RGM Capital M&A Event: Bottomline Technologies (EPAY) Acquired By Thoma Bravo For $57 Per Share  December 17, 2021

This morning it was announced that RGM Capital portfolio company Bottomline Technologies (EPAY) is being acquired by private equity firm Thoma Bravo for $57.00 per share in cash. The purchase price represents a 16% premium to yesterday’s closing price and a 42% premium to EPAY’s unaffected stock price on October 19th (the day prior to the company’s announcement about adding shareholder representatives to their Board and forming a Strategy Committee).

EPAY is a multi-segment financial technology company that we have followed for several years. We researched the company more intensively in recent months as it was evident that the momentum of their high-growth B2B payments platforms (Paymode-X and PTX) was being masked largely by the revenue headwinds created by other EPAY product’s transition from on-premise to subscription revenue and the wind-down of certain legacy business lines. The company has a highly predictable business model which is over 90% recurring revenue through subscriptions, maintenance, and transaction fees, $125 million in cash on their balance sheet, and is sustainably profitable with roughly 20% EBITDA margins.

We felt that EPAY had very good assets yet was undervalued, and had multiple levers for shareholder value creation which included better segment disclosures and capital allocation, and potentially asset divestitures given their diverse product portfolio. Accordingly, we started a position in the company in mid-October in the high $30s. Shortly thereafter the company announced a reconstitution of their Board as the result of a settlement with two activist shareholders, and the formation of a Strategy Committee to evaluate shareholder value creation initiatives. The stock price appreciated on this news and we were therefore only able to build a 1.7% position in the Funds prior to today’s announcement.

The transaction values EPAY at approximately $2.6 billion and roughly 5.0x EV/Revenue (‘22E) and 24x EV/EBITDA (’22E).

Should the transaction close as expected in Q2 ‘22, it would represent our 45th company to be acquired since inception (47% M&A hit rate), and our seventh portfolio company to be acquired in 2021.

Please let us know if you have any questions, or if you would like to discuss our firm and investment philosophy in more detail.

Very best wishes.

Edward T. Calkins

RGM Capital, LLC

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Naples, FL 34109

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C: 239/404-6723

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