Dive Brief:

• AvidXchange, an accounts payable and payments software provider, has agreed to be taken private by global asset management firm TPG in a transaction that values the business at $2.2 billion, according to a Tuesday press release from the two companies.
• As part of the acquisition, another payments company Corpay, formerly known as FleetCor Technologies, will buy a 33% stake in the publicly-traded AvidXchange for $500 million, according to its separate release Tuesday. Corpay, which is also publicly-traded, said in its release that it will have the option to buy all of AvidXchange.
• “There is a very large opportunity for businesses to improve their accounts payable processes through automation and become more efficient, more secure, and more accurate,” TPG Partner John Flynn said in the joint release.

Dive Insight:

Charlotte, North Carolina-based AvidXchange has focused its software business on the middle market, collecting some 8,500 clients in various verticals, including real estate, homeowners’ associations, financial institutions and media, according to the Corpay release. When AvidXchange sold shares to the public for the first time in 2021, it had about 7,000 clients.

The payments company is a good fit for Fort Worth, Texas-based TPG’s $76 billion portfolio partly because it has previously invested in payments companies, including the digital payments processor Toast as well as payments orchestration company Freedom Pay, according to the investment firm’s website. 

Flynn explained how AvidXchange offers payments set-up that easily integrates into corporate workflows, allowing for connectivity between businesses and suppliers. His TPG partner, Tim Millikin, predicted a growing need for such software.

“Modern businesses require modern payment technology, and we see significant opportunity for AvidXchange as a private company to continue enhancing its solutions to improve visibility and unlock efficiencies across the payment process,” Millikin said in the release.

Corpay CEO and Chairman Ron Clarke also highlighted the business prospects for AvidXchange. He has experience with AvidXchange because Atlanta-based Corpay has acted as its card payments processor.

“We really like AvidXchange’s business model: diverse revenue streams from payments and software, high retention rates, and very little working capital and credit exposure,” he said in his company’s release.

Last month, Corpay itself attracted an investment from Mastercard, which injected $300 million into its cross-border unit as part of a broader commercial, cross-border services agreement.

AvidXchange’s CEO, Michael Praeger, is a career entrepreneur who co-founded the company in 2000. Prior to launching AvidXchange, he co-founded career and recruiting web site PlanetResume.com and the tax billing and collections software company InfoLink Partners. 

“With TPG and Corpay, we will have the resources and long-term focus to scale our platform and provide more innovative solutions that help our customers across the country transform their accounts payable processes,” Praeger said in his company’s press release. 

In a Tuesday letter to employees, Praeger talked about the milestone deal as the company marks its 25th anniversary.

“We’ve accomplished a lot over the past 25 years, growing from an AP automation software company for the real estate business into a leading B2B payments network and processing more than 79 million transactions in 2024 with annual revenue of more than $425 million,” he said in the letter, which was included in a Wednesday filing with the Securities and Exchange Commission.

A spokesperson for AvidXchange didn’t respond to a question about whether Praeger will remain at the company once the transaction is completed.

AvidXchange will institute a $3 million retention bonus program for top executives in an effort to “to promote retention and incentivize efforts to consummate” the transaction, according to another SEC filing by the company on Wednesday. Those bonuses will vest annually over the next three years.

The transaction is expected to close in the fourth quarter, subject to regulatory approvals, according to the releases.