Two cookies, Image credit pixabay/pezibearLast week Sovos made two acquisitions to strengthen its claim as the leading global solution for tax. The first is the acquisition of Turkish based Foriba. This will see it strengthen its VAT and e-invoicing solutions.

The second is Eagle Technology Management (ETM). It provides statutory financial reporting and insurance premium tax software to insurers. ETM also provides unclaimed property reporting solutions and services to financial institutions, corporations and insurers in the United States. Sovos disclosed none of the financial terms of either agreement.

The tax software market is set to rise by a CAGR of 10.5% according to Transparency Market Research Analysis from a 2017 figure of $2.819 billion in the US alone. However, Sovos’ claim to be the market leader is not yet backed up by market watchers G2.

While the company is listed it does not yet appear on any of the category grids it belongs to. These are Best Sales Tax Compliance Software, Best Corporate Tax Software and Best GRC Platforms Software. This may, however, be due to a lack of software reviews by customers or a lack of commercial engagement between Sovos and G2, or a combination of both.

Foriba helps international growth

Both deals are significant. Foriba provide solutions to a mature e-invoicing market. Turkey deployed e-invoicing in 2014. With other countries including Spain, Hungary, Portugal, the UK and Italy looking to create similar compliance requirements, the acquisition is timely. It will also be able to use the technology to strengthen its presence in Latin America, where rules are already in place. The Foriba periodic VAT reporting will also be useful in other geographies. It should also help place Sovos higher on the G2 grids once rolled out.

Andy Hovancik,President and CEO Sovos Compliance (Image credit Linkedin)
Andy Hovancik,President and CEO Sovos Compliance

Andy Hovancik, CEO, Sovos commented: “By 2025, companies in VAT economies are expected to exchange more than 75 percent of all invoices electronically with tax administrations in real time or very shortly after the invoice-exchange process.

“Sovos’ acquisition of Foriba, along with other recent investments, helps us safeguard customers as countries around the world adopt e-invoicing, e-archiving and e-receipt regulations for B2B and B2C transactions.

ETM extends reach into Financial and Insurance sector

The acquisition of ETM provides Sovos with relationships into more than 6,500 companies. 1,500 are in the insurance sector while the remainder use the ETM unclaimed property platform connecting businesses to 36 state treasuries. There is no comment about how or even whether Sovos will look to integrate the technologies from these different solutions in either press release. That is a challenge that it may need to solve in order to reduce some of its costs.

Hovancik commented: “ETM has a history of innovation in the insurance space, and its management team helped create the core markets the company now leads. ETM’s technology and its passionate staff extend our ability to help customers manage more of their critical tax and regulatory demands, safeguarding their businesses from burden and risk.”

Enterprise Times: What does this mean

With the help of its PE backer Hg, Sovos is building a significant company that is challenging Avalara and Vertex O in the mid and large enterprise market respectively. Historically, Avalara has produced ERP integrations that enable companies to deliver accurate sales tax, invoicing and reporting in many geographies, However, while Sovos is still catching up on the integrations it is acquiring businesses that deliver more of the reporting than Avalara currently does. Those acquisitions have included Invoiceware, Paperless and TrustWeaver as well as Foriba and ETM.

Companies will not want to pay for both solutions. This may lead to these two companies battling it out for dominance in the market. Avalara will need to look to improve some of its reporting engines in some geographies to keep pace. However, the acquisitions that Sovos is now making may give it an advantage in certain regions and industries if there is no other solution available. The question is whether by centralising the different systems they are able to maintain the supporting organisation in a profitable way.

There is also another consideration. As Sovos strengthens its share of the US and international markets, private equity Hg may look to exit. That could be through an IPO or sale. However, it will need to demonstrate growth through both winning new customers and cross selling its solutions if it wants to IPO.


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