The Pushpay Holdings Ltd (ASX: PPH) share price fell around 10% today on news the donation and church management software business is now unlikely to be taken over.
Shares in the ASX tech company closed the day 9.77% lower at 97 cents a share.
For months, there has been a question over whether Pushpay was going to be acquired.
Takeover not likely to happen
According to reporting by The Australian, private equity group BGH Capital and "at least one other party" have been interested in buying the business.
Goldman Sachs has been advising Pushpay through this process, though it was certainly not guaranteed that a takeover was going to happen.
There has been hefty volatility on share markets in recent months as investors get used to higher interest rates while central banks try to control the strong inflation being experienced around the world.
Lower earnings and multiples
Not only are businesses now having challenges in relation to their costs – such as wages and rent – but investors are now seemingly offering a lower multiple for the earnings. This is also called the price/earnings (P/E) ratio.
The Australian reported: "BGH Capital, advised by Craigs, and global fund Sixth Street have an interest in 20.3% of Pushpay shares. The likely scenario is that BGH Capital and Sixth Street have returned to the negotiating table with a lower price, which is not to the liking of Pushpay's board."
With the likely end of a potential takeover, the Pushpay share price has dropped 23% this year and it's down 27% from the end of May 2022.
Why do interest rates and inflation matter?
As Warren Buffett once said about interest rates:
The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature…its intrinsic valuation is 100% sensitive to interest rates.
Latest Pushpay result
For the year ended 31 March 2022, Pushpay reported that its operating revenue rose by 13% to US$202.8 million. Excluding Resi Media, Pushpay increased operating revenue by 6% to US$190.6 million. Net profit after tax (NPAT) went up 7% to US$33.4 million.
In FY23, the company is expecting operating revenue growth of between 10% to 15%. It's also expecting a "strong growth outlook from FY24 onward".
