B2B network creator Corcentric makes deal to trade on Nasdaq
18:40, 15 December 2021
Business-to-business sourcing, procurement and payment provider Corcentric entered into a definitive agreement to combine with North Mountain Merger (NMMC), a fintech-focussed special purpose acquisition company listed on Nasdaq.
The implied enterprise value of the combined company is $1.2bn (£910m).
Corcentric’s B2B payment network includes 45,000 buyers and 1.4 million suppliers.
As the flywheel turns
Speaking on a conference call on 10 December, the same date the deal was announced, Corcentric executives spoke about the “flywheel effect” the company has been able to achieve over the years on the proprietary network it created. The flywheel effect is a popular term coined by author Jim Collins in the business book Good to Great (2001). It refers to small victories building on each other to gather momentum that propels growth.
Matt Clark, president and chief operating officer of Corcentric, said a single business customer can add hundreds or even thousands of suppliers to its B2B network, whether they are turning to Corcentric for advisory services, sourcing and payments software, or to have their orders converted into cash (in many cases, Corcentric is willing to take on the role of creditor).
“This creates a powerful flywheel effect where a proprietary B2B payment network continues to grow exponentially, and we become the hub for more and more B2B transactions, positioning us to become the pre-eminent B2B payments network of networks much like a Visa or Mastercard has done in the B2C space,” Clark said.
Single pane of glass
Clark added that the complex nature of B2B payments causes companies to struggle with managing cash flow while dealing with inefficient processes and “stitched-together point solutions,” which in turn causes them to seek a comprehensive solution that enables them to “run their business through a single pane of glass.”
“Through our software, payments, and advisory capabilities, we have the ability to get multiple bites at the apple all at once if we are providing a turnkey full-suite solution, or over time in a land-and-expand fashion,” Clark said.
In terms of growth opportunities, Concentric is eyeing the $100bn of transactions flowing through its platform as a potential wellspring of new revenue. The vast majority of those invoices and purchase orders – about $97bn – are from businesses that are only using Corcentric’s software, but not its payment capabilities. Migrating these existing customers’ payments to Corcentric could substantially expand revenue.
$182m gross proceeds
The North Mountain Merger SPAC raised $132.25m in its initial public offering of September 2020, and there is also a $50m private investment in public equity (PIPE) from investors including Wellington Management and Millais Ltd. The merger will provide $182m in gross proceeds to Corcentric, assuming there are no redemptions. The boards of directors of both Corcentric and Blue Mountain have already approved the transaction, which is expected to close in 2022’s second quarter.
North Mountain Merger is led by CEO Chuck Bernicker, who was formerly the CEO of payment processor CardConnect.
Corcentric, which is headquartered in Cherry Hill, New Jersey, was founded by Douglas Clark in 1996. It was originally called Ameriquest Transportation and Logistics Resources Corp. and operated primarily as a leasing and logistics service for fleet management, as well as a group purchasing organisation (GPO). In 2002, Ameriquest acquired Corcentric Collective Business Systems, and by 2018, both entities were unified under the single banner of Corcentric.
“Our vision was to create a model that would serve both buyers and suppliers utilising a combination of software, services, and payment capabilities,” Doug Clark said on the 10 December conference call. “The goal was to simplify integration, improve efficiencies and accuracy, and bring value to both sides of all transactions in the B2B ecommerce ecosystem.”
In recent years, Corcentric has made strategic acquisitions to enhance its business-to-business services. In 2018, it purchased Source One, a tech company offering sourcing and procurement solutions. Then in 2019, Corcentric acquired Determine, which handles the automation of the procurement process from end to end, including spend management, strategic sourcing, vendor management, purchasing, performance management and accounts payable. Also in 2019, Corcentric bought Netsend, a company that offers electronic invoicing.