Organization and Nature of Business

9 Months Ended

Sep. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Business

Note 1 - Organization and Nature of Business

BTRS Holdings Inc., formerly known as Factor Systems, Inc. ("Legacy Billtrust"), utilizing the trade name Billtrust (the "Company” or “Billtrust”), was incorporated on September 4, 2001, in the State of Delaware and maintains its headquarters in Lawrenceville, New Jersey, with additional domestic offices and print facilities in Colorado and California, and international offices in Belgium, the Netherlands, Germany, and Poland.

The Company provides a comprehensive suite of order-to-cash software as a service ("SaaS") solutions with integrated payments, including credit decisioning and monitoring, online ordering, invoicing, cash application, and collections. In addition, Billtrust founded the Business Payments Network ("BPN") as part of its strategic relationship with VISA, Inc., which combines remittance data with business-to-business ("B2B") payments and facilitates straight-through payment processing. Billtrust primarily serves B2B companies and integrates the key areas of the order-to-cash process: credit decisioning, e-commerce solutions, invoice presentment, invoice payment, cash application, and collections workflow management, helping its clients connect with their customers and cash.

Proposed Merger

On September 28, 2022, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Bullseye FinCo, Inc., a Delaware corporation (“Parent”), and Bullseye Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Merger Sub” and, together with Parent, the "Acquiring Parties"), pursuant to which Merger Sub will, upon the terms and subject to the conditions set forth in the Merger Agreement, merge with and into the Company, with the Company surviving such merger as a wholly-owned subsidiary of Parent (the “Merger”). Parent and Merger Sub are each affiliated with the EQT X Fund.

Subject to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of Class 1 common stock of the Company, $0.0001 par value, and Class 2 common stock of the Company, $0.0001 par value (other than shares rolled over in accordance with the Merger Agreement, and shares of its common stock held by the Company as treasury stock), issued and outstanding immediately prior to the Effective Time (other than dissenting shares) will be cancelled and immediately converted into the right to receive $9.50 in cash, without interest and less any applicable withholding taxes.

The completion of the Merger is subject to several conditions beyond the Company's control that may prevent, delay or otherwise adversely affect its completion in a material way, including the approval of the Company's stockholders, the expiration or termination of applicable waiting periods, and the receipt of applicable approvals or consents under antitrust and competition laws and foreign investment laws of certain jurisdictions. Assuming the satisfaction of the remaining outstanding conditions set forth in the Merger Agreement, the Merger is currently expected to close in the fourth quarter of 2022 or first quarter of 2023. However, the Company cannot assure completion of the Merger by any particular date, if at all or that, if completed, it will be completed on the terms set forth in the Merger Agreement.

If the Merger is consummated, the Company’s securities will be de-listed from the Nasdaq Global Select Market and de-registered under the Securities Exchange Act of 1934 as soon as practicable following the Effective Time.

Under the terms of the Merger Agreement, the Company may be required to pay Parent a termination fee of $50.2 million if the Merger Agreement is terminated under certain specified circumstances, including the Company terminating the Merger Agreement to enter into a definitive written agreement with respect to a superior proposal that did not result from a breach of the non-solicitation provisions. The Merger Agreement additionally provides that Parent pay the Company a termination fee of $100.5 million under certain specified circumstances.

During the three and nine months ended September 30, 2022, the Company incurred $5.8 million in Merger related costs, primarily consisting of investment banking, legal, accounting, and other professional advisory fees, filing fees, regulatory fees, and other related costs. These costs were recorded in general and administrative expenses on the Condensed Consolidated Statements of Operations.

Business Combination Agreement

On October 18, 2020, as amended on December 13, 2020, South Mountain Merger Corp., a Delaware corporation (“South Mountain”), BT Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of South Mountain (“First Merger Sub”), BT Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of South Mountain (“Second Merger Sub”), and Legacy Billtrust entered into a Business Combination Agreement (the “BCA”), pursuant to which (i) First Merger Sub was merged with and into Legacy Billtrust (the “First BCA Merger”), with Legacy Billtrust surviving the First BCA Merger as a wholly owned subsidiary of South Mountain (“Surviving Corporation”), and (ii) the Surviving Corporation merged with and into Second Merger Sub (the “Second BCA Merger”, and together with the First BCA Merger, the “BCA Mergers”), with Second Merger Sub surviving the Second BCA Merger as a wholly owned subsidiary of South Mountain (such BCA Mergers, collectively with the other transactions described in the BCA, the “Business Combination”).

In connection with the execution of the Business Combination, on October 18, 2020, South Mountain entered into separate subscription agreements (“Subscription Agreements”) with a number of investors (“PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase, and South Mountain sold to the PIPE Investors, an aggregate of 20.0 million shares of South Mountain Class A common stock, for a purchase price of $10.00 per share and at an aggregate purchase price of $200.0 million, in a private placement (“PIPE Financing”).

As described in Note 3 - Business Combination & Acquisitions, the Business Combination and PIPE Financing closed on January 12, 2021 (the "BCA Closing Date"). The Business Combination was accounted for as a reverse recapitalization in accordance with the generally accepted accounting principles in the United States of America ("U.S. GAAP"). Under this method of accounting, South Mountain was treated as the “acquired” company for financial reporting purposes. For accounting purposes, Billtrust was the accounting acquirer in the transaction and, consequently, the transaction was treated as a recapitalization of Billtrust (i.e., a capital transaction involving the issuance of stock by South Mountain for the stock of Billtrust). Accordingly, the assets, liabilities, and results of operations of Billtrust became the historical financial statements of "New Billtrust", which was renamed BTRS Holdings Inc., and South Mountain’s assets, liabilities, and results of operations were consolidated with Billtrust beginning on the BCA Closing Date. All amounts of BTRS Holdings Inc. reflect the historical amounts of Billtrust carried over at book value with no step up in basis to fair value. After the Business Combination, the Company’s Class 1 common stock began trading on the Nasdaq Global Select Market under the ticker symbol "BTRS".