Pennsylvania fintech Cantaloupe has acquired Three Square Market (32M) in western Wisconsin for $41 million in an effort to expand in the micro market industry and grow its presence overseas.
32M’s headquarters is located in River Falls — about 40 miles east of Minneapolis — but it also has offices in the U.K. It provides software and self-service kiosk-based point of sale and payment solutions that power the micro market industry — which Cantaloupe described as a high-growth area. That includes self-service kiosks, smart coolers and cloud-based software.
Cantaloupe (Nasdaq: CTLP) is a Malvern, Pennsylvania, digital payments and software services company focused on cashless and mobile transactions in the self-serve retail markets — such as vending machines.
“The acquisition of 32M, with its expansive portfolio of micro-market technology and broad geographic footprint, immediately accelerates two of our most important strategic growth priorities,” Cantaloupe CEO Ravi Venkatesan said in a statement. “32M is already an integrated partner of our Seed Markets software platform, which will enable Cantaloupe to capture additional revenue synergies through cross-sell and upsell opportunities throughout our combined customer base. We are now well positioned as a best-in-class technology provider for the accelerating self-service commerce industry."
Venkatesan said the acquisition builds on what he described as the strong organic growth the company is experiencing in its core business. “This combination will accelerate our organic top line growth while also expanding our margins, offering attractive financial returns to our investors,” he said. “We believe that this combination also enhances the value and attractiveness of our company for future partners and strategic opportunities.”
Cantaloupe said the deal expands its micro market presence by adding nearly 3,000 locations across North America and international markets including the U.K., Sweden and Romania. It also increases direct salesforce and customer service teams in both the U.S. and U.K., generates opportunities for revenue synergies through converting current 32M customers to Cantaloupe’s Seed Markets software platform — which focuses on increasing efficiency and driving greater revenue — as well as cross-selling 32M’s micro market technology to Cantaloupe’s existing food and beverage customers.
The company believes the deal will enhance its revenue growth and EBITDA margins immediately.
32M president Tony Danna said in a statement that the deal will give his company access to Cantaloupe’s more than 25,000 customers.
“We can now better leverage Cantaloupe’s Seed platform with our existing customers, both in the U.S. and other geographies, and expect to benefit from a combined salesforce to help our products reach more customers,” Danna said.
The $41 million purchase price was funded with 90% cash and 10% stock. The stock consideration is subject to a two-year vesting schedule. Cantaloupe said it has funded the cash portion with $25 million of debt from its existing credit facility and existing cash on hand.
32M is estimated to produce $19 million of revenue with EBITDA margins exceeding 20% for calendar year 2022 on a standalone basis.
This is Cantaloupe’s first acquisition since Ventatesan replaced the retiring Sean Feeney as CEO in October. In an interview before taking over as CEO, he said that the company could slow its growth to reach profitability faster or keep growing and delay that process, but he seemed focused on the second approach.
Piper Sandler & Co. served as financial advisor and King & Spalding served as legal advisor to Cantaloupe.
