Basware – A Potential Acquisition Target? Speculation Abounds in the Saunas of Helsinki …

On Friday, software firm Basware issued a statement confirming that an unnamed potential buyer was looking at purchasing the firm.

There’s many a slip ‘twixt cup and lip' as they say, so this may come to nothing, but as a quoted firm (on the Finnish stock market) Basware obviously felt they had to be open about what is going on.

But the shares, which were briefly suspended in Helsinki on Friday, soared by 43%, to 33 euros apiece. That boosted Basware’s market value to 475 million euros, which is around 4 times annual revenues. According to Bloomberg, “Arrowgrass, the hedge fund started by former Deutsche Bank AG traders Henry Kenner and Nicholas Niell, owns about 25 percent of Basware”, so the speculation points towards that investor as perhaps being behind this potential deal.

Basware has been a sponsor of ours since ProcServe was acquired in 2015, and they have been a pleasure to work with. They’ve been going through a tricky transition, their heritage being in invoice automation, including both software and business process outsourcing in the invoicing area, rather than in the full end-to-end procurement software arena like competitors Ariba, Coupa or Jaggaer.

Until about three years ago the firm was profitable, but it took a conscious decision to give up that profitability and sell off parts of the business that did not fit the new model, to invest in the transition to software-as-a-service (SaaS), along with more expenditure on product and marketing. That has been partially successful; whilst growth has not lived up to expectations, this is now a genuine SaaS cloud-based business in the main and although invoicing related capability is still their sweet spot, they are serious players in the wider purchase-to-pay software market.

We suspect that a buyer might see potential to strip costs out of the business, in the way we have seen with other acquisitions in our market in recent years. Basware has a decent market position, and we would expect any buyer to continue product investment. But it has always seemed to us to be a firm that was probably a really good place to work and perhaps a little less ruthless in cost and performance terms than competitors like Coupa. A buyer might see the opportunity therefore to take a few % of the cost base out, relatively painlessly, and also build on those strengths in terms of the product?

Anyway, if you want to read more, we suggest you take a look at the excellent article our colleagues at Spend Matters US published on Friday afternoon (after we’d knocked off for the weekend!)  They provide more insight and also highlight the Spend Matters Solution Map analysis on Basware, which places them as strong contenders for a number of the Solution Map user “personas” and product segments too. Here is a quick snippet, but it is well worth reading the whole article.

"As we note in the qualitative comments for the latest Insider reports for Procure-to-Pay, “Based on its Solution and Customer Value scoring, Basware is a recommended fit for all five Procure-to-Pay SolutionMap Personas, although it is ranked higher in certain personas than others … [its] investments to build out an integrated procure-to-pay platform indicate its intention to become a strong player in this broader market segment.”

Further, we observe that while Basware has the functional and technological capabilities to achieve this, its challenge will be to build a greater presence outside Europe and to position its P2P capabilities in an increasingly competitive solutions market to become a more frequent global shortlist candidate.”

 

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