NerdWallet Will Acquire On the BarrelHead For $120M

Financial platform NerdWallet, Inc. (Nasdaq: NRDS) is set to acquire On the Barrelhead, Inc., an AI consumer debt advisor, for $120 million in a deal that will enable NerdWallet to become a trusted financial brand and accelerate its data and technology capabilities and offerings.

Pursuant to the June 23 deal, the $120 million deal consists of approximately $70 million in cash and approximately $50 million in NerdWallet common stock. The equity value will be determined based on a 30-day trading volume-weighted-average price as of June 22, 2022, or $10.37 per share; half of the equity will have a two-year lock up restriction. The cash portion will purportedly be funded by borrowing from its existing credit facility.

Moreover, the indemnity cap is set at $12 million, which is 10% of the transaction value. One the Barrelhead will also fully integrate with NerdWallet’s team, brand, products and technology. There is also a $30 million retention pool for On the Barrelhead management. According to the filings, On the Barrelhead’s data and technology “will enable consumers and SMBs (small-and mid-sized businesses) to match with better financial products and make smarter money moves.”

As noted in the filings, NerdWallet anticipates that its trusted brand and large reach with the addition of On the Barrelhead will help grow the company to become “a trusted financial ecosystem. The proposed acquisition will help NerdWallet vertically integrate and expand, while it tries to expand into new areas.

“Our vision for a trusted financial ecosystem means we’re able to provide consumers and SMBs with a trusted platform to learn about various financial topics, shop for products, connect their data and receive data-driven nudges,” Tim Chen, CEO and Co-Founder of NerdWallet said in a press release. “On the Barrelhead’s data and technology solutions will help us advance toward our goal by enabling us to leverage consumer information to provide users with relevant financial guidance and more personalized and compelling product recommendations. Their differentiated technology solutions and NerdWallet’s trusted brand and reach will also strengthen our footprint in the lending space by providing significant value to our partners.”  

According to the filings, On the Barrelhead generated around $38 million for the 12-month period ending on December 31, 2021. This represented about a 90% year-over-year growth. It is expected to be accretive to NerdWallet’s 2022 revenue and adjusted EBITDA.

On the Barrelhead helps consumers and SMBs “understand and navigate their loan options to improve their finances.” Accordingly, On the Barrelhead provides its customers with personalized credit recommendations by matching customer credit information with financial partner data.

“Finding trustworthy guidance and recommendations on how to access capital and consolidate debt is hard to come across for consumers and SMBs,” Sam Yount, CEO and Co-Founder of On the Barrelhead said in a press release. “We are excited to be joining NerdWallet’s dedicated and knowledgeable team to unlock more ways for users to optimize their finances.”

The reverse triangular merger is set to close in Q3 2022, subject to customary closing conditions.

NerdWallet’s legal counsel is Jones Day. On the Barrelhead’s legal counsel is Cooley LLP and its financial advisor is Solomon Partners.

Prior to the announcement, NerdWallet’s stock was valued at $9.88 on June 22. When it was announced on June 23, its stock was valued at $10.12. Days later on July 5, its stock was valued at $8.94.

This deal comes after NerdWallet acquired small business loan marketplace Fundera in 2020.