Lightspeed Arms Itself for Heavy-Duty Competition With Its Acquisition of ShopKeep

Lightspeed POS Inc. on Thursday acquired ShopKeep Inc., a payments and commerce provider, for $440 million in cash and stock. Under the terms of the deal, Lightspeed will pay $145.2 million in cash and issue 9.5 million subordinate voting shares. The deal is expected to close by Dec. 31. RBC Capital Markets acted as advisor to Lightspeed on the transaction.

The acquisition positions Lightspeed to compete more effectively with the likes of Fiserv Inc.’s Clover point-of-sale business and with Square Inc.’s tech offerings.

ShopKeep’s platform, which is used by more than 20,000 retailers, bars, and restaurants, enables businesses to accept any type of payment and provides core operations-management capabilities such as such automatic inventory tracking, employee management, and real-time sales reporting. 

“Up to now, LightSpeed has done pretty well competing against Clover and Square, but their offerings have not been quite up to par with those competitors,” says Jared Drieling, senior director of consulting and market intelligence for the Strawhecker Group. “ShopKeep brings additional performance capabilities and a strong presence among small and medium businesses and restaurants.

ShopKeep generated $50 million in revenue and $7 billion in gross transaction value for the 12 months ended Sept. 30.

The deal also reflects an ongoing trend of consolidation in the smart POS terminal market, Drieling adds. “ShopKeep is less of a hardware company and more of an integrated software player, which makes it attractive in today’s environment because their app adds value by having POS and operations management on a single platform,” Drieling says. “Merchants that also need to quickly pivot, such as creating an online presence during the pandemic, can do it with a Lightspeed or ShopKeep. That’s why there is a lot of buzz around the smart POS terminal market now.”

LightsSpeed, which went public in its native Canada in 2019 and in the United States in September, reported total revenue of $45.5 million for the second quarter of its 2021 fiscal year ended Sept. 30, a 62% increase year over year. Recurring software and payments revenue for the quarter totaled $41.1 million, up 62% from a year earlier. The increase was helped in part by the prior acquisitions of POS software providers Gastrofix and Kounta in January this year and October 2019, respectively. 

In addition, Lightspeed grew its customer base to more than 80,000 locations. Gross new customer locations were 68% higher than a year ago, the company says. The acquisition of ShopKeep will bring Lightspeed’s customer base to more than 100,000.

“We are honored to be growing alongside our merchants as they continue to adapt and serve their customers in safe and creative ways with the help of our technology,” Dax Dasilva, founder and chief executive of Lightspeed, says in a prepared statement. “Our focus on quickly delivering products to help our merchants respond to evolving consumer behavior has been an innovation multiplier.”