How Mercell grew by 73 million euros in 5 years

Mercell has had a fantastic growth journey over the past five years, increasing its Annual Recurring Revenue (ARR) 9 times by enhancing the ARR from EUR 9 million to EUR 82 million. Their unique business model sets them apart from their competitors and is crucial to their success story. In this interview, Mercell CEO Terje Wibe explains how Mercell succeeds with its growth strategy and keeps tapping into new markets.  

Taking on an external investor 

Terje Wibe was hired as the CEO of Mercell back in 2014. At that time, Mercell was well-positioned as an industry-leading procurement marketplace that ties buyers and suppliers together in Norway and Denmark. His vision and goal were to continue the growth journey, first across the Nordic market and subsequently throughout Europe. 

– At the beginning of 2018, I got a phone call from Magnus from Viking Venture. He said all the right things for our business, so I agreed to meet with him and his colleagues. Previously, Mercell had kept the door closed to external investors. However, from my first conversation with Magnus and the subsequent meetings with Viking Venture, I understood that bringing in Viking as an investor would result in many advantages for our employees, management, and owners, says Terje. 

A new management team and growth strategy

Viking Venture became the largest owner in Mercell in the summer of 2018. 

– With a new owner on board, we started the work on recruiting a new management team. Until then, the management basically consisted of the company’s founder and myself. Therefore, we needed to fill management roles within Product, Tech, HR, Sales and Marketing and Finance. We formed a plan for further growth, with acquisitions as an essential part of our growth strategy. In addition to strengthening our dual business model for organic growth, says Terje.

Acquiring companies to enter new markets

Mercell’s business model is built around an electronic marketplace where public buyers can connect with relevant suppliers. It is a dual business model where many buyers’ presence attracts many suppliers and vice versa. The acquisition strategy is, therefore, to identify potential companies in new markets with a large proportion of the public buyers using their solution. 

– The dual business model sets us apart from our competitors because we have income from both the buyer and supplier side. An example is when we bought the Finnish company, Cloudia, which had a substantial market position towards the buyers, but no supplier income. The benefit of acquisitions like these is the possibility for organic growth on the supplier side based on a solid foundation of public buyers already using the platform, continues, Terje.

Demanding integration processes

Undoubtedly, the acquisition strategy has helped Mercell scale fast. However, making 12 acquisitions in just over two years entails critical and demanding integration processes, and these processes affect large parts of their functional areas.

– These integration processes have entailed a lot of work and long days for several of our vital resources. The initial phase is always hectic for the finance and technical departments, ensuring the fastest possible transition into our systems and reporting. Afterward comes long-term and value-driven activities such as aligning sales and marketing. I am very proud of our employees and the internal teamwork to ensure good processes, says Terje. 

Attractive products and value proposition

To grow organically, Mercell focuses on continually strengthening its value proposition. Being attractive to suppliers and buyers simultaneously is essential because that’s where you get the network effects. Having great products and providing value to customers increases the willingness to pay for the products. 

– Pricing strategy is essential to our growth, and Viking Venture has been invaluable here. They have a lot of experience and expertise in this area. Focusing on making attractive products that provide customers great value increases the willingness to pay more for your products, states Terje. 

Skilled and hard-working employees 

When asked what has been decisive for Mercell’s successes, Terje quickly refers to the skilled and hard-working employees at Mercell. In addition, he emphazises the value of all companies in the Viking Venture portfolio being part of a community where employees meet peers to discuss relevant topics and challenges. 

– As part of the Viking community, physical or video meetings are organized around relevant subject areas where we can learn from each other. Being part of a larger environment where you have other relevant companies’ and their management to spar with and exchange experiences is a great benefit, explains Terje.

During the Viking Venture ownership time, Mercell has: 

– Grown its ARR 9 times

– Acquired 12 companies in 5 different countries

– Acquired and delisted EU Supply off the London Stock Exchange

– Acquired Visma Commerce business area from Visma

– Raised 270 million EUR in new funding

– Raised 200 million EUR in debt and bonds (where 30 MEUR were converted into the new bond raised in December 2020)

– Concluded a successful Public To Private (P2P) process with a sale to Thoma Bravo at a 110% premium to the share price

What’s next for Mercell now?

– We are no longer a listed company but now owned by the world’s leading software investor, Thoma Bravo. The new ownership is the start of the next exciting chapter for Mercell, where the focus is to continue our efforts to strengthen our market-leading position in Europe, says Terje. 

Seize the opportunity  

To sum up, Mercell has had an incredible journey resulting in solid prerequisites for taking an even stronger position in Europe in the future. During the Viking Venture investment term, we experienced excellent collaboration with the owners and management team.

– If you are lucky and skilled enough to bring Viking Venture on board as an investor, then it is my clear recommendation to seize this opportunity. Not only do you get capital, but you also get capacity and expertise, which will most likely increase the company’s growth rate and profitability, concludes Terje. 

Header image: Terje Wibe, CEO of Mercell

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