Dive Brief:

• Par Technology, a restaurant software company, bought Punchh, a loyalty and guest engagement company, for about $500 million, according to a press release Thursday. 
• Par funded the cash considerations in the transaction through a combination of debt and equity, which was raised through the sale of $160 million in PAR common stock to PAR Act III, LLC and accounts advised by T. Rowe Price Associates. It also received a $180 million senior secured term loan under a credit agreement. Ron Shaich, Act III managing partner and Panera Bread founder, will take a board observer seat while Act III Partner Keith Pascal joins Par's board of directors.
• The acquisition will allow Par to provide a commerce cloud platform that provides enterprise restaurants integrated point-of-sale, back office, payment and guest engagement offerings.

Dive Insight:

This acquisition comes at a time when guests are quickly returning to dining rooms and increasing their purchases. The addition of a guest engagement offering will create a more unified product for Par technology and help boost the company's revenue. Par's revenue increased 14.2% to $213.8 million in 2020 compared to $187.2 million in 2019, according to an earnings release.

"Restaurants are living through a dramatic change in their operating and business models. Technology will be at the center of that change," Savneet Singh, Par's CEO and president, said during the company's Q4 2020 earnings call. "We are building at PAR the platform to lean into this change. There's no question that the volume of software purchased by restaurants will grow tremendously over the next decade."

One area the Punchh acquisition will help is allowing restaurants to better own their data and control the guest experience. Punchh claims its technology was instrumental in an average 25% increase in loyalty spend for its customers from Q1 2020 through September, according to a press release. 

"With the Punchh acquisition, we are building a platform that enables restaurants to scale quickly, own their path to innovation, and take back their guest relationship," Singh said in the press release. "This eliminates the need for juggling disjointed vendors, developing cumbersome point-to-point integrations, and relying on 3rd party dependencies. At the same time, Punchh advances our ability to provide customers with an end-to-end solution, from guest-to-kitchen, through one unified data source."

Par's growth strategy has been heavily weighted toward acquisitions to expand its portfolio. In 2019, it acquired restaurant software company Restaurant Magic for $42 million. Restaurant Magic developed Data Central Management Suite, which offers advanced forecasting, predictive scheduling and mobile technologies. That same year, it also bought 3M's Drive Thru Communications Systems business, which offers wireless headsets for order taking. In 2014, Par purchased Brink, a cloud-based point-of-sales software for restaurants.

Par estimates the addition of Punchh to its portfolio would have generated $65 million in run-rate annual recurring revenue at the end of 2020, according to the press release. Par works with 100,000 restaurants in 110 countries and over 200 enterprise companies, including Yum, Denny's and TGI Fridays.

The consolidation of technology companies is likely to continue, especially with restaurants more interested in partnering with a provider that offers multiple services. This latest transaction is also part of an ongoing trend toward technology acquisitions. Squarespace bought Tock for over $400 million at the end of March. Yum Brands also made acquisitions last month, purchasing two technology companies, Kvantum and Tictuk Technologies to expand its digital marketing capabilities.