Why Did Bill.com Pay $2.5B For Divvy?

As expected, Bill.com is buying DV, starting to manage Utah-based corporate spending that competes with Brex, Ramp and Airbase. 

The total purchase price of about $2.5 billion is above the company’s post-money value of about $1.6 billion, which DV set for its $165 million fund in January 2021. According to Bill.com, the transaction includes $625 million in cash; the rest of the consideration will come in the form of stock at DV’s new parent firm.

Bill.com also reported its quarterly results today: $59.7 in Q1. Million $54.63 million dollars above expectations included $0.02 million in revenue. The company’s per-share deficit widened further to $0.07, with a combined loss of $0.02 per share also exceeding expectations. Better-than-expected results and news of the acquisition combined to increase the value of Bill.com by more than 13% in the after-hours trading session.

Luckily for us, Bill.com has released a deck that provides a variety of financial metrics related to DV purchases. This not only allows us to better understand the quality of the Unicorn when exiting, but also its competitors, against which we now have a set of metrics to carry. So, this afternoon, let’s unpack the deal to get a better idea of ​​the value of competitors with huge exits and DV-rich financing.

  • The numbers below come from Bill.com on the deal, which you can read here. Here are the key images we took care of:
  • “~$4 billion annualized TPV,” or total payment volume. Again, this is a March number annualized.
  • “~$100 million annualized revenue,” calculated using the company’s March results multiplied by 12. That puts Divvy’s March, 2021 revenues at around $8.3 million.
  • “>100% revenue growth YoY,” again calculated by leaning on the company’s March results. So, we can’t be sure that its full Q1 2021 growth was over the 100% mark. Still having its most recent Q1 month generate a three-figure growth rate is good. It also lets us know that the company did no more than $4 million or so in March 2020 revenue.

It gives us some value. Divvy has sold at about 25x its current revenue rate. This is a software-level multiple that means the company has either incredibly strong gross margins, or Bill.com had to pay a multiple-premium to buy today’s company’s future growth. I suspect more later than the previous one, but we’ll need to find out more data when the bill shows the DV results after the deal closes; A few quarters away from that information.