OB10 and Tungsten – more on innovative e-invoicing deal

So, let’s look in more detail at the announcement yesterday concerning OB10, e-invoicing specialists.

OB10 is being acquired by a financial vehicle set up for the purpose – Tungsten. That is run by Edmund Truell, a guy with 30 years experience in financial, banking and venture capital industries. Tungsten is paying £99 million for OB10, but it’s worth noting that OB10’s current shareholders are in the main retaining some equity in the new venture.  Tungsten then intends to acquire a bank – the UK arm of the    First International Bank of Israel, according to the FT.  It has also agreed a licensing deal with @UK for use of their spend analytics software, which will be badged as “Tungsten Analytics”.

The new entity will then be floated as soon as next month on the London AIM stock market, raising some £160 million. That pays for the purchase of OB10, and provides further working capital. So here are a few immediate thoughts – and there will be more detail and in depth analysis on our subscription sites as well to come.

1. This isn’t a traditional “acquisition”, more a complex re-structuring. The OB10 management team are staying in place, and are, we believe, extremely positive and enthusiastic about these events. The previous shareholders (which includes some of the executives as well as external financiers) are taking some cash out, but are taking 30% of their payment in Tungsten shares.

2. Bringing a bank – or more specifically, the banking licences and regulatory approvals – together with the e-invoicing activities of OB10 opens up interesting and potentially innovative options around supply chain finance.  There will be opportunities to link lending directly to receivables and use both the invoice issuer’s cash (in some financing situations) or the bank’s  (in others).

3. The analytics piece is also noteworthy.  @UK are an interesting business, who operate in a number of disparate sectors, and have had some good technology for years without perhaps always exploiting it fully themselves. They’re also a quoted company– indeed, their share price has gone up enormously in the last month, around four-fold. Whether the market got wind of this deal, I don’t know, although I’m not sure it is significant enough to explain such an increase!  (Their current valuation would certainly explain why Tungsten has done the licensing deal rather than just buying them outright).

4. The analytics addition is apparently going to give users greater ability to analyse invoice payments, and even  give users (according to Pete Loughlin at Purchasing Insight ) “deep insight into not only their own spend profile but also allow them to benchmark their spend”.  There is of course a huge amount of data within the OB10 supplier network and others, and turning that into useful intelligence is another big opportunity. We touched on this actually in the recent workshops with ProcServe actually – the potential to compare spend and pricing across UK public sector bodies in that case.

5. The impact on competitors will be covered my colleagues on Spend Matters PRO I more detail I’m sure, but some will have mixed feelings. OB10 will be a stronger and better funded competitor, that is clear. However, the valuation of OB10 might make Basware, for instance, look under-valued by the market. And more focus on the e-invoicing / supply chain finance link generally may help others (“the rising tide lifts all the boats” theory) – so firms such as Tradeshift and Oxygen Finance may perceive positives and negatives from this.

We’ll follow developments here of course and watch the progress of both the Tungsten transactions and the customer side of things with great interest.

Voices (2)

  1. Sam Unkim:

    @UK share price has gone up enormously in the last month

    +

    NHS to procure a single, best-in-class Spend. Analysis & Price Benchmarking Service

    = £30.5 Market Capitalisation methinks!!!

    Damn, wish I had bought shares myself

    1. Davied Wight:

      Its gone up massively after a very positve review in a respected newsletter, SCSW.

      http://www.scsw.co.uk/searchresults.php?textfield=tungsten

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