A Potential Basware Takeover: Speculation Abounds

Earlier today, Basware, a Europe-based procure-to-pay provider that, through integrated partner capabilities, also offers broader source-to-pay solutions, responded to “media speculation” that it had received a takeover offer, resulting in a material run up in its share price.

A press announcement published Friday, Nov. 16, noted:

Basware refers to the recent media speculation about a takeover approach and confirms that it has been approached with a non-binding and highly conditional indicative proposal for a possible tender offer for the entire share capital of Basware (the “Indicative Proposal”).

The Indicative Proposal is subject to a number of pre-conditions including, but not limited to, securing of appropriate financing, satisfactory completion of due diligence and a recommendation from the Board of Directors of Basware. Completion of any such tender offer would in turn be subject to further conditions, including, but not limited to, approval by Basware shareholders holding at least 90% of the shares of Basware and receipt of all necessary regulatory approvals.

The Board of Directors of Basware is evaluating the Indicative Proposal and will determine whether and how to proceed with it.” Basware will release further information at an appropriate time. There can be no assurance that the Indicative Proposal will result in a tender offer or any transaction.

The wording of the release may provide some hints as to what kind of firm is considering an offer. But who the potential acquirer is perhaps matters less than what a Basware takeover could mean more broadly for the procurement technology market in which Basware competes.

Basware: By the Numbers

Basware is well along the path in multiple simultaneous company journeys:

• Transitioning revenue from enterprise software to cloud
• Expanding globally (especially in North America)
• Building a broader channel and partner ecosystem to facilitate growth and scale (which have been key to the continued success of competitors such as Coupa and SAP Ariba)

In a recent Q3 2018 investor presentation, Basware shared the following data:

• It has realized year-to-date organic cloud growth of 15% (based on constant currencies)
• Cloud represented 66% of revenues in the quarter
• Quarterly revenue for Q3 2018 was €33.99 million
• Quarterly cloud revenue growth was up 11.9% year-over-year (with SaaS revenues growing 14.3%)

Basware as a Strategic Acquisition

A strategic buyer — that is, another provider of technology or solutions — might consider Basware as a takeover candidate for several reasons. The product, customer and geographic synergies it could bring to other software companies are particularly attractive.

But to understand the strategic appeal of Basware to potential buyers, it is critical to peel the onion on its solutions. For an exploration of how Basware compares to Coupa, Ivalua, SAP Ariba, Tradeshift and dozens of other procure-to-pay firms, based on both detailed analyst ratings of technology components and peer-based customer satisfaction benchmarks, see the latest Q3 2018 SolutionMap Insider reports for E-Procurement, Invoice-to-Pay and Procure-to-Pay.

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.”

The Case for a Financial Buyer  

While Basware would be attractive to a range of strategic buyers, the vendor also could be a compelling target for financial buyers.

Based on the wording of the above press release, we would wager that the potential suitor is likely a financial buyer, such as a private equity firm, not a technology firm. Note that we include privately held technology providers owned by private equity firms as financial buyers rather than strategic in this definition, given the specific notation that the deal is contingent on the “securing of appropriate financing.”

Regardless, the question of whether new ownership could further accelerate Basware’s growth, based on the still fragmented solution markets that it competes in, remains. This is clearly the bet that a potential suitor is wagering on.

The Final Word 

In the meantime, Spend Matters continues, as of Q3 2018, to rate Basware as a recommended vendor for all 15 SolutionMap personas for e-procurement, invoice-to-pay and procure-to-pay. The provider scores above the benchmark average based on the weighted criteria for analyst scoring, customer satisfaction or both in each of these scenarios.

This is an accomplishment that puts Basware within only a small group of peers — precisely what procurement and finance organizations selecting technology should focus on in deciding whether Basware is a potential fit.

Speculation of a takeover? Leave that to the speculators.