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Procore is paying $500 million for a startup that helps contractors get paid as tech disrupts the construction biz

Scott Wolfe, CEO of Levelset, and Tooey Courtemanche, CEO of Procore
Scott Wolfe, CEO of Levelset, left; and Tooey Courtemanche, CEO of Procore, right. Courtesy of Levelset and Procore

    • Software firm Procore announced a definitive agreement to acquire payments processor Levelset.
    • The two companies focus on the construction industry. Procore went public in May.
    • The deal gives the publicly traded Procore the tools it needs to solve one of the biggest problems facing the construction industry: getting paid.

Procore, a cloud-based construction management software company, announced on Wednesday that it has inked a deal to acquire software firm Levelset for $500 million.

The deal gives the publicly traded Procore, a dominant player in construction software, the tools it needs to solve one of the biggest problems facing the construction industry: getting paid. The acquisition comes amid a major spending spree by the construction industry as it seeks to become more technologically savvy.


Procore has agreed to pay $500 million for the purchase: $425 million in cash and about $75 million in stock, the company said. The deal is expected to close in the fourth quarter. Procore, which went public in May and raised more than $634 million in its IPO, has a market cap of nearly $12 billion.

The acquisition builds upon a previous partnership the two companies shared in which Levelset tools were available to Procore users through Procore's App Marketplace.

On average, it can take more than 90 days for construction contractors to get paid on jobs, the slowest of industries surveyed around the globe, consulting firm PwC says.

Levelset helps subcontractors expedite the timeline for getting paid on projects through their lien waiver management tools. It's recently-launched lending capability helps subcontractors by providing capital to cover large expenses on projects.

Investment bank D.A. Davidson served as the exclusive financial advisor to Levelset on the transaction, and Jones Walker LLP served as Levelset's legal advisor. Cooley LLP, a law firm headquartered in Palo Alto, Calif., served as the exclusive legal advisor to Procore.

Shares of Procore, which went public in May at $84 a share, closed on Tuesday at $90.48 per share.

Technology is transforming the construction industry

The deal comes amid a digital evolution that is sweeping the construction industry. Venture capital and private equity investors deployed $25 billion of investable capital into the industry from 2014 to 2019 — an increase from the $8 billion that they invested over the previous five years, according to consulting firm McKinsey.

Last year, half of construction industry executives and experts surveyed by McKinsey told the management consultant that they had increased investments aimed at tech transformation since the coronavirus pandemic began. Rapid technological transformations catalyzed by the coronavirus pandemic have served as accelerants for a host of construction tech startups to raise millions in capital from VCs.

Procore itself has done a series of recent acquisitions, buying artificial-intelligence SaaS firm INDUS.AI in early May. In October 2020, it bought Esticom, a cloud-based system focused on risk reduction. Terms of both deals were undisclosed. Its announced purchase of Levelset is the first since it went public in May, and the largest since its founding in 2002, the company said.

For Procore, accessing Levelset's proprietary data is a key driver behind the transaction

Tooey Courtemanche, CEO of Procore, told Insider that managing cash flow between owners, general contractors, and subcontractors on construction projects is fraught with challenges.

Levelset's data — which monitor payments-related concerns, such as which parties on a construction project have a payment outstanding or if a general contractor and subcontractor are engaged in an active dispute — can help Procore users who range from owners to subcontractors. Procore, one of the nation's most widely-used construction management software, boasts more than 1.6 million users who have completed over 1 million projects. 

"In the world of construction, if you know where risk lies, you can understand how to move money, and you can understand who you can lend money to in order to allow them to have better access to cash flow," Coutemanche said.

'Our vision is that no one ever loses a night's sleep over payment'

Poor communication and inefficient information and data management cost the industry more than $31 billion in excess expenses annually, according to a 2018 report from PlanGrid and industry consultant FMI.

Levelset CEO Scott Wolfe said that solving the industry's payments woes is his "life's work." He will remain at Procore in a role focused on innovation and new product development after the transaction closes.

"Our mission is to empower this industry to always get what they earn," he said. "Our vision is that no one ever loses a night's sleep over payment."

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