Comment on OrderYOYO’s merger with German app smart

OrderYOYO announced on Friday, June 17th, that the company is joining forces with app smart GmbH (“app smart”), a fast-growing market leader within shop systems, POS-systems and digital infrastructure addressing delivery restaurants in Germany and Austria. The transaction values the share capital of app smart DKK 222m (based on last closing price per share of 6.75 DKK of OrderYOYO 2022-06-16), which will be financed via issuance of new shares in OrderYOYO to the sellers and a cash payment of DKK 22.3m. Closing of the transaction is expected to occur on July 1, 2022.

”Through the transaction, OrderYOYO extends the number of market leading positions in European countries from three to five, servicing more than 9,000 restaurant partners. Furthermore, the transaction creates several potential synergy effects, for example upsell potential, since app smart will leverage OrderYOYO’s marketing solutions and OrderYOYO intends to leverage app smart’s own POS system and create customer stickiness via combined offerings. The transaction is expected to be completed at 4.2x app smart’s reported ARR in 2021, which we consider to be an attractive ARR-multiple for a company that has a market-leading position in Germany and Austria and has delivered an average growth in ARR of 81% per year since 2019”, says Analyst Group.

The transaction

OrderYOYO and app smart have reached an agreement to combine the two companies in a transaction where OrderYOYO will acquire app smart, in which the app smart shareholders will become shareholders in OrderYOYO. OrderYOYO will acquire certain shares in app smart by way of a share transfer, and the remaining shares in app smart will be contributed in-kind into OrderYOYO in exchange for new shares in OrderYOYO. Payment to the sellers consists of 29,608,901 shares in OrderYOYO and DKK 22.3m in cash. Worth noticing is that the app smart shareholders will enter into lock-up agreements with OrderYOYO, meaning that 50% of the locked-up shares will be released January 2023, additionally 25% of the locked-up shares will be released July 2023 and the remaining 25% of the locked-up shares will be released January 2024, which instills confidence from current shareholders in app smart. The transaction is expected to result in a dilution of 34% for existing shareholders in OrderYOYO.

About app smart

app smart was founded in 2014 and has more than 120 employees located in Wiesbaden, Frankfurt. In addition to the company having a market-leading position in Germany and Austria, app smart has initiated a market entry into Switzerland and also has a minor position in Poland, which are new markets for OrderYOYO. As per May 2022, the company had more than 4,000 Restaurant Partners, app smart delivered annualized December 2021 ARR of DKK 53m and annualized December 2021 GMV of DKK 886m.

“OrderYOYO has updated the company’s outlook for 2022, subject to closing of the transaction. The combined company will target an annualized December 2022 ARR of DKK 175-190m (140-170m previously communicated). By using the midpoint in guidance, to illustrate a forward-multiple, and based on OrderYOYO’s market cap today (included the new shares), the combined company is trading at 3.5x ARR 2022E. This forward-multiple is lower than the average ARR-multiple in the Danish SaaS-sector (5.5), despite the fact that the combined company has a high historical ARR growth and has a market-leading position in five markets, we therefore believe that an investment in the combined company invites to an attractive risk-reward.

In connection with the announcement of the transaction, we have interviewed management and considering that app smart has grown its ARR with a CAGR of approximately 81% (2019-2021), it is our belief that the current guidance is conservative and leave room for focusing on the integration of the two companies”, says Analyst Group.