Vista Equity Partners to acquire automated tax compliance company Avalara for $8.4B

Global investment giant Vista Equity Partners has announced plans to acquire automated tax compliance software provider Avalara, in an all-cash deal worth $8.4 billion.

Founded in 2004, Seattle-based Avalara works with companies including Zillow, Pinterest, and Roku, helping to automate many of the time-consuming processes involved in managing taxes in each market they operate.

Indeed, many governments around the world collect taxes based on where a service is consumed, rather than where the service provider is located — and keeping on top of what specific service is taxable, and at what rates, is important for running a legally compliant business. Throw into the mix the vast array of variables involved, such as whether a transaction is B2C or B2B or whether a product is digital or physical, and things can get complicated pretty quickly for businesses looking to stay on the right side of local tax laws.

And that is why Avalara provides a funnel into local tax databases, so its customers always have access to up-to-date information spanning sales and use tax, VAT and goods and service tax (GST), excise, and more.

Taxing times

The company had raised around $341 million ahead of its 2018 IPO, and like many companies in recent times, Avalara has undergone something of a “correction,” with its market cap falling over the past year by roughly 60% to $6 billion last month, though it had bounced back up to more than $8 billion as of last week. Alongside today’s acquisition news, Avalara also posted its Q2 financials, where it reported a year-on-year revenue jump of 23%, though its operating loss nearly doubled to $56 million over the same period.

Vista notes that its proposed share purchase price of $93.50 represents a premium of 27% on its closing share price of exactly a month ago — however, it’s worth noting that the price is marginally lower than Avalara’s $95 closing price on Friday.

Still, the $8.4 billion price tag is sizeable, and is indicative of the broader appeal that automated tax compliance software holds in the investment sphere — in the past eight months alone, we’ve seen German startup Taxdoo raise $64 million, while Ireland’s Fonoa last month locked down $60 million.

While the deal is still subject to shareholder and regulatory approval, Vista said that it expects the transaction to close before the end of 2022, after which Avalara will be a privately-held company.

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