Arrowgrass Acquires Oxygen Finance: Company Update and Solution Analysis (Part 1) [PRO]

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In February, Arrowgrass Capital Partners, a London-based asset manager, announced it acquired Oxygen Finance. The acquisition is curious, in part because of the existing Arrowgrass and Basware partnership and Oxygen’s unique model, which we explore in this analysis. Oxygen currently has “billions of pounds” flowing through its infrastructure annually, primarily from U.K.-based public sector clients, yet it is not a P2P or e-invoicing vendor like most other providers focusing on discounting. Nor is it like C2F0, which focuses on creating loosely coupled — from a transactional systems perspective — competitive markets that provide greater flexibility to suppliers around participation compared with Oxygen. This multipart Spend Matters PRO brief delves into the Oxygen Finance solution in detail and explores a number of questions that Oxygen and the acquisition raise. These include whether or not the deal signals that additional private funds are likely to make more investments and buyouts in the sector. (Note Zouk investing in Taulia recently.) More important for users, we provide our analysis of the Oxygen Finance model, which is theoretically based broadly on a closed loop buyer network with its suppliers, and whether it might be able to gain the same type of discount scale and supplier adoption that new e-invoicing led trade financing models of the sort Taulia is bringing to market with its SCF+ are hoping to achieve through an alternative means. Finally, we analyze the days payable outstanding (DPO) and working capital impact Oxygen can have in comparison to alternative approaches — and why the public sector appears the most fertile ground for the solution approach.

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