Tradeshift Looking At Basware Bid – Business Sense, Culture Shock?

Well, we got that wrong. When the story about a bid potentially coming in for Basware, we thought that the obvious candidate was Arrowgrass, the hedge fund that already holds 25% of the Finnish firm’s equity.

But no, on Monday, Bloomberg reported that it was Tradeshift, the originally Danish, now Silicon Valley head-quartered disruptors. “Finnish software maker Basware confirmed the unsolicited takeover approach it received was from payment-technology startup Tradeshift Holdings Inc.  The indicative proposal came from San Francisco-based Tradeshift, Basware said in a statement Tuesday in response to a Bloomberg News report. The bid is backed by a group of U.S. investors and Ping An Insurance Group Co., the Chinese insurance giant that’s been building out its own financial technology platforms, people with knowledge of the matter said”.

That surprised me personally, less so I suspect some of my better informed colleagues at Spend Matters US, and Jason Busch wrote one of his typically brilliant and insightful articles on the developments, titled simply and accurately “Five Reasons Why Tradeshift Would Acquire Basware”.

As he says, “This Spend Matters PRO research brief attempts to answer these questions, exploring five reasons why a vendor with what first appears to be a near identical product footprint to Basware would consider such a move to bring the two together. Hint: There’s likely more to the proposed transaction than what appears on the surface (i.e., market consolidation, valuation arbitrage)”.

The article is behind the PRO paywall, unfortunately, but it is worth the subscription!  Anyway, back to our thoughts this side of the Atlantic. One assumes that even after their fairly recent fundraising round, Tradeshift couldn’t acquire Basware with cash, so one issue will be whether Basware shareholders are prepared to accept equity in the “new Tradeshift”. Might a flotation be on the cards as well? Perhaps not until a year or two post deal, we suspect. That is assuming Tradeshift don’t want to continue with the Basware listing on the Finnish stock exchange.

Jason makes a very good case for the deal, and as he knows more about how these things work than anyone, I accept his views. But the “culture” issue would concern me. Although Basware has changed a lot in recent years, the firm comes from an on-premise software and business processing outsourcing background, and the company culture appears to an outsider fairly formal, professional, somewhat under-stated, and perhaps slower moving than some. But we’ve found them very good people to work with here in the last two or three years, I should say.

Tradeshift on the other hand is a maverick, disruptive, innovative, sneaker and jeans type firm, built originally at least in the image of Christian Lanng, the brilliant but somewhat volatile founder. I can see some culture shock issues there in terms of post-deal integration, to be sure.

That is not unmanageable though – a Basware executive we know said that there were rumours around their office last week and “I’m all for the bring your dog to work policy”!  I suppose that indicates that some at Basware might love the whole Tradeshift vibe – others might struggle a little more.

Finally, we haven’t heard any stories of other potential alternative bidders in the process as yet. It is also worth noting this, from the Basware statement this week.

"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".

90% is quite a high hurdle!  In any case, I guess there might be a quiet period now while more due diligence is carried out by Tradeshift; in the meantime, you can learn much more about both firms through the excellent Spend Matters SolutionMap analysis – start here.

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First Voice

  1. Cynical:

    Hi Peter, I am looking at this story through somewhat less sophisticated eyes that Jason…. I see it as a no lose situation for Tradeshift and I think it’s got more than a healthy dose of Christian Lanng’s mischief behind it….
    – If the acquisition fails – which I suspect it will because I cannot see the average Basware investor being open to being a Tradeshift investor, different breed – then Tradeshift have succeeded again at putting themselves into the headlines without achieving anything other than playing the markets ;
    – If the acquisition succeeds, which it could, then it could be another step towards Tradeshift become another ‘aggregator’ in this market, like Jaegger and Proactis. These companies have realised how hard it is to generate significant, sustainable and repeatable revenue by delivering real customer value, so they set about aggregating other under-performing firms, stripping out back-office costs and dressing the window. This is a proven model in the ERP sector… think how Baan/BPCS/etc. rolled into SSA Global and then that rolled into Infor along with Lawson, SunSystems, etc….. it’s a financial play, a sound strategy for shareholders but much less sound for customers and employees. Tradeshift started down this route with IBX and probably enjoyed the injection of revenue…. Basware would be the next shot in the arm.
    A master stroke by Mr Lanng. But I do sense that Jason’s article has already given more thought to issues like “product fit” or “cultural fit” than anyone at Tradeshift has – I just don’t see this play being about that at all.

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