ASX-listed Earlypay is acquiring invoice financing fintech Timelio in a deal that delivers a major haircut for the startup’s investors.
The Melbourne fintech provides invoice and trade financing to Australian SMEs, but appears to have been on a downward trajectory for more than 12 months.
Cofounders Charlotte and Andrew Petris left Timelio in mid-2022. Charlotte Petris said at the time that she and her husband had “decided now is the right time to exit the business” they’d launched in 2015.
Timelio raised more than $12 million from investors, including $7.5 million from four existing shareholders: Thorney Investments, Wilbow Group, Riversdale Capital Funding and David Roseman, in August last year following the departure of the founders. The fintech banked $5 million in late 2016, with Alex Waislitz’s Thorney among its initial backers.
In early 2022, Timelio acquired the Bendigo and Adelaide Bank’s Invoice Finance business in a deal that included exclusive referral partnership agreement for invoice finance opportunities over three years. The merger took Timelio’s funding book to $100 million.
Announcing the deal, Earlypay (ASX: EPY) said the “bolt-on acquisition” adds around $40 million in Funds in Use (FIU) -$35 million from the core invoice finance product and $5 million FIU in trade finance. The acquisition includes selected customer receivables, IP, software, and other assets, while Timelio retains the cash balance released from existing warehouse funding structure.
The $3 million purchase price, in cash and EPY scrip includes a hold-back mechanism to contribute to post-acquisition credit losses.
While Earlypay gets a bargain, Startup Daily understands residual equity and assets remain with Timelio’s Convertible Note holders and shareholders, with $5m owed to convertible note holders and a further $2m or so to shareholders.
Earlypay CEO James Beeson said the acquisition supports their push to be Australia’s leading working capital financier.
“The additional scale in our core invoice financing product allows us to invest further in people and our market-leading software to better service Australian SMEs and their referrers,” he said.
“The addition of the Supplier Early Payment platform complements our existing invoice, equipment and trade financing products to offer SMEs a full suite of working capital solutions. We are also very pleased to have the talented Timelio team joining us to strengthen our capabilities.”
Timelio’s Supplier Early Payment platform enables larger businesses to pay their supplier invoices early to benefit from a small early payment discount on the value of the invoices.
Timelio GM Adam Pinkus said Earlypay’s two decades of experience supporting SMEs gave the fintech the ability to offer its customers the resources of a larger business.
“At a time when many SMEs are in search of working capital solutions, we will be able to provide our customers with ready access to the invoice and trade financing they require as well as additional products including equipment finance, invoice collection services and trade debtor protection,” he said.
Timelio’s invoice financing customers will maintain their existing relationship manager and experience no interruptions to funding.
Earlypay said it intends to grow the Supplier Early Payment business, which also offers potential cross-selling opportunities for the company’s existing invoice, equipment, and trade finance products.