Descartes acquires Sellercloud for $110MM. Descartes announced yesterday the acquisition of U.S.-based Sellercloud, an omni- channel e-commerce solutions provider focused on small/mid-market retailers, distributors, and manufacturers. Descartes is paying $110MM (cash) along with a maximum earn-out of $20MM (cash, to be paid in FY26 and FY27) based on the achievement of revenue targets in the first two years post-acquisition. Other financial metrics were not disclosed in the release. We estimate takeout at ~5.5x EV/S (implying revenues of ~$20MM), which is higher than Descartes' average takeout multiple over the last 10 years (~4.2x). We believe Sellercloud is profitable (likely EBITDA margins in the mid-teen range). Post-acquisition, we expect profitability to expand with continued revenue growth, cross-selling, and cost synergies to achieve Descartes' target IRR range of 15-20%.
Acquisition complements Descartes' e-commerce portfolio. Sellercloud's integrated e-commerce suite helps merchants manage inventory and orders through synchronizing, planning, and managing inventory levels across multiple sales channels along with routing orders to better manage picking, packing, shipping, and returns. The acquisition complements Descartes' existing e- commerce shipping, fulfilment and warehouse management solutions and previous e-commerce acquisitions including XPS, ShipRush, pixi, and Peoplevox.
Capital deployed on acquisitions is now more than double last year. Descartes has now deployed $298MM capital on five acquisitions (OCR, ASD, BoxTop, MyCarrierPortal, Sellercloud) in FY25, which is more than double the $144MM deployed on acquisitions in all of FY24. Looking ahead, we believe that Descartes is well-positioned to sustain a strong pace of acquisitions. Descartes is well capitalized with $245MM net cash as of Q2 and a $350MM untapped credit facility, while we forecast the company will generate $283MM FCF over the next 12 months. We estimate every $200MM deployed on acquisitions is ~8% accretive to EPS.