PropTech Acquisition Corporation
PROPOSED BUSINESS COMBINATION: Porch.com
ESTIMATED CURRENT FUNDS in TRUST: $173.3 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.04*
ENTERPRISE VALUE: $523 million
*SPACInsider estimate
PropTech Acquisition Corp. proposes to combine with Porch.com, a leading software and services platform for the home inspection and home service industries. This transaction is expected to have an implied enterprise value of $523 Million, consisting of an estimated equity value of $728 million and $205 million in cash and no debt, assuming no redemptions of PropTech public stockholders. Upon closing of the transaction, PropTech will be renamed Porch.com, Inc. and is expected to remain listed on the Nasdaq Capital Market under the new ticker symbol “PRCH.”
Seattle-based Porch, the vertical software platform for the home, provides software and services to more than 11,000 home services companies such as home inspectors, moving companies, real estate agencies, utility companies, and warranty companies. Through these relationships and its multiple brands, Porch provides a moving concierge service to homebuyers, helping them save time and make better decisions on critical services, including insurance, moving, security, TV/internet, home repair and improvement, and more.
Porch delivers software and services through several wholly-owned brands, including Inspection Support Network (ISN), Elite Insurance Group, HireAHelper and Porch.com. In 2019, Porch processed approximately $2.2 billion of gross services volumes through its platform.
Porch Investment Highlights
- Access to Valuable Demand: Approximately 65% of all U.S. homebuyers are processed through Porch’s platform via its integrated software users.1 Approximately 27%2 of all U.S. homebuyers are introduced to Porch’s “Moving Concierge” six weeks prior to their move when most major purchasing decisions are made, providing Porch a distinct advantage in engaging with these high-value consumers.
- Defensible Moat Provides Sustainable Advantage: The early access provided by Porch’s software platform allows it to deliver services efficiently across the lifetime of the home, from pre-move and move-in, to maintenance and improvement.
- Large Addressable Market: Porch competes in a total U.S. addressable market estimated at more than $220 billion. As the company pursues other opportunities in the home services market, including expanding into other home services verticals, Porch’s potential addressable market will continue to grow.
- Rapid Expected Revenue Growth: Pro forma 2018 revenue (excluding certain divested businesses) was $36 million and is projected to be $120 million in 2021, a 49% compounded annual growth rate.
- Strong Unit Economics: Porch has innovated with a differentiated software pricing model, moving from traditional software-as-a-service (SaaS) fees to monetizing access to consumers provided by the platform, driving significantly more value than the traditional SaaS pricing model.
- Attractive Margin Profile: Strong unit economics are driving high margins. Projected 2020 gross margin is expected to be 78% and Porch management anticipates being profitable on an adjusted EBITDA basis in 2021.
1 U.S. homebuyer data sourced from U.S. Census Bureau and National Association of Realtors (for the August 2019-January 2020 period).
2 Based on percentage of U.S. homebuyers during August 2019-January 2020 period with respect to which Porch had call and marketing rights.
TRANSACTION SUMMARY
The aggregate consideration to be paid in the Merger is $471,500,000
- The combined company will have an estimated post-transaction enterprise value of $523 million, consisting of an estimated equity value of $728 million and $205 million in cash and no debt, assuming no redemptions of PropTech public stockholders.
- Cash proceeds raised will consist of PropTech’s approximately $174 million of cash in trust (before redemptions) and an additional $150 million private investment at $10.00 per share.
- The net proceeds raised from the transaction will be used to support Porch’s working capital, pay down debt and fund expansion through acquisitions.
- Porch’s growth strategy is expected to generate estimated revenue and adjusted EBITDA of $120 million and $7 million, respectively, in 2021, exclusive of any accretive benefits from M&A activity made possible by this transaction.
- Current Porch management, employees and existing shareholders will roll 92% of their existing equity holdings into equity of the combined company.
PIPE
- $150 million private investment at $10.00 per share.
EARNOUT
There is also an earnout included in this transaction with the Company receiving an aggregate of 5,000,000 restricted PTAC Common Shares based on the following:
- one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $18.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading Day period,
- one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $20.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading Day period, and
- one-third (1/3) of the Earn Out Shares will vest if the closing price of the PTAC Common Shares is greater than or equal to $22.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading Day period, in each case, prior to the expiry of three (3) years from the Closing (the “Earn Out Period”).
In addition, if there is a sale of PTAC prior to the expiration of the Earn Out Period that will result in the holders of PTAC Common Shares receiving a price per share equal to or in excess of the applicable price per share thresholds described above, then Earn Out Shares will vest in connection with such sale of the Company in the manner set forth in the Merger Agreement.
NOTABLE CONDITIONS TO CLOSING
- The Company also has the right to not consummate the Merger in the event the aggregate cash proceeds available in PTAC’s trust account, together with the cash proceeds received by PTAC at Closing (including financing from the PIPE Investors), is less than $100,000,000 (after giving effect to payments in respect of redemptions).
NOTABLE CONDITIONS TO TERMINATION
- If the Transactions have not been consummated on or prior to December 31, 2020 (subject to extensions for delays as set forth in the Merger Agreement).
ADVISORS
- Financial Technology Partners and FTP Securities (FT Partners) is serving as exclusive strategic and financial advisor to Porch.com
- Sidley Austin LLP is acting as legal advisor to Porch.
- Cantor Fitzgerald & Co. is acting as sole placement agent to PropTech.
- Cantor Fitzgerald & Co. and Northland Securities, Inc. are acting as capital markets advisors to PropTech
- Kirkland & Ellis LLP is acting as legal advisor to PropTech.
- Gateway Group is acting as investor relations and public relations to both PropTech and Porch.
- DLA Piper LLP (US) is acting as placement agent counsel.
PROPTECH MANAGEMENT & BOARD
Executive Officers
Thomas D. Hennessy, 34
Chairman, Chief Executive Officer & President
Mr. Hennessy has served as the Managing Partner of Real Estate Strategies of Hennessy Capital LLC since July 2019. From September 2014 to July 2019, Mr. Hennessy served as a Portfolio Manager of ADIA, the largest global institutional real estate investor, where he was responsible for managing office, residential, and retail assets in the U.S. totaling over $2.1 billion of net asset value or $5.0 billion of gross asset value. While at ADIA, Mr. Hennessy executed over $475 billion of equity commitments to U.S. acquisitions and developments and over $435 million of limited partner equity commitments to opportunistic real estate equity funds, real estate credit funds, and real estate technology venture capital funds. Mr. Hennessy also created and led ADIA’s PropTech investment mandate, which included committing equity to PropTech. From January 2011 to April 2014, Mr. Hennessy served as an associate at Equity International Management LLC, an opportunistic real estate private equity fund founded by Sam Zell, where he evaluated investments and structured equity investments in real estate operating platforms in emerging markets. From September 2009 to January 2011, Mr.Hennessy served as an associate for CERES Real Estate Partners LLC, a private investment management company. From June 2007 to June 2009, Mr. Hennessy served as an analyst in the investment banking division of Credit Suisse, where he focused on mergers and acquisitions for companies in the real estate, gaming, lodging and leisure sectors as well as public and private financings of equity, debt and structured products. Mr. Hennessy is the son of Daniel J. Hennessy, one of our advisors. Mr. Hennessy holds a B.A. degree from Georgetown University and an M.B.A. from the University of Chicago Booth School of Business.
M. Joseph Beck, 34
Co-Chief Executive Officer, CFO & Director
Mr. Beck has served as the Managing Partner of Real Estate Strategies of Hennessy Capital LLC since July 2019. From August 2012 to July 2019, Mr. Beck served as a Senior Investment Manager of ADIA, where he was responsible for managing office, residential, industrial and retail assets in the U.S. totaling over $2.7 billion of net asset value or $3.6 billion of gross asset value. While at ADIA, Mr. Beck executed over $2.2 billion of equity commitments to U.S. acquisitions and developments and over $400 million of limited partner equity commitments to opportunistic real estate equity funds and real estate credit funds. Mr. Beck also led an internal restructuring of a seven-asset, $3.5 billion gross asset value portfolio at the ADIA. From July 2008 to August 2012, Mr. Beck served as an analyst in the Investment Banking Division of Goldman, Sachs & Co., where he focused on mergers and acquisitions for companies in the real estate sector as well as public and private financings of equity, debt and structured products. Mr. Beck holds a B.A. degree from Yale University.
Board of Directors
Jack Leeney, 34
Director
Since September 2016, Mr. Leeney has served as a Founding Partner of 7 Global Capital, a growth stage venture capital firm, and is responsible for running the funds’ operations. Mr.Leeney led the firm’s investments in Cheddar, a digital-first new media company (sold to Altice USA, May 2019), Capsule Corp., an online pharmacy, and hims & hers, a health and wellness e-commerce brand and Jyve, a skilled economy job marketplace for the consumer packaged goods industry. Between April 2011 and December 2016, Mr. Leeney served on the boards of directors of Quantenna Communications, Inc. (NASDAQ: QTNA), DoAt Media Ltd. (Private), CinePapaya (acquired by Comcast), Joyent (acquired by Samsung), BOKU, Inc. (AIM: BOKU), Eventful (acquired by CBS) and Blueliv (Private). Previously, Mr. Leeney served as the Head of U.S. Investing for Telefonica Ventures between June 2012 and September 2016, the investment arm of Telefonica (NYSE: TEF), served as an investor at Hercules Capital (NYSE: HTGC) between May 2011 and June 2012 and began his career as a technology-focused investment banker at Morgan Stanley in 2007. Mr. Leeney holds a B.S. from Syracuse University.
Courtney Robinson, 35
Director
Since October 2014, Ms. Robinson has served as a Founding Partner of Advance Venture Partners LLC, a growth stage venture capital firm, and is responsible for the firm’s consumer investment practice. Ms. Robinson led the firm’s investments in Bellhops, a technology-enabledmoving service; Brandable, a portfolio of CPG brands; Curology, a personalized skincare provider; Modsy, an interior design marketplace; Rent the Runway, a subscription clothing business; and Sawyer, an education marketplace. Between December 2011 and October 2014, Ms. Robinson was a Founding Principal at American Express Ventures, the investment arm of American Express (NYSE: AXP), and before that, served as Director of Business Development at Plum District, a local commerce marketplace, between February 2011 and December 2011. She began her career as a technology-focused investment banker at GCA Savvian Advisors LLC in 2006. Ms. Robinson holds a B.A. from Columbia University.
Margaret Whelan, 47
Director
Since November 2014, Ms. Whelan has served as the Founder and Chief Executive Officer of Whelan Advisory LLC, a boutique investment banking firm focused on the residential real estate industry. In this role, she provides strategic and financial counsel to leaders of both public and private real estate companies in the U.S. and globally. From September 2013 to November 2014, she served as Chief Financial Officer of Tricon Capital Group Inc., a private equity firm specializing in residential real estate. Previously, she served in positions with JP Morgan Chase (2007 to 2013), UBS Financial Services Inc. (1997 to 2007) and Merrill Lynch & Co. (1995-1997). Between June 2015 and May 2019, Ms. Whelan served on the board of directors of Top Build Corp. (NYSE: BLD), as an independent director and member of the audit, compensation and nominating and governance committees. Since September 2017, she has served on the board of directors of Mattamy Homes, North America’s largest privately owned homebuilder. She also serves on the advisory boards of John Burns Real Estate Consulting and the Housing Innovation Alliance. Ms. Whelan holds a Bachelor of Commerce in Finance degree from the University College Dublin (Ireland).
Mark Farrell, 45
Director
Mr. Farrell serves as a Managing Director at Thayer Ventures, an early-stage venture capital firm with a strategic focus on the travel and transportation industry, which he co-founded in 2009. He leads the firm’s transportation investments, and currently serves on the board of directors of private companies. Mr. Farrell served as the 44th Mayor of San Francisco in 2018, and prior to his election as Mayor, served on the San Francisco Board of Supervisors from 2010 to 2018. From 2004 to 2009 Mr. Farrell served as a Vice President in the investment banking group at Thomas Weisel Partners, where he advised companies in the Internet & Digital Media sector, including the sale of MySpace to News Corp. (NASDAQ: NWSA), HomeAway’s purchase of VRBO, and the initial public offering of Thomas Weisel Partners. Prior to this, from August 2001 to February 2004, Mr. Farrell was a practicing attorney at Wilson Sonsini Goodrich & Rosati, advising growth companies on venture capital and M&A transactions. Mark holds a B.A. degree from Loyola Marymount University, a M.A. degree from University College Dublin (Ireland) and a J.D. from the University of Pennsylvania Law School.
Daniel J. Hennessy, 61
Senior Advisor
Daniel J. Hennessy is the Founder and the Managing Member of Hennessy Capital LLC, an alternative investment firm founded in 2013 that focuses on the industrial services, infrastructure services and real estate industries. Since March 2019, Mr. Hennessy has served as Chairman and CEO of Hennessy Capital Acquisition Corp. IV, or Hennessy IV (NASDAQ: HCACU). Mr. Hennessy has served as a director of SIRVA Worldwide Relocation & Moving since August 2018. From January 2017 to October 2018, Mr. Hennessy served as Chairman of the Board and Chief Executive Officer of Hennessy Capital Acquisition Corp. III, or Hennessy III, which merged with NRC Group Holdings, LLC, a global provider of comprehensive environmental, compliance and waste management services, now known as US Ecology, Inc. (NASDAQ: ECOL) and served as a director from January 2017 to October 2019. From April 2015 to February 2017, Mr. Hennessy served as Chairman and CEO of Hennessy Capital Acquisition Corp. II, or Hennessy II, which merged with Daseke in February 2017 and is now known as Daseke, Inc. (NASDAQ: DSKE) and since February 2017, has served as its Vice Chairman. From September 2013 to February 2015, Mr. Hennessy served as Chairman of the Board and Chief Executive Officer of Hennessy Capital Acquisition Corp., or Hennessy I, which merged with School Bus Holdings Inc. in February 2015 and is now known as Blue Bird Corporation (NASDAQ: BLBD), and previously served as a director from September 2013 to April 2019. From 1988 to 2016, Mr. Hennessy served as a Partner at Code Hennessy & Simmons LLC (n/k/a CHS Capital or “CHS”), a middle-market private equity investment firm he co-founded in 1988. Over a 25 year period, CHS invested $2.9 billion in nearly 400 operating companies. Mr.Hennessy has served as Chairman of the Board of Directors of various CHS portfolio companies that manufacture and/or distribute a broad array of products or provide services for the industrial, infrastructure, energy and packaging sectors. In 2009, EDH Properties, LLC, a family real estate investment entity for which Mr. Hennessy was the managing member, filed a petition for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. A plan of reorganization was confirmed by the court in 2010 and the lender received payment in full. Prior to forming CHS, Mr. Hennessy was employed by Citicorp from 1984 to 1988 as head of the Midwest Region for Citicorp Mezzanine Investments and Vice President and Team Leader with Citicorp Leveraged Capital Group. He began his career in 1981 in the oil and gas lending group at Continental Illinois National Bank (now Bank of America) where he was a Banking Officer. Mr. Hennessy holds a B.A. degree, magna cum laude, from Boston College and an M.B.A. from the University of Michigan Ross School of Business. Mr. Hennessy is the father of Thomas D. Hennessy, our Chairman of the Board and Co-ChiefExecutive Officer.
Greg Ethridge, 43
Senior Advisor
Greg Ethridge, since February 2019, has served as President, Chief Operating Officer and director of Hennessy IV. Since June 2019, Mr. Ethridge has served as Chairman of Motorsports Aftermarket Group, a designer, manufacturer, marketer, distributor and primarily e-commerce retailer of aftermarket parts, apparel and accessories for the motorcycle and power sports industry. Mr. Ethridge previously served as President of Matlin & Partners Acquisition Corporation from January 2017 to November 2018, at which time it merged with USWS Holdings LLC, a growth- and technology-oriented oilfield service company focused exclusively on hydraulic fracturing for oil and natural gas exploration and production companies and is now known as U.S. Well Services, Inc. (NASDAQ: USWS). He serves as Senior Partner of MatlinPatterson Global Advisers LLC, or MatlinPatterson. Prior to joining MatlinPatterson in 2009, Mr. Ethridge was a principal in the Recapitalization and Restructuring group at Broadpoint Capital, Inc. where he moved his team from Imperial Capital LLC, from 2008 to 2009. In 2006, Mr. Ethridge was a founding member of the corporate finance advisory practice for Imperial Capital LLC in New York. From 2005 to 2006, Mr. Ethridge was a principal investor at Parallel Investment Partners LP (formerly part of Saunders, Karp and Megrue), executing recapitalizations, buyouts and growth equity investments for middle market companies. From 2001 to 2005, Mr.Ethridge was an associate in the Recapitalization and Restructuring Group at Jefferies and Company, Inc. where he executed corporate restructurings and leveraged finance transactions and was a crisis manager at Conway, Del Genio, Gries & Co. in New York from 2000 to 2001. Mr. Ethridge has served a director of Palmetto Bluff Company, LLC, formerly a multi-asset class real estate developer known as Crescent Communities, LLC, a multi-class real estate developer, since June 2010. From 2009 until 2017, Mr. Ethridge served on the board of directors of FXI Holdings Inc., a foam and foam products manufacturer and served as its chairman from February 2012 until 2017. Mr. Ethridge has also served on the board of directors of Advantix Systems Ltd. and Advantix Systems, Inc., HVAC equipment manufacturers, from August 2013 until 2015 (for Advantix Systems, Inc.) and until 2018 (for Advantix Systems Ltd.). Mr. Ethridge holds a BBA and a Masters in Accounting from The University of Texas at Austin.