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Saskatoon-based Vendasta Technologies Inc. has formally pulled plans to go public on the Toronto Stock Exchange and has instead raised $119.5-million in a private financing led by New York’s Lugard Road Capital.

Vendasta, which sells digital tools to companies that serve small businesses, filed to go public 10 weeks ago, laying out plans to raise $100-million at $14 to $16 a share. However, Vendasta had difficulty filling out its order book from institutional investors amid a market swoon that cut valuations of tech stocks. That downturn prompted several other companies that went public this spring to slash their deal sizes and offering prices to complete their IPOs.

“There’s a lot of [companies who filed to go public] who changed their pricing range; we just didn’t want to do that,” said Vendasta chief executive Brendan King.

Instead, Vendasta began talking to Lugard, an affiliate of U.S. hedge fund Luxor Capital Group, which expressed strong interest in Vendasta even before the offering process began and offered to lead a private capital raise if the company abandoned the IPO. Lugard was also the first investor to commit to the IPO, a source familiar with the transaction said.

When it started to look like the IPO was in trouble, Vendasta shifted plans to pursue a private financing instead, with Lugard committing to a lead position early on. Vendasta was then able to complete the financing at terms valuing the company at the low end of what it was seeking with the IPO – roughly in the range of $550-million to $600-million – rather than cutting its IPO price and going public at a lower valuation in an uncertain market, the source said.

The Globe And Mail is not identifying the source because they are not authorized to speak publicly about the matter.

Mr. King said: “We saw the IPO market start to change a bit so we said, ‘We really like [Lugard], they like us, we’re getting the valuation we want, let’s take that … . We felt this was the best option for us.” He declined to comment on the company’s valuation, but said he was happy with the process and outcome, which enables the company to continue building “the operating system of choice” for small businesses, hire 150 people in the next year and possibly pursue acquisitions – and perhaps try public markets again later.

“We didn’t have a negative experience with this,” Mr. King said. “I felt we met a lot of great investors who were super excited about our business and it was mostly a positive experience.”

Other investors in the deal include Nicola Wealth, a Vancouver-based wealth management firm that backs one of Vendasta’s largest investors, Vanedge Capital, and Canadian Business Growth Fund, which led a $40-million financing of Vendasta two years ago. The latest financing is the largest private investment for a Saskatchewan-based technology company, eclipsing the previous record it set in 2019. Vendasta was advised on the pulled IPO and the completed private deal by CIBC Capital Markets, TD Securities and National Bank Financial.

“We are thrilled to be partnering with the Vendasta team as they continue to revolutionize how [small and medium businesses] discover, access, purchase and ultimately interact with software to better their businesses,” Lugard partner Doug Friedman said in a statement.

Vendasta has more than 500 employees and generates about $50-million in recurring annual revenue by offering tools that help small businesses speed up digitization efforts in areas such as e-commerce, remote collaboration and online learning. It provides marketing automation, customer relationship management and billing software to resellers that, in turn, market the tools to small businesses.

Vendasta booked $42.6-million in revenue in 2020, up 23 per cent for two years in a row. It has 43,000 registered “channel partner” customers, 2,681 of whom are paying. The company lost $14.8-million in 2020, compared with a $9.1-million loss in 2019.

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