Avalara Q2 2022 Financial Analysis
Avalara Appears to Misrepresent a Process with Limited Competitive Tension
Avalara ran a robust 3+ month competitive sale process
Avalara
May 19, 2022
Following a review of the business performance
and outlook, Avalara's BoD approved Goldman
Sachs to begin outreach to a targeted group of
financial investors
June 13, 2022
On behalf of Avalara, Goldman Sachs sent a
letter to interested parties requesting initial
indications to be submitted by June 22, 2022
July 7, 2022 and After
Various media reports speculated that Avalara had
been contacted by vista regarding a potential
acquisition. Thereafter, representatives of
Goldman Sachs received inquiries of varying
degrees of seriousness from a variety of parties;
none presented a proposal to acquire Avalara
April 2022
Board conducted review of broad range of
strategic alternatives, including standalone path
Initial outreach
8 parties
Goldman Sachs contacted
7 financial sponsors
An additional Party 6 (majority owner of
Company B) contacted Avalara
expressing interest in a transaction
Initial diligen
7 parties
participated in initial
diligence and
management meetings
Parties B, C, and E expressed interest to
partner with additional PE firms to help
finance a potential acquisition of Avalara
Initial indications
2 parties
submitted initial
indications of interest
Reasons Parties Cited for
Not Submitting Bids
Concerns around operating plan
Market conditions
Size of deal and valuation
Party G: Difficulty of achieving significant
synergies with Company B
Second round diligence
2 parties
participated int
second round diligence, including
previewing Q2 earnings
Reasons Party A Cited for Not
Submitting a Revised Bid
Q2 performance below management
expectations and 2022 likely to follow
Unfavorable macroeconomic conditions
Revised price would likely be substantially
below previous offer and not attractive
Continued negotiation to final proposal
1 party (Vista)
submitted revised indication of interest
and continued to negotiate a final fully
financed proposal following several
price increases
Source: Avalaia merger proxy
2
1
2
Of the 7 parties involved in Goldman's "initial outreach," 5 appear to have
proactively and independently reached out to Avalara expressing an interest in
the Company1
The 8th party appears to have been overlooked by Goldman during its initial
round of outreach and reached out to management independently a month after
the sale process had started²
Goldman's outreach did not appear to extend to any strategic acquirers
We believe strategics could have paid a higher price for Avalara and should have
been contacted as a means of maximizing the potential universe of buyers
during the sale process
3
Though this chart makes it appear as if there was competition until the
penultimate stage of the sale process, Party A's last engagement with Avalara
was on July 8, leaving Vista as the only interested party for almost a full month³
4
The implication that the Board spent time negotiating with Vista is misleading;
there was no change to Vista's proposed price from July 19 to August 4; the two
price increases came in a span of three days from August 4 to August 7, during
which time Avalara's stock was trading above $94 per share
In our view, because Goldman Sachs' outreach was limited and potential interest was inhibited by macroeconomic factors, the
Board's process was neither “competitive” nor “robust”
12
1 Source: Avalara Definitive Proxy Statement, filed with the SEC on September 12, 2022, at page 34 (indicating that Parties A-D had reached out to Avalara in March and April 2022) and 36 (indicating that Party E appears to have reached out to Avalara
independently of Goldman's process).
2 Id. at page 36 (indicating that Party G, which does not appear to have been on Goldman's initial list of targets, reached out to Avalara on May 29, a month after the Board determined to initiate a sale process on April 27).
3 Source: Avalara Definitive Proxy Statement, filed with the SEC on September 12, 2022, at page 40 (indicating Party A met with Avalara to conduct due diligence on July 8, but had no further engagement with the Company and failed to submit a definitive proposal).
Altair US, LLCView entire presentation