compared to a net loss of $31 million in the second quarter of 2021.
Subscription and returns revenue was $190 million, up 24 percent year over year. Avalara professional services sales hit $19 million, an increase of 13 percent year over year.
“Despite ongoing macro uncertainties, we believe Avalara is a durable, diversified and resilient business and that we are in the early days of addressing a huge market to automate compliance for businesses of all sizes,” said McFarlane.