Vertex Inc. a global provider of tax technology solutions, announced the acquisition of ecosio, a B2B integration provider specializing in electronic data interchange (EDI) and e-invoicing. The closing is pending customary Austrian regulatory approval.
The acquisition advances a shared vision to accelerate global commerce and deliver a single, scalable platform for automating business transactions and managing indirect tax reporting and e-invoicing compliance. With the increasing prevalence of real-time and near real-time digital tax reporting mandates, e-invoicing is rapidly evolving into a crucial requirement for businesses operating globally, across multiple jurisdictions.
Integrating ecosio’s cloud-based, scalable global network with Vertex’s best-in-class indirect tax solutions will enable customers to facilitate the creation, exchange, and clearance of jurisdictionally compliant e-invoices and seamlessly reconcile these invoices with their periodic filing requirements. The combined solution will aid companies in overcoming obstacles to geographic expansion and improve the efficiency of their compliance and reporting operations.
“By acquiring ecosio’s advanced technology and their team's extensive e-invoicing and EDI experience, we are committed to delivering a differentiated global compliance solution that simplifies both e-invoicing and VAT complexities,” said Vertex CEO David DeStefano. “E-invoicing has emerged as one of the most rapidly growing challenges confronting global businesses, and with several large economies soon to adopt new requirements it makes this transaction a logical next step for Vertex to unlock additional value for our customers.”
Continuous compliance has become a difficult task for businesses due to the proliferation of VAT reporting requirements and e-invoicing mandates across Europe and the world. The combination of Vertex and ecosio will result in a comprehensive global solution with reliable, end-to-end indirect tax reporting and Continuous Transaction Controls (CTC) capabilities to mitigate the risk of noncompliance. This streamlines the entire compliance lifecycle from tax determination and periodic reporting with complex CTC requirements and automated B2B communication.
“This new endeavor with Vertex is a strategic move that will significantly enhance our ability to deliver exceptional value to our customers,” said ecosio Managing Director Christoph Ebm. “Our shared vision for the future and commitment to growth makes this alignment an ideal fit. By combining our complementary products and mutual values, we'll create new opportunities and expand our global reach.”
Strategic and Financial Benefits of the Proposed Acquisition
Under the terms of the agreement, the acquisition includes an upfront cash payment of $69 million as well as a targeted earn-out of $76 million in cash and $35 million of Vertex shares, based on ecosio achieving certain financial performance targets over the next three years, subject to adjustments pursuant to the terms of the purchase agreement. Vertex will utilize cash on hand to fund the upfront cash payment.
Closing is subject to local regulatory approvals and expected to take place by the end of the third quarter of 2024.
Vertex believes acquiring ecosio will provide significant benefits to stakeholders of the combined company, including:
- Significantly Expands Market Opportunity: The e-invoicing market is large and growing, fueled by legislation and an increasingly complex compliance environment for companies to navigate. By extending its leadership into e-invoicing through the acquisition of ecosio, Vertex expects to expand its market opportunity with considerable upside opportunities as the Company helps customers navigate evolving compliance mandates globally.
- Advances International Growth Strategy: Today, ecosio directly supports Continuous Transaction Controls (“CTC”) and B2G mandates globally. The business’ opportunity is rapidly expanding as new countries have currently adopted or are expected to adopt CTC mandates. To address these requirements, customers are seeking solutions that simplify their returns and reporting processes. Vertex expects to capitalize on this demand by leveraging ecosio’s e-invoicing solutions for existing customers and as an entry point for new customer acquisition.
- In-Demand, Strategically Aligned Solutions to Manage Tax Compliance in the Digital Era: CTC and e-invoicing are key components in streamlining compliance processes and ensuring timely and accurate reporting. Through this transaction, Vertex will deliver a seamless, end-to-end compliance platform with a scalable, highly available open business network that will enable continuous compliance.
- Growth and Financial Impact: The transaction is expected to unlock additional value as the combined company supports customers at more points through their compliance and electronic data interchange processes globally. Vertex expects that deepening and expanding customer relationships will drive increased revenue growth. ecosio is anticipated to contribute approximately $15 million in revenue in the first 12 months post-closing. Due to incremental R&D investments in product integrations, enhancements, and additional e-invoicing country support, ecosio will be modestly dilutive to profitability in the first two years after closing. The transaction is expected to be accretive to profitability in the third full year after closing.
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