Apr 18, 2022 · 19m · top-founders
The Math Behind the $360m Sage Paid to Acquire BrightPearl
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Conversations with Nathan Latka, Brightpearl CEO Derek O'Connell explains how he led a six-year turnaround of the retail software company, culminating in a $360 million acquisition by enterprise giant Sage.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 36.7% of the talking time here. How this is scored →
Nathan as informed peer 5.8 Guest teaching 2.4 Guest disagreement 1.2 Nathan pushing back 2.8
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:27 Derek disputes cap table calculation
Derek pushes back on Nathan's equity deduction, insisting Sage only acquired 10-11% rather than the 17% indicated by transaction disclosures.
Hardest push from Nathan ▶ 14:43 Nathan presses on public regulatory figuresNathan refuses Derek's estimates, citing Sage's own public filings stating they bought an 83% remaining stake to prove they previously owned 17%.
Biggest teaching moment ▶ 7:03 Derek explains secondary fund primary investmentsDerek educates Nathan on how secondary specialist funds bought out an expiring fund's position while injecting fresh capital directly onto the balance sheet.
Nathan holds their own ▶ 14:43 Nathan catches cap table discrepancy using financial dataNathan demonstrates mastery over the M&A numbers by catching an inconsistency in the guest's cap table breakdown and forcing Derek to apologize for the oversight.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| The Turnaround Journey and Growth Trajectory | 6 | 2 | 1 | 2 | Nathan tracks historical ARR growth and probes into the acquisition metrics for Inventory Planner. Derek openly shares valuation multiples and deal structure terms. | |
| Cap Table Restructuring, Secondary Funds, and Series C Funding | 6 | 4 | 1 | 3 | Nathan digs into funding rounds and secondary transactions. Derek clarifies that while secondary funds invested, all capital went directly onto the balance sheet rather than cashing out equity. | |
| Spillover PE Bidding and the Inbound Sage Acquisition | 4 | 3 | 1 | 1 | Derek explains the dynamics of runner-up private equity firms driving inbound acquisition interest after losing a competitor's deal. Nathan lets Derek recount the story uninterrupted. | |
| Sponsor Break: Paragon Embedded Integrations | 8 | 2 | 2 | 7 | After an ad read, Nathan breaks down the multiple arbitrage of the buyout and challenges Derek on Sage's prior cap table percentage using public regulatory filings, compelling Derek to concede an error in his math. | |
| Post-Acquisition Execution and Distribution Inside Sage | 5 | 1 | 1 | 1 | Derek discusses integration strategy inside Sage and answers the rapid-fire questions, while Nathan summarizes the founder's multi-year turnaround. |
Statements from this episode (13)
Brightpearl's revenue grew from $12.8M in 2019 to $30M in 2021
“Yeah, we ended 2019 at 12.8. Then the next year, 2020 went to eighteen million. So that was about 39, 38% growth. And then in 21, just gone, we got to thirty million, which was 63% growth year over year.”
Brightpearl's $30M revenue in 2021 included $4.5M from an acquisition
“So organically Brightboro got to 25 and a half and then the four and a half came from the acquisition that we made. So the group got to thirty million at the end, which was key.”
Inventory Planner grew from $2.4M to $4.5M in revenue during acquisition
“So that business is growing at 70%. When we sent in the LOI, the letter of intent we have, we obviously had them growing at 70%. They were on revenue at 2.4. They ended the year at four, 4.5.”
Brightpearl paid a 3.1x revenue multiple to acquire Inventory Planner
“The multiple that we paid cause they were pre-scale. Was around about 3.1 times 3.1 revenue because they were subscale and they were technology only team”
Inventory Planner buyout was 70% cash upfront, 30% for technical remediation
“No, it was 7030 because the remediation list was very small. It was a known, you know, it's just pretty tight, well-written code base. So yeah, 7030.”
Brightpearl executed an internal down round to top up employee option pool
“We did do a down round, like in terms of a revalue of bride pro we had to, and the primary driver of that was to ensure that we could top up the option pool for the employees and make sure that they all came along for the ride and every share was equal.”
Brightpearl raised a $30M round led by strategic investor Sage
“And then on top of that, we brought in a strategic investor, which was called Sage. And altogether we raised thirty million about 14 months ago with those guys.”
Brightpearl raised its $30M strategic round at a $130M valuation
“Yeah. A little bit lower. It's around about one 30.”
Brightpearl's team owned just over 16% of the company after Series C
“It was just over 16%, just over like clean.”
Brightpearl planned to raise a $100M-$120M round before the Sage buyout
“So we had always had a plan in early 20, 22, we'd go to market and raise a hundred and twenty million dollars. That was very clear to the board. So it was a two stage process. Thirdly in, get a product out to market with Sage and then do the one 20, early 20, …”
Sage acquired Brightpearl to build a retail solution to rival NetSuite
“And the reason why Sage bought us at the end of the day is they compete with NetSuite. So do we. But it's no secret that if you go to their website, you don't see a sector specific solution for retail, but obviously we are a sector specific solution for retail…”
Sage acquired Brightpearl for a $360M enterprise value plus retention packages
“Three 60 enterprise value, and then some separate retention stuff on top, but enterprise value in terms of equity was three 60, which everyone was very happy with.”
Partnering beats building custom accounting tools in a commoditized software market
“I wanted to raise money to build a better accounting solution within Brideboro specifically designed for retail. But when I looked at it, the cost of doing that and having a clear idea of what the strategy was to win in a highly commoditized market didn't real…”