Avalara (AVLR) Sold For … Wait, What?
Waking up today to more rumors that Avalara (AVLR) is going to be sold to Vista Equity Partners wasn’t too surprising. Speculation had been swirling for weeks. But when the implied takeover price of 93.5 was announced anybody that follows this company did a double take. Was there an error in the press release? AVLR closed at 95.6 last Friday.
In other words, the takeover price is lower than the current price (as of pre-market).
Unfortunately, it doesn’t appear to be a fat-finger mistake. The press release goes on to say the buyout price is a 27% premium to the closing share price on July 6, the last trading day before media reports of a potential deal.
Doubly unfortunate is that on July 6 shares of AVLR closed at 73.18. That’s 10% above the stock’s intra-day low of the year of 66.4 which was struck just weeks earlier, in mid-June. We have to go back to April 2020 to find AVLR trading at that low of a price.
In other words, this deal was put together when the market was really in the gutter.
The implications here are that AVLR didn’t have a lot of bargaining power. Maybe they see something down the road that’s of significant concern. Or the Board of Directors just didn’t negotiate very well.
Either way, this is a surprising outcome for a company that seems to be sold for far too little. Credit to Vista Equity Partners. I guess.
My best guess is that Avalara will require a TON of investment to get to that next level. And/or that growth will slow into the mid-teens percent zone and it will transition into cash flow mode. Or some combination of the two. If that’s the case, it could be a rocky road for AVLR as a public company.
As far as what to do now we will have to just take the offer as is. Surely the lawyers will get involved and say this deal isn’t in the best interest of shareholders. But if no other buyer steps up with a better offer and this one falls through AVLR will surely take a big hit.
A bird in the hand …
Take the deal. SELL FINAL QUARTER for a roughly 130% gain.