Coupa Software Inc. (NASDAQ:COUP), which manages about $2 trillion in global spending, said Monday it acquired supply chain management specialist Llamasoft for $1.5 billion in an effort to strengthen the cost-effectiveness of Coupa’s clients’ spending activities.
According to Pitchbook, Llamasoft grew revenues by 25% in 2019 to $100 million. The 15x 2019 revenues is in line with public SaaS multiples, but far below Coupa’s multiple of 47.5x 2020 fiscal year revenues. While the deal is considered a home-run for private equity firm TPG, it will be more accretive to Coupa because of the valuation arbitrage between the two companies.
The cash-stock deal, which closed Monday morning, is designed to integrate Llamasoft’s strategic skills in supply chain optimization with Coupa’s spend management execution across its massive customer base, Sandra Moran, Llamasoft’s chief marketing officer, said in a phone interview Monday afternoon. Ann Arbor, Michigan-based Llamasoft provides qualitative and data-driven services to its global client base, some of which overlap with Coupa’s.
Adding Llamasoft’s capabilities to Coupa’s portfolio will help Coupa’s customers “execute their business strategy in the most effective way,” Moran said. The objective is to support profitable capital spending for Coupa’s customers, even if it doesn’t involve the lowest-cost means of investment, Moran said. “It’s about balancing the trade-offs and how to do it more profitably,” she said.
The acquisition comes as the COVID-19 pandemic has thrown many supply chains into chaos, forcing businesses to realign their inventory management processes as new end-demand patterns emerge. Llamasoft specializes in forecasting demand trends, a holy grail for businesses long before the pandemic. With the novel coronavirus upending traditional consumer and business buying patterns, Coupa customers will find great value in Llamasoft’s analytics because it will enable them to make better strategic decisions in this area, Moran said.
Coupa believes there is substantial runway in integrating supply chain capabilities with spend management, particularly since supply chain management accounts for about 70% of the spend of a business that produces, stores and distributes goods, Moran said. Freight spending will likely be one area where Coupa’s customers can benefit from Llamasoft’s input, according to Moran.
San Mateo, California-based Coupa’s platform supports the so-called procurement-to-pay model, which tracks orders from the initial purchase order to the payment process.
Coupa shares fell more than $20 a share in Monday trading to close at $247.62, a drop of 7.62% on the day.