SEC Form PRER14A filed by EngageSmart Inc.

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Amendment No. 1)

 

 

Filed by the Registrant  ☒

Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☒	Preliminary Proxy Statement

 

☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

☐	Definitive Proxy Statement

 

☐	Definitive Additional Materials

 

☐	Soliciting Material under §240.14a-12

EngageSmart, Inc.

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

 

☐	No fee required.

 

☒	Fee paid previously with preliminary materials.

 

☐	Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

 

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

 

 

ENGAGESMART, INC.

30 Braintree Hill Office Park, Suite 101

Braintree, Massachusetts 02184

To the Stockholders of EngageSmart, Inc.:

You are cordially invited to attend a special meeting of stockholders (together with any adjournment, postponement, or other delay thereof, the “Special Meeting”) of EngageSmart, Inc., a Delaware corporation (“EngageSmart”). The Special Meeting will be held on [●], at [●], Eastern time. You may attend the Special Meeting via a live interactive webcast at www.virtualshareholdermeeting.com/ESMT2024SM. You will be able to listen to the Special Meeting live and vote online. We believe that a virtual meeting provides expanded access, improved communication and cost savings for our stockholders.

At the Special Meeting, you will be asked to consider and vote on a proposal to adopt the Agreement and Plan of Merger (as it may be amended, supplemented or modified from time to time), dated as of October 23, 2023 (the “Merger Agreement”), among Icefall Parent, LLC (“Parent”), Icefall Merger Sub, Inc. (“Merger Sub”) and EngageSmart. Parent and Merger Sub are affiliates of Vista Equity Partners Management, LLC (“Vista”), a leading private equity firm focused on investments in software, data and technology-enabled companies. Pursuant to the Merger Agreement, Merger Sub will merge with and into EngageSmart, with EngageSmart surviving such merger as a wholly owned subsidiary of Parent (the “Merger”). At the Special Meeting, you will also be asked to consider and vote on a proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger, and a proposal to adjourn the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement.

If the Merger is completed, at the effective time of the Merger, each share of EngageSmart’s common stock that is outstanding as of immediately prior to the effective time of the Merger (the “EngageSmart Common Stock”), subject to certain exceptions specified in the Merger Agreement, will be canceled and extinguished and automatically converted into the right to receive cash in an amount equal to $23.00 per share, without interest thereon and subject to any applicable withholding taxes. This amount represents an approximately 23% premium to the unaffected closing price of EngageSmart Common Stock of $18.71 per share on October 4, 2023, the last full trading day before media reports that EngageSmart was exploring a potential transaction.

The proposed Merger is a “going private transaction” under the rules of the Securities and Exchange Commission. If the Merger is completed, EngageSmart will become a privately held company, wholly owned by Parent.

EngageSmart’s Board of Directors (the “EngageSmart Board”) formed a Special Committee of the EngageSmart Board comprised solely of independent and disinterested directors (the “Special Committee”) to engage with Vista, to consider other potential value creation opportunities and to take other actions that the Special Committee deemed appropriate. The Special Committee, as more fully described in the enclosed proxy statement, evaluated the Merger, with the assistance of its own independent financial and legal advisors. At the conclusion of its review, the Special Committee, among other things, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders (as defined below), (2) recommended that the EngageSmart Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, and (3) resolved to recommend that the Unaffiliated Stockholders adopt the Merger

Agreement. In addition, the Special Committee believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The EngageSmart Board, acting upon the recommendation of the Special Committee, (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and its stockholders, (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and other obligations in the Merger, and the consummation of the Merger Agreement upon the terms and conditions set forth therein, and (3) resolved to recommend that EngageSmart’s stockholders adopt the Merger Agreement. In addition, the EngageSmart Board, on behalf of EngageSmart, believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act.

The EngageSmart Board unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement, (2) “FOR” the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger, and (3) “FOR” the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Your vote is very important, regardless of the number of shares you own. The approval of the proposal to adopt the Merger Agreement requires the affirmative vote of (1) the holders of a majority of all of the outstanding shares of EngageSmart Common Stock, and (2) the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders (as defined below). The “Unaffiliated Stockholders” means the holders of EngageSmart Common Stock, excluding those shares of EngageSmart Common Stock held, directly or indirectly, by or on behalf of (1) Vista, its investment fund affiliates and its portfolio companies majority owned by such investment fund affiliates, (2) General Atlantic, L.P. (“General Atlantic”), its investment fund affiliates, its portfolio companies majority owned by such investment fund affiliates and those members of the EngageSmart Board who are employees of General Atlantic or one of its investment fund affiliates, and (3) any person that EngageSmart has determined to be an “officer” of EngageSmart within the meaning of Rule 16a-1(f) of the Exchange Act. Each record holder of EngageSmart Common Stock is entitled to one (1) vote for each share of EngageSmart Common Stock owned of record as of the close of business on [●] (the “Record Date”). If you fail to vote on the proposal to adopt the Merger Agreement, the effect will be the same as a vote against such proposal.

The accompanying proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger, and the other proposals to be considered at the Special Meeting. A copy of the Merger Agreement is attached as Annex A to the proxy statement. The accompanying proxy statement also describes the actions and determinations of the EngageSmart Board and the Special Committee in connection with their evaluation of, among other things, the Merger Agreement and the Merger. Please read the proxy statement and its annexes, including the Merger Agreement, carefully and in their entirety, as they contain important information.

In connection with execution of the Merger Agreement, certain of EngageSmart’s existing stockholders, including certain affiliates of General Atlantic, entered into support agreements, pursuant to which the applicable stockholders agreed to vote all of their respective shares of EngageSmart Common Stock in favor of the adoption of the Merger Agreement, subject to certain terms and conditions contained in the support agreements. In addition, pursuant to the applicable support agreement and subject to the terms and conditions described in the section of the proxy statement captioned “Special Factors—Financing of the Merger”, among other things, certain affiliates of General Atlantic will contribute a portion of the shares of EngageSmart Common Stock owned by such affiliates to a direct or indirect parent company of Parent in exchange for equity interests in such direct or indirect parent company of Parent, which contribution and exchange will happen immediately prior to the closing of the Merger and such affiliates will indirectly own approximately 35% of Parent or such direct or indirect parent company thereof. As a result of the Merger, the shares of EngageSmart Common Stock

contributed to such direct or indirect parent company of Parent by the affiliates of General Atlantic will be cancelled and extinguished without any conversion thereof or consideration paid therefor along with any other shares of EngageSmart Common Stock owned by Parent or Merger Sub as of immediately prior to the effective time of the Merger. Copies of the support agreements are attached as Annex C and Annex D to the accompanying proxy statement.

Even if you plan to attend the Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the Special Meeting and vote at the Special Meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote against the adoption of the Merger Agreement.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the Special Meeting. Your bank, broker or other nominee cannot vote on any of the proposals to be considered at the Special Meeting without your instructions. As a result, if you do not provide your bank, broker or other nominee with any voting instructions, your shares will not be counted for purposes of a quorum and will not be voted at the Special Meeting, which will have the same effect as a vote against the adoption of the Merger Agreement.

If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders call: (877) 717-3922 (toll-free from the U.S. and Canada) or

+1 (412) 232-3651 (from other countries)

Banks and brokers call collect: (212) 750-5833

Thank you for your support.

Sincerely,

Paul G. Stamas

Chairman of the Board

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

 

 

ENGAGESMART, INC.

30 Braintree Hill Office Park, Suite 101

Braintree, Massachusetts 02184

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●]

Notice is given that a special meeting of stockholders (together with any adjournment, postponement or other delay thereof, the “Special Meeting”) of EngageSmart, Inc., a Delaware corporation (“EngageSmart”), will be held on [●], at [●], Eastern time, for the following purposes:

 

1.	To consider and vote on the proposal to adopt the Agreement and Plan of Merger (as it may be amended, supplemented or modified from time to time, the “Merger Agreement”), dated as of October 23, 2023, among Icefall Parent, LLC, Icefall Merger Sub, Inc., and EngageSmart (the “Merger Proposal”);

 

2.

To consider and vote on the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the merger (the “Merger”) of Icefall Merger Sub, Inc., a wholly owned subsidiary of Icefall Parent, LLC, with and into EngageSmart (the “Compensation Proposal”);

 

3.

To consider and vote on any proposal to adjourn the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (the “Adjournment Proposal”); and

 

4.	To transact any other business that may properly come before the Special Meeting.

Approval of the Merger Proposal requires the affirmative vote of (1) the holders of a majority of all of the outstanding shares of EngageSmart Common Stock, and (2) the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders (as defined below). The “Unaffiliated Stockholders” means the holders of EngageSmart Common Stock, excluding those shares of EngageSmart Common Stock held, directly or indirectly, by or on behalf of (1) Vista Equity Partners Management, LLC, its investment fund affiliates and its portfolio companies majority owned by such investment fund affiliates, (2) General Atlantic, L.P. (“General Atlantic”), its investment fund affiliates, its portfolio companies majority owned by such investment fund affiliates and those members of the EngageSmart Board who are employees of General Atlantic or one of its investment fund affiliates, and (3) any person that EngageSmart has determined to be an “officer” of EngageSmart within the meaning of Rule 16a-1(f) of the Exchange Act. Approval of each of the Compensation Proposal and the Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of EngageSmart Common Stock present by means of remote communication or represented by proxy at the Special Meeting and entitled to vote thereon.

The Special Meeting will be held by means of a live interactive webcast on the internet at www.virtualshareholdermeeting.com/ESMT2024SM. The Special Meeting will begin promptly at [●], Eastern time. Online check-in will begin at [●], Eastern time, and you should allow ample time for the check-in procedures. You will need the control number found on your proxy card or voting instruction form in order to participate in the Special Meeting (including voting your shares).

Only EngageSmart’s stockholders as of the close of business on [●] are entitled to notice of, and to vote at, the Special Meeting. A list of stockholders of record entitled to vote at the Special Meeting will be available at EngageSmart’s corporate offices located at 30 Braintree Hill Office Park, Suite 101, Braintree, Massachusetts

02184 during regular business hours for a period of no less than 10 days before the Special Meeting and on the virtual meeting website during the Special Meeting.

EngageSmart’s Board of Directors, acting upon the recommendation of the Special Committee of EngageSmart’s Board of Directors, unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement, (2) “FOR” the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger, and (3) “FOR” the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

EngageSmart’s stockholders who do not vote in favor of the proposal to adopt the Merger Agreement and otherwise comply with the requirements under Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) will have the right to seek appraisal of the “fair value” of their shares of our common stock (exclusive of any element of value arising from the accomplishment or expectation of the Merger and together with interest (as described in the accompanying proxy statement) to be paid on the amount determined to be “fair value”) in lieu of receiving $23.00 per share in cash if the Merger is completed, as determined in accordance with Section 262 of the DGCL. To do so, an EngageSmart stockholder must properly demand appraisal before the vote is taken on the Merger Agreement and comply with all other requirements of the DGCL, including Section 262 of the DGCL, which are summarized in the accompanying proxy statement, and certain conditions set forth in Section 262(g) of the DGCL must be satisfied. Section 262 of the DGCL may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262 and is incorporated in this notice by reference.

Even if you plan to attend the Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the Special Meeting and vote at the Special Meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote against the Merger Proposal.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the Special Meeting. Your bank, broker or other nominee cannot vote on any of the proposals to be considered at the Special Meeting without your instructions. As a result, if you do not provide your bank, broker or other nominee with any voting instructions, your shares will not be counted for purposes of a quorum and will not be voted at the Special Meeting, which will have the same effect as a vote against the Merger Proposal.

By Order of the Board of Directors,

Scott Semel

Chief Legal Officer and Secretary

Braintree, Massachusetts

[●]

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION

 

 

 

 

ENGAGESMART, INC.

PROXY STATEMENT

FOR

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON [●]

 

This proxy statement is dated [●] and, together with the enclosed form of proxy card,

is first being sent to stockholders on or about [●].

Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

TABLE OF CONTENTS

 

DEFINED TERMS			iv
SUMMARY TERM SHEET			1
Introduction			1
The Parties to the Merger			1
The Special Meeting			2
Votes Required			3
Intent of EngageSmart’s Directors and Executive Officers and Certain Stockholders to Vote in Favor of the Merger			3
Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board			4
Opinion of the Financial Advisor to the Special Committee			4
Position of the Purchaser Filing Parties as to the Fairness of the Merger			5
Certain Effects of the Merger			5
Treatment of Shares and Equity Awards			5
Certain Effects on EngageSmart if the Merger is Not Completed			7
Interests of EngageSmart’s Directors and Executive Officers in the Merger			8
The Support Agreements			9
U.S. Federal Income Tax Consequences of the Merger			9
Restrictions on Solicitation of Other Acquisition Offers			10
Change in the EngageSmart Board’s Recommendation			11
Limited Guarantee			11
Financing of the Merger			11
Conditions to the Closing of the Merger			12
Termination of the Merger Agreement			13
Termination Fees and Remedies			13
Appraisal Rights			13
Litigation Relating to the Merger			15
QUESTIONS AND ANSWERS			16
SPECIAL FACTORS			27
Background of the Merger			27
Reasons for the Merger; Recommendation of the Special Committee and the EngageSmart Board			51
Opinion of the Financial Advisor to the Special Committee			59
Position of the Purchaser Filing Parties as to the Fairness of the Merger			70
Plans for EngageSmart After the Merger			75
Certain Effects of the Merger			75
Certain Effects on EngageSmart if the Merger is Not Completed			78
Unaudited Prospective Financial Information			78
Interests of EngageSmart’s Directors and Executive Officers in the Merger			85
Intent of EngageSmart’s Directors and Executive Officers to Vote in Favor of the Merger			92
Intent of Certain Stockholders to Vote in Favor of the Merger			92
Closing and Effective Time of the Merger			93
Accounting Treatment			93
Certain U.S. Federal Income Tax Consequences of the Merger			93
Regulatory Approvals Required for the Merger			97
Limited Guarantee			98
Financing of the Merger			99
Delisting and Deregistration of EngageSmart Common Stock			100
Fees and Expenses			100
Litigation Relating to the Merger			101
FORWARD-LOOKING STATEMENTS			102

 

i

THE PARTIES TO THE MERGER			104
EngageSmart			104
Parent Entities			104
THE SPECIAL MEETING			105
Date, Time and Place			105
Purpose of the Special Meeting			105
Attending the Special Meeting			105
Record Date; Shares Entitled to Vote; Quorum			105
Votes Required			106
Abstentions			106
Broker Non-Votes			106
Shares Held by EngageSmart’s Directors and Executive Officers			106
Voting of Proxies			107
Revocability of Proxies			107
Adjournment			108
Solicitation of Proxies			108
Anticipated Date of Completion of the Merger			108
Appraisal Rights			108
Other Matters			110
Important Notice Regarding the Availability of Proxy Materials for the Stockholder Meeting to be Held on [●]			110
Householding of Special Meeting Materials			110
Questions and Additional Information			110
THE MERGER AGREEMENT			111
Explanatory Note Regarding the Merger Agreement			111
Effect of the Merger			111
Closing and Effective Time			111
Directors and Officers; Certificate of Incorporation; Bylaws			112
Merger Consideration			112
Exchange and Payment Procedures			114
Representations and Warranties			114
Conduct of Business Pending the Merger			117
Solicitation of Other Offers			120
Recommendation Changes			123
Employee Benefits			125
Conditions to the Closing of the Merger			126
Indemnification and Insurance			127
Other Covenants			128
Termination of the Merger Agreement			131
Company Termination Fee			132
Specific Performance			133
Limitations of Liability			133
Fees and Expenses			134
Amendment			134
Governing Law			134
THE SUPPORT AGREEMENTS			135
PROVISIONS FOR UNAFFILIATED STOCKHOLDERS			136
IMPORTANT INFORMATION REGARDING ENGAGESMART			136
Company Background			136
Directors and Executive Officers			136
Selected Historical Consolidated Financial Data			139
Security Ownership of Certain Beneficial Owners and Management			140

 

ii

Prior Public Offerings			143
Transactions in EngageSmart Common Stock			144
Past Contracts, Transactions, Negotiations and Agreements			146
Book Value Per Share			146
Market Price of EngageSmart Common Stock			146
Dividends			147
The Stockholders Agreement			147
IMPORTANT INFORMATION REGARDING THE PURCHASER FILING PARTIES			149
Parent Entities			149
Vista Filing Parties			149
General Atlantic Filing Parties			150
APPRAISAL RIGHTS			151
Written Demand			153
Notice by the Surviving Corporation			154
Filing a Petition for Appraisal			155
Determination of Fair Value			156
PROPOSAL 1: THE MERGER PROPOSAL			157
PROPOSAL 2: THE COMPENSATION PROPOSAL			158
PROPOSAL 3: THE ADJOURNMENT PROPOSAL			158
STOCKHOLDER PROPOSALS AND NOMINATIONS			159
WHERE YOU CAN FIND ADDITIONAL INFORMATION			160
MISCELLANEOUS			161
ANNEX A—AGREEMENT AND PLAN OF MERGER			A-1
ANNEX B—OPINION OF EVERCORE GROUP L.L.C.			B-1
ANNEX C—SUPPORT AGREEMENT (GENERAL ATLANTIC)			C-1
ANNEX D—SUPPORT AGREEMENT (SUMMIT)			D-1
ANNEX E—COMPLAINT AND MOTION TO EXPEDITE			E-1

 

iii

DEFINED TERMS

Unless stated otherwise, whenever used in this proxy statement, the following terms have the meanings set forth below:

Adjournment Proposal means the proposal to approve the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

Compensation Proposal means the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger.

Certificate of Merger means a certificate of merger in such form as required by and in accordance with the applicable provisions of the DGCL.

Code means the Internal Revenue Code of 1986, as amended.

Dissenting Shares means all shares of EngageSmart Common Stock that are issued and outstanding as of immediately prior to the effective time of the Merger and held by EngageSmart stockholders who have neither voted in favor of the Merger nor consented thereto in writing and who have properly and validly exercised and not withdrawn their statutory rights of appraisal in respect of such shares of EngageSmart Common Stock in accordance with Section 262 of the DGCL.

DGCL means the General Corporation Law of the State of Delaware.

DOJ means the Antitrust Division of the Department of Justice.

EngageSmart means EngageSmart, Inc. In addition, the terms “we,” “us” and “our” refer to EngageSmart, Inc.

EngageSmart Board means the board of directors of EngageSmart, Inc.

EngageSmart Bylaws means the bylaws of EngageSmart, Inc.

EngageSmart Common Stock means EngageSmart’s common stock, par value $0.001 per share.

EngageSmart Option Award means a stock option award issued under either the EngageSmart, Inc. 2021 Incentive Award Plan or the EngageSmart, LLC Amended and Restated 2015 Stock Option Plan.

EngageSmart RSU Award means an award of restricted stock units that is granted under the EngageSmart, Inc. 2021 Incentive Award Plan.

Equity Commitment Letter means the equity commitment letter, dated October 23, 2023, between Guarantor and Parent.

ESPP means the EngageSmart, Inc. 2021 Employee Stock Purchase Plan.

Evercore means Evercore Group, L.L.C., the Special Committee’s financial advisor.

Exchange Act means the Securities Exchange Act of 1934, as amended.

FTC means the Federal Trade Commission.

GAAP means U.S. generally accepted accounting principles.

 

iv

GA Funds means General Atlantic Partners 100, L.P., a Delaware limited partnership, General Atlantic Partners (Bermuda) EU, L.P., a Bermuda exempted limited partnership, GAP Coinvestments III, LLC, a Delaware limited liability corporation, GAP Coinvestments IV, LLC, a Delaware limited liability corporation, and GAP Coinvestments V, LLC, a Delaware limited liability corporation.

GA Management Committee means the management committee of GASC MGP, LLC, a Delaware limited liability company.

General Atlantic means General Atlantic, L.P., together with its affiliates.

General Atlantic Filing Parties means the Rollover Stockholders, the GA Funds, General Atlantic, L.P., a Delaware limited partnership, GAP Coinvestments CDA, L.P., a Delaware limited partnership, General Atlantic (SPV) GP, LLC, a Delaware limited liability company, General Atlantic GenPar (Bermuda), L.P., a Bermuda exempted limited partnership, General Atlantic GenPar, L.P., a Delaware limited partnership, and GAP (Bermuda) L.P., a Bermuda exempted limited partnership.

Go-Shop Period means the period beginning on the date of the Merger Agreement and continuing until 11:59 p.m., Eastern time, on November 22, 2023.

Guarantor means Vista Equity Partners Fund VIII, L.P.

HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.

IRS means the Internal Revenue Service.

Limited Guarantee means the Limited Guarantee, dated as of October 23, 2023, entered into by Guarantor in favor of EngageSmart.

Merger means the merger of Merger Sub with and into EngageSmart pursuant to the Merger Agreement in accordance with the applicable provisions of the DGCL, with EngageSmart surviving the Merger as a direct, wholly owned subsidiary of Parent.

Merger Agreement means the Agreement and Plan of Merger, dated as of October 23, 2023, by and among EngageSmart, Parent, and Merger Sub, as it may be amended, supplemented or modified from time to time.

Merger Proposal means the proposal to adopt the Merger Agreement, pursuant to which Merger Sub will merge with and into EngageSmart, with EngageSmart continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent (the “Surviving Corporation”).

Merger Sub means Icefall Merger Sub, Inc., a wholly owned subsidiary of Parent.

NYSE means the New York Stock Exchange and any successor stock exchange.

Owned Shares means each share of EngageSmart Common Stock that is (1) held by EngageSmart or its subsidiaries, (2) owned by Parent or Merger Sub (including the Rollover Shares), or (3) owned by any direct or indirect wholly owned subsidiary of Parent or Merger Sub as of immediately prior to the effective time of the Merger.

Parent means Icefall Parent, LLC.

Parent Entities means Merger Sub and Parent.

Per Share Price means $23.00 in cash per share of EngageSmart Common Stock.

 

v

Purchaser Filing Parties means (1) the Parent Entities, (2) the Vista Filing Parties, and (3) the General Atlantic Filing Parties.

Record Date means [●].

Rollover Shares means the shares contributed to Parent (or any direct or indirect parent company thereof) by the Rollover Stockholders pursuant to the Rollover Stockholder Support Agreement.

Rollover Stockholder Support Agreement means the support agreement, dated October 23, 2023, entered into in connection with the Merger Agreement by Parent and EngageSmart with the Rollover Stockholders.

Rollover Stockholders means General Atlantic (IC), L.P., a Delaware limited partnership, and General Atlantic (IC) SPV, L.P., a Delaware limited partnership.

SEC means the United States Securities and Exchange Commission.

Securities Act means the Securities Act of 1933, as amended.

Special Committee means a committee established by the EngageSmart Board comprised solely of independent and disinterested members of the EngageSmart Board.

Special Meeting means the special meeting of the stockholders of EngageSmart to be held on [●] at [●], Eastern time, and any adjournment, postponement or other delay thereof.

Summit Shares means the shares of EngageSmart Common Stock beneficially owned by the Summit Stockholders.

Summit Stockholders means Summit Partners Growth Equity Fund VIII-A, L.P., Summit Partners Growth Equity Fund VIII-B, L.P., Summit Partners Entrepreneur Advisors Fund I, L.P., Summit Investors I, LLC and Summit Investors I (UK), L.P.

Summit Support Agreement means the support agreement, dated October 23, 2023, among EngageSmart, the Summit Stockholders and Parent.

Support Agreements means, collectively, the Rollover Stockholder Support Agreement and the Summit Support Agreement.

Unaffiliated Stockholders means the holders of EngageSmart Common Stock, excluding those shares of EngageSmart Common Stock held, directly or indirectly, by or on behalf of (1) Vista, its investment fund affiliates and its portfolio companies majority owned by such investment fund affiliates, (2) General Atlantic, its investment fund affiliates, its portfolio companies majority owned by such investment fund affiliates and those members of the EngageSmart Board who are employees of General Atlantic or one of its investment fund affiliates, and (3) any person that EngageSmart has determined to be an “officer” of EngageSmart within the meaning of Rule 16a-1(f) of the Exchange Act.

Vista means Vista Equity Partners Management, LLC.

Vista Filing Parties means Guarantor, Vista Equity Partners Fund VIII-A, L.P., Vista Equity Partners Fund VIII-B, SCSp, Vista Equity Partners Fund VIII GP, L.P., VEPF VIII GP, LLC, and Robert F. Smith, as further described in the section of this proxy statement captioned “Important Information Regarding the Purchaser Filing Parties—Vista Filing Parties.”

 

vi

SUMMARY TERM SHEET

This summary term sheet discusses the material terms contained in this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to carefully read this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement in their entirety.

Introduction

On October 23, 2023, EngageSmart entered into the Merger Agreement, pursuant to which, subject to the satisfaction or waiver of certain conditions, Merger Sub will merge with and into EngageSmart, with EngageSmart surviving the Merger as a wholly owned subsidiary of Parent. Parent is an affiliate of Vista, a leading private equity firm focused on investments in software, data and technology-enabled companies. If the Merger is completed, each outstanding share of EngageSmart Common Stock (other than as described below) will be converted into the right to receive the Per Share Price, without interest and subject to any applicable withholding taxes, and EngageSmart will become a privately held company. EngageSmart is asking its stockholders to consider and vote on the adoption of the Merger Agreement.

The EngageSmart Board formed the Special Committee to evaluate and negotiate a possible sale transaction involving EngageSmart and other strategic alternatives and provide a recommendation to the EngageSmart Board as to whether or not to approve any such transaction. As more fully described below, the Special Committee evaluated among other things, the Merger, with the assistance of its own independent financial and legal advisors and, where appropriate, EngageSmart management and EngageSmart’s outside financial advisor. At the conclusion of its review, the Special Committee, among other things, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders, (2) recommended that the EngageSmart Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, and (3) resolved to recommend that the Unaffiliated Stockholders adopt the Merger Agreement. In addition, the Special Committee believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act. The EngageSmart Board, acting upon the recommendation of the Special Committee, (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and its stockholders, (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and other obligations in the Merger, and the consummation of the Merger Agreement upon the terms and conditions set forth therein, and (3) resolved to recommend that EngageSmart’s stockholders adopt the Merger Agreement. In addition, the EngageSmart Board, on behalf of EngageSmart, believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act.

Because the transactions contemplated by the Merger Agreement constitute a “going private” transaction under the rules of the SEC, EngageSmart and the Purchaser Filing Parties have filed with the SEC a Transaction Statement on Schedule 13E-3 with respect to such transactions. You may obtain additional information about the Schedule 13E-3 under the caption “Where You Can Find Additional Information.”

The Parties to the Merger

 

•

EngageSmart. EngageSmart was formed as a limited liability company in Delaware in December 2018 under the name Hancock Parent, LLC and subsequently changed its name to EngageSmart, LLC. EngageSmart then converted into a Delaware corporation under the name EngageSmart, Inc. in September 2021. EngageSmart is a leading provider of vertically tailored customer engagement software and integrated payments solutions. EngageSmart’s mission is to simplify customer and client engagement to allow our customers to focus resources on initiatives that improve their businesses and

 

1

better serve their communities. EngageSmart offers single instance, multi-tenant, true Software-as-a-Service vertical solutions, including SimplePractice, InvoiceCloud and DonorDrive, that are designed to simplify customers’ engagement with their clients by driving digital adoption and self-service. EngageSmart Common Stock is listed on the NYSE under the symbol “ESMT”. EngageSmart’s corporate offices are located at 30 Braintree Hill Office Park, Suite 101, Braintree, MA 02184. For more information about EngageSmart, see the sections of this proxy statement captioned “The Parties to the Merger—EngageSmart” and “Important Information Regarding EngageSmart.”

 

•

Parent. Icefall Parent, LLC was formed on October 20, 2023 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement and has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the Merger Agreement and arranging of financing in connection with the Merger. Parent is an affiliate of Vista. Parent’s address is c/o Vista Equity Partners Management, LLC, Four Embarcadero Center, 20th Floor, San Francisco, CA 94111, and its telephone number is (415) 765-6500. For more information about Parent, see the sections of this proxy statement captioned “The Parties to the Merger—Parent Entities” and “Important Information Regarding the Purchaser Filing Parties—Parent Entities.”

 

•

Merger Sub. Icefall Merger Sub, Inc. is a wholly owned subsidiary of Parent and was formed on October 20, 2023 solely for the purpose of engaging in the transactions contemplated by the Merger Agreement. Merger Sub has not engaged in any business activities other than as incidental to its formation and in connection with the transactions contemplated by the Merger Agreement. Merger Sub is affiliated with Vista. Merger Sub’s address is c/o Vista Equity Partners Management, LLC, Four Embarcadero Center, 20th Floor, San Francisco, CA 94111, and its telephone number is (415) 765-6500. For more information about Merger Sub, see the sections of this proxy statement captioned “The Parties to the Merger—Parent Entities” and “Important Information Regarding the Purchaser Filing Parties—Parent Entities.”

 

•

Parent and Merger Sub are each affiliated with Guarantor. In connection with the transactions contemplated by the Merger Agreement, Guarantor has committed to provide Parent, at or prior to the closing of the Merger, with an aggregate equity contribution of up to $2,574,000,000, which will be available, together with available cash on hand of EngageSmart and any third party financing obtained by Parent or its affiliates as of the closing of the Merger, to fund the aggregate Per Share Price and to pay the fees, expenses and other amounts required to be paid in connection with the closing of the Merger by EngageSmart, Parent and Merger Sub, as described further in this proxy statement under the caption “Special Factors—Financing of the Merger”.

The Special Meeting

 

•

Date, Time and Place. The Special Meeting will be held on [●] at [●], Eastern time. You may attend the Special Meeting solely via a live interactive webcast on the internet at www.virtualshareholdermeeting.com/ESMT2024SM. You will need the control number found on your proxy card or voting instruction form in order to participate in the Special Meeting (including voting your shares). EngageSmart believes that a virtual meeting provides expanded access, improved communication and cost savings for its stockholders.

 

•

Purpose. At the Special Meeting, EngageSmart will ask stockholders to vote on the following proposals:

 

•

The Merger Proposal: the proposal to adopt the Merger Agreement, pursuant to which Merger Sub will merge with and into EngageSmart, with EngageSmart continuing as the Surviving Corporation and becoming a wholly owned subsidiary of Parent;

 

•

The Compensation Proposal: the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger; and

 

2

•

The Adjournment Proposal: the proposal to approve the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

•

Record Date; Shares Entitled to Vote; Quorum. You are entitled to vote at the Special Meeting if you owned shares of EngageSmart Common Stock as of the close of business on the Record Date. As of December 7, 2023, there were 168,334,721 shares of EngageSmart Common Stock outstanding and entitled to vote at the Special Meeting. For each share of EngageSmart Common Stock that you own as of the close of business on the Record Date, you will have one vote on each matter submitted for a vote at the Special Meeting. The holders of a majority in voting power of the outstanding EngageSmart Common Stock entitled to vote at the Special Meeting, present by means of remote communication or represented by proxy, will constitute a quorum at the Special Meeting.

Votes Required

 

•

The Merger Proposal. Approval of the Merger Proposal requires the affirmative vote of (1) the holders of a majority of all of the outstanding shares of EngageSmart Common Stock, and (2) the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders (the “Requisite Stockholder Approval”).

 

•

The Compensation Proposal. Approval of the Compensation Proposal requires the affirmative vote of the holders of a majority in voting power of EngageSmart Common Stock present by means of remote communication or represented by proxy at the Special Meeting and entitled to vote thereon. This vote will be on a non-binding, advisory basis.

 

•

The Adjournment Proposal. Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of EngageSmart Common Stock present by means of remote communication or represented by proxy at the Special Meeting and entitled to vote thereon.

Intent of EngageSmart’s Directors and Executive Officers and Certain Stockholders to Vote in Favor of the Merger

 

•

Intent of EngageSmart’s Directors and Executive Officers to Vote in Favor of the Merger. EngageSmart’s directors and executive officers have informed EngageSmart that, as of the date of this proxy statement, they intend to vote all of the shares of EngageSmart Common Stock owned directly by them in favor of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal. As of December 7, 2023, EngageSmart’s directors and executive officers beneficially owned, in the aggregate, approximately 1.9% of the voting power of the shares of EngageSmart Common Stock outstanding as of December 7, 2023. For more information, see the section of this proxy statement captioned “Special Factors—Intent of EngageSmart’s Directors and Executive Officers to Vote in Favor of the Merger.”

 

•

Intent of Certain Stockholders to Vote in Favor of the Merger. The Summit Stockholders, who beneficially owned approximately 14.9% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Summit Support Agreement, pursuant to which the Summit Stockholders agreed to vote all of the Summit Shares in favor of the Merger Proposal, subject to the terms and conditions contained in the Summit Support Agreement. In addition, the Rollover Stockholders, who beneficially owned, in the aggregate, approximately 53.6% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Rollover Stockholder Support Agreement pursuant to which the Rollover Stockholders agreed to vote all of their shares of EngageSmart Common Stock in favor of the Merger Proposal, subject to the terms and conditions contained in the Rollover Stockholder Support Agreement. However, approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders (the “Unaffiliated Stockholder Vote”), which excludes all of the shares of EngageSmart Common Stock

 

3

held (1) by the Rollover Stockholders and certain of their affiliates, (2) by EngageSmart’s officers (within the meaning of Rule 16a-1(f) of the Exchange Act) and (3) by Vista and certain of its affiliates, but does not exclude the Summit Shares. For more information, see the sections of this proxy statement captioned “Special Factors—Intent of EngageSmart’s Directors and Executive Officers to Vote in Favor of the Merger” and “The Support Agreements,” as well as the full text of the Support Agreements, attached as Annex  C and Annex D, which are incorporated by reference in this proxy statement in their entirety.

Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board

 

•

Special Committee’s Recommendation. The Special Committee, pursuant to resolutions adopted at a meeting of the Special Committee held on October 23, 2023, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders, (2) recommended that the EngageSmart Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger, and (3) resolved to recommend that the Unaffiliated Stockholders adopt the Merger Agreement. In reviewing the Merger, the Special Committee consulted with its independent financial and legal advisors and, where appropriate, with EngageSmart management and EngageSmart’s outside legal advisor and considered other potential value creation opportunities. In addition, the Special Committee believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 of the Exchange Act. For a description of the reasons considered by the Special Committee, see the section of this proxy statement captioned “Special Factors—Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board.”

 

•

EngageSmart Board’s Recommendation. The EngageSmart Board, acting upon the unanimous recommendation of the Special Committee, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and its stockholders, (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and other obligations in the Merger, and the consummation of the Merger Agreement upon the terms and conditions set forth therein, and (3) resolved to recommend that EngageSmart’s stockholder adopt the Merger Agreement. In addition, the EngageSmart Board, on behalf of EngageSmart, believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act. For a description of the reasons considered by the EngageSmart Board, see the section of this proxy statement captioned “Special Factors—Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board.”

The EngageSmart Board, acting upon the unanimous recommendation of the Special Committee, unanimously recommends that you vote: (1) “FOR” the approval of the Merger Proposal, (2) “FOR” the approval of the Compensation Proposal, and (3) “FOR” the approval of the Adjournment Proposal.

Opinion of the Financial Advisor to the Special Committee

 

•

The Special Committee retained Evercore to act as its financial advisor in connection with the Special Committee’s evaluation of strategic and financial alternatives, including the Merger. As part of this engagement, the Special Committee requested that Evercore evaluate the fairness, from a financial point of view, to holders of EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates, of the Per Share Price to be paid to such holders in the Merger. At a meeting of the Special Committee held on October 23, 2023, Evercore rendered to the Special Committee its oral opinion, subsequently confirmed by delivery of a written opinion dated October 23, 2023, that as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, the Per Share Price to be received by holders of

 

4

EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates, in the Merger was fair, from a financial point of view, to such holders.

 

•

The full text of the written opinion of Evercore, dated October 23, 2023, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B and is incorporated herein by reference into this proxy statement in its entirety. The summary of the opinion of Evercore in this proxy statement is qualified in its entirety by reference to the full text of the written opinion. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Special Committee (solely in its capacity as such) in connection with its evaluation of the proposed Merger. The opinion does not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of EngageSmart Common Stock should vote or act in respect of the Merger. Evercore’s opinion does not address the relative merits of the Merger as compared to other business or financial strategies that might be available to EngageSmart, nor does it address the underlying business decision of EngageSmart to engage in the transaction.

 

•

For further information, see the section of this proxy statement captioned “Special Factors—Opinion of the Financial Advisor to the Special Committee” and the full text of the written opinion of Evercore attached as Annex B to this proxy statement.

Position of the Purchaser Filing Parties as to the Fairness of the Merger

 

•

The Purchaser Filing Parties believe that the Merger is substantively and procedurally fair to EngageSmart’s “unaffiliated security holders,” as defined in Rule 13e-3 of the Exchange Act. However, none of the Purchaser Filing Parties has undertaken any formal evaluation of the fairness of the Merger to EngageSmart’s unaffiliated security holders or engaged a financial advisor for such purpose. Moreover, none of the Purchaser Filing Parties participated in the deliberation of the Special Committee or received advice from the Special Committee’s legal or financial advisors in connection with the Merger. The belief of the Purchaser Filing Parties as to the fairness of the Merger is based on the factors discussed in the section of this proxy statement captioned “Special Factors—Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board.”

Certain Effects of the Merger

 

•

If the conditions to the completion of the Merger are either satisfied or waived, at the effective time of the Merger (the “Effective Time”): (1) Merger Sub will merge with and into EngageSmart, (2) the separate existence of Merger Sub will cease, and (3) EngageSmart will continue as the Surviving Corporation in the Merger and as a wholly owned subsidiary of Parent. As a result of the Merger, EngageSmart will cease to be a publicly traded company. If the Merger is completed, you will not own any shares of capital stock of the Surviving Corporation as a result of the Merger.

 

•

The time at which the Merger becomes effective will occur upon the filing of the Certificate of Merger with, and its acceptance by, the Secretary of State of the State of Delaware (or at a later time as EngageSmart, Parent and Merger Sub may agree and specify in the Certificate of Merger).

Treatment of Shares and Equity Awards

 

•

Common Stock. The Merger Agreement provides for the following treatment of shares of EngageSmart Common Stock in connection with the Merger:

 

•

At the Effective Time, each share of EngageSmart Common Stock outstanding immediately prior to the Effective Time (other than the Owned Shares or Dissenting Shares) will be cancelled and extinguished and automatically converted into the right to receive cash in an amount equal to the Per Share Price,

 

5

without interest thereon. This amount constitutes a premium of approximately 23% to the unaffected closing price of EngageSmart Common Stock on October 4, 2023 of $18.71 per share, the last full trading day before media reports that EngageSmart was exploring a potential transaction. For more information, see the sections of this proxy statement captioned “Special Factors—Certain Effects of the Merger” and “The Merger Agreement—Merger Consideration—EngageSmart Common Stock.”

 

•

At or prior to the closing of the Merger, Parent will deposit with the Payment Agent (as defined in the section of this proxy statement captioned “The Merger Agreement—Exchange and Payment Procedures”) an amount of cash equal to the aggregate consideration to which EngageSmart stockholders will become entitled under the Merger Agreement. Once a stockholder has provided the Payment Agent with any documentation required by the Payment Agent, the Payment Agent will pay the stockholder the appropriate portion of the aggregate Per Share Price in exchange for the shares of EngageSmart Common Stock held by that stockholder. For more information, see the section of this proxy statement captioned “The Merger Agreement—Exchange and Payment Procedures.”

 

•

After the Merger is completed, you will have the right to receive the Per Share Price for each share of EngageSmart Common Stock that you own, but you will no longer have any rights as a stockholder (except that EngageSmart’s stockholders who have neither voted in favor of the Merger nor consented thereto in writing, properly demanded appraisal of such shares of EngageSmart Common Stock pursuant to, and in accordance with, Section 262 of the DGCL, and do not validly withdraw or otherwise lose their appraisal rights may have the right to receive a payment for the “fair value” of their shares as determined pursuant to an appraisal proceeding as contemplated by the DGCL, as described in the section of this proxy statement captioned “Appraisal Rights”).

 

•

Treatment of EngageSmart Option Awards. The Merger Agreement provides for the following treatment of EngageSmart Option Awards at the Effective Time:

 

•

Vested EngageSmart Option Awards. Each outstanding EngageSmart Option Award (whether vested at the Effective Time or that vests as a result of the consummation of the Merger (each, a “Vested EngageSmart Option”)), will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Vested EngageSmart Option multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of EngageSmart Common Stock underlying such Vested EngageSmart Option. This amount (less any required withholding and other taxes) will be paid to the applicable holder no later than the second regularly scheduled payroll date following the date on which the Closing occurs (the “Closing Date”). Any Vested EngageSmart Option that has an exercise price per share of EngageSmart Common Stock that is greater than or equal to the Per Share Price will be canceled at the Effective Time for no consideration.

 

•

Unvested EngageSmart Option Awards. Each outstanding EngageSmart Option Award that is not a Vested EngageSmart Option (each, an “Unvested EngageSmart Option”) will automatically be canceled and converted into the contingent right to receive (a “Converted Cash Award”) an aggregate amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart Option immediately prior to the Effective Time multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of EngageSmart Common Stock underlying such Unvested EngageSmart Option. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart Option immediately prior to the Effective Time. Any Unvested EngageSmart Option that has an exercise price per share of EngageSmart Common Stock that is greater than or equal to the Per Share Price will be canceled at the Effective Time for no consideration. Due to the existing change in control vesting provisions of the EngageSmart Option Awards, it is expected that there will be no Unvested EngageSmart Options at the Effective Time.

 

•

For more information about the treatment of EngageSmart Option Awards, see the sections of this proxy statement captioned “Special Factors—Certain Effects of the Merger,” “The Merger

 

6

Agreement—Merger Consideration—Equity Awards; ESPP—Treatment of EngageSmart Option Awards” and “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

 

•

Treatment of EngageSmart RSU Awards. The Merger Agreement provides for the following treatment of EngageSmart RSU Awards at the Effective Time:

 

•

Vested EngageSmart RSU Awards. Each EngageSmart RSU Award, that is outstanding and vested at the Effective Time (but not yet settled) or that vests as a result of the consummation of the Merger (each, a “Vested EngageSmart RSU”) will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Vested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price. This amount (less any required withholding and other taxes) will be paid to the applicable holder no later than the second regularly scheduled payroll date following the Closing Date.

 

•

Unvested EngageSmart RSU Awards. Each outstanding EngageSmart RSU Award that is not a Vested EngageSmart RSU (each, an “Unvested EngageSmart RSU”) will automatically be canceled and converted into a Converted Cash Award with respect to an aggregate amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart RSU immediately prior to the Effective Time.

 

•

For more information about the treatment of EngageSmart RSU Awards, see the sections of this proxy statement captioned “Special Factors—Certain Effects of the Merger,” “The Merger Agreement—Merger Consideration—Equity Awards; ESPP—Treatment of EngageSmart RSU Awards” and “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

 

•

Treatment of the ESPP. The Merger Agreement provides for the following treatment of the ESPP in connection with the Merger:

 

•

From and after the date of the Merger Agreement, among other things, (1) no new individuals will be permitted to enroll in the ESPP and (2) no increase in the amount of participants’ payroll deduction elections under the ESPP will be permitted. EngageSmart has determined that the purchase period ending on November 30, 2023 was the final purchase period under the ESPP.

 

•

No later than one business day prior to the Effective Time, EngageSmart will apply any funds within each ESPP participant’s account to the purchase of whole shares of EngageSmart Common Stock in accordance with the terms of the ESPP. These shares will be deposited into the applicable participant’s account and will be treated in the same manner as any other outstanding share of EngageSmart Common Stock in connection with the consummation of the Merger.

 

•

For more information about the treatment of the ESPP, see the sections of this proxy statement captioned “Special Factors—Certain Effects of the Merger,” “The Merger Agreement—Merger Consideration—Equity Awards; ESPP—Treatment of the ESPP” and “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

Certain Effects on EngageSmart if the Merger is Not Completed

 

•

If the Merger Agreement is not adopted as a result of the failure to obtain the Requisite Stockholder Approval, or if the Merger is not completed for any other reason, EngageSmart’s stockholders will not receive any payment for their shares of EngageSmart Common Stock in connection with the Merger. Instead, (1) EngageSmart will remain an independent public company, (2) EngageSmart Common Stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and

 

7

(3) EngageSmart will continue to file periodic reports with the SEC. For more information, see the section of this proxy statement captioned “Special Factors—Certain Effects on EngageSmart if the Merger is Not Completed.”

Interests of EngageSmart’s Directors and Executive Officers in the Merger

 

•

In considering the recommendations of the Special Committee and the EngageSmart Board with respect to the Merger, you should be aware that, aside from their interests as holders of EngageSmart Common Stock, EngageSmart’s directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. In particular:

 

•

Paul Stamas, Chairman of the EngageSmart Board, is an affiliate of General Atlantic;

 

•

Diego Rodriguez is entitled to receive a fee in connection with his service on the Special Committee;

 

•

EngageSmart’s directors and officers are entitled to continued indemnification and insurance coverage under the Merger Agreement and indemnification agreements between such individuals and EngageSmart;

 

•

each of EngageSmart’s executive officers is party to an employment agreement with EngageSmart that provides for “double-trigger” severance payments and benefits in the event of an involuntary termination (as defined in the section of this proxy statement captioned “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger—Change in Control and Severance Benefits under Existing Agreements”) within a certain period preceding or 12 months following the Merger;

 

•

pursuant to EngageSmart’s Amended and Restated 2015 Stock Option Plan and the terms of the applicable equity award agreements between EngageSmart and certain individuals, vesting of certain unvested EngageSmart Option Awards held by certain of EngageSmart’s directors and executive officers will accelerate upon the effectiveness of the Merger;

 

•

EngageSmart and the Buyer Parties agreed that EngageSmart may grant a retention bonus in an amount equal to $250,000 to Cassandra Hudson, EngageSmart’s Chief Financial Officer, with such bonus payable no earlier than the Effective Time, subject to Ms. Hudson’s continued employment with EngageSmart through the Effective Time;

 

•

EngageSmart and the Buyer Parties agreed that EngageSmart may grant a retention bonus in an amount equal to $100,000 to an executive officer who is not a named executive officer, with such bonus payable 50% on the Closing Date and 50% on the date that is six months following the Closing Date, subject, in each case, to such individual’s continued employment with EngageSmart through the applicable payment date; and

 

•

Robert Bennett, EngageSmart’s Chief Executive Officer, will be the Chief Executive Officer of the Surviving Corporation as of the consummation of the Merger. As of the date of this proxy statement, none of EngageSmart’s executive officers have reached an understanding on potential employment with the Surviving Corporation or with Parent or Merger Sub (or any of their respective affiliates), or entered into any definitive agreements or arrangements regarding employment with the Surviving Corporation or with Parent or Merger Sub (or any of their respective affiliates) to be effective following the consummation of the Merger.

 

•

The Special Committee and the EngageSmart Board were aware of and considered these interests to the extent that they existed at the time, among other matters. For a more detailed description of the interests of EngageSmart’s executive officers and directors in the Merger, see “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

 

8

The Support Agreements

 

●

For purposes of this Proxy Statement, each of “Acquisition Proposal” and “Superior Proposal” is defined in the section of this proxy statement captioned “The Merger Agreement—Solicitation of Other Offers.”

 

●

On October 23, 2023, the Rollover Stockholders, who beneficially owned, in the aggregate, approximately 53.6% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Rollover Stockholder Support Agreement, pursuant to which the Rollover Stockholders agreed, among other things, to vote all of their shares of EngageSmart Common Stock in favor of the Merger Proposal, subject to the terms and conditions contained in the Rollover Stockholder Support Agreement. In addition, pursuant to the Rollover Stockholder Support Agreement and subject to the terms and conditions described in the section of this proxy statement captioned “Special Factors—Financing of the Merger”, among other things, the Rollover Stockholders will contribute a portion of the shares of EngageSmart Common Stock owned by the Rollover Stockholders to a direct or indirect parent company of Parent in exchange for equity interests in such direct or indirect parent company of Parent, which contribution and exchange will happen immediately prior to the Closing and the Rollover Stockholders will indirectly own approximately 35% of Parent or such direct or indirect parent company thereof. As a result of the Merger, the shares of EngageSmart Common Stock contributed to such direct or indirect parent company of Parent by the Rollover Stockholders will be cancelled and extinguished without any conversion thereof or consideration paid therefor along with the other Owned Shares.

 

●

On October 23, 2023, the Summit Stockholders, who beneficially owned, in the aggregate, approximately 14.9% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Summit Support Agreement, pursuant to which Summit agreed to vote all of the Summit Shares in favor of the Merger Proposal, subject to the terms and conditions contained in the Summit Support Agreement.

 

●

Additionally, pursuant to the Support Agreements, among other things, the Rollover Stockholders and Summit, respectively, are prohibited from transferring any of the shares subject to the Support Agreements while the Support Agreements are in effect and are prohibited from (1) engaging in any activities, or assisting or facilitating in the engagement of any activities, that EngageSmart and its affiliates were permitted to engage in during the Go-Shop Period, and (2) soliciting, initiating, proposing or inducing any proposal that constitutes, or is reasonably expected to lead to, an Acquisition Proposal (except that the Rollover Stockholders and Summit, respectively, are permitted to participate or engage in discussions or negotiations with persons or groups for the purpose of entering into a voting agreement and, solely in the case of the Rollover Stockholders, a rollover or reinvestment agreement (including the post-Closing governance terms with respect thereto), with such persons or groups in connection with an Acquisition Proposal that the Special Committee has determined in good faith constitutes or is reasonably likely to lead to a Superior Proposal).

 

●

For more information, see the section of this proxy statement captioned “The Support Agreements” and the full text of the Support Agreements, attached as Annex C and Annex D, which are incorporated by reference in this proxy statement in their entirety.

U.S. Federal Income Tax Consequences of the Merger

 

●

The receipt of cash by EngageSmart stockholders in exchange for shares of EngageSmart Common Stock in the Merger will be a taxable transaction to U.S. Holders (as defined under the section entitled, “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger”) for U.S. federal income tax purposes. Such receipt of cash by a EngageSmart stockholder that is a U.S. Holder generally will result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. Holder receives in the Merger and such U.S. Holder’s adjusted tax basis in the shares of EngageSmart Common Stock surrendered in the Merger.

 

9

•

EngageSmart stockholders that are Non-U.S. Holders (as defined under the section entitled, “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income tax with respect to the exchange of EngageSmart Common Stock for cash in the Merger unless they have certain connections with the United States.

 

•

For a more complete description of the U.S. federal income tax consequences of the Merger, see the section entitled “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger.”

Restrictions on Solicitation of Other Acquisition Offers

 

•

For purposes of this Proxy Statement, “Acceptable Confidentiality Agreement” is defined in the section of this proxy statement captioned “The Merger Agreement—Solicitation of Other Offers.”

 

•

During the period beginning on October 23, 2023 and continuing until 11:59 p.m., Eastern time, on November 22, 2023 (the “No-Shop Period Start Date”), EngageSmart, certain of its affiliates (other than the Rollover Stockholders and certain of their affiliates) and its representatives have the right to (1) solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or is reasonably expected to lead to, an Acquisition Proposal, (2) subject to the entry into, and in accordance with, an Acceptable Confidentiality Agreement, furnish to any person (and its representatives and financing sources subject to the terms and obligations of such Acceptable Confidentiality Agreement applicable to such person) any non-public information relating to EngageSmart and its subsidiaries or afford to any such person (and such representatives and financing sources) access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EngageSmart and its subsidiaries, in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, any proposal or inquiry that constitutes, or is reasonably expected to lead to an Acquisition Proposal, provided that EngageSmart must promptly (and in any event within 24 hours) provide Parent with any such non-public information concerning EngageSmart and its subsidiaries that is provided to any such person or its representatives that was not previously provided to Parent or its representatives, and (3) participate or engage in discussions or negotiations with any such person (and such representatives and financing sources) with respect to an Acquisition Proposal.

 

•

From the No-Shop Period Start Date until the Requisite Stockholder Approval of the Merger Agreement, EngageSmart is subject to customary “no-shop” restrictions on its ability to solicit alternative Acquisition Proposals from third parties and to provide information to, and participate in discussions and engage in negotiations with, third parties regarding any alternative Acquisition Proposals, subject to a customary “fiduciary out” provision that allows EngageSmart, under certain specified circumstances and after entry into an Acceptable Confidentiality Agreement, to provide information to, and participate in discussions and engage in negotiations with, third parties with respect to an Acquisition Proposal if the Special Committee determines in good faith (after consultation with its financial advisor and outside legal counsel) that such alternative acquisition proposal constitutes a Superior Proposal or is reasonably likely to lead to a Superior Proposal, and the failure to take such actions would be inconsistent with its fiduciary duties pursuant to applicable law. For more information, see the section of this proxy statement captioned “The Merger Agreement—Solicitation of Other Offers.”

 

•

EngageSmart is not entitled to terminate the Merger Agreement to enter into an agreement for a Superior Proposal unless it complies with certain procedures in the Merger Agreement, including engaging in good faith negotiations with Parent during a specified period. If EngageSmart terminates the Merger Agreement in order to accept a Superior Proposal from a third party, it must pay a termination fee to Parent. For more information, see the section of this proxy statement captioned “The Merger Agreement—Recommendation Changes.”

 

10

Change in the EngageSmart Board’s Recommendation

 

•

The EngageSmart Board (or a committee thereof, including the Special Committee) may not amend, modify or withdraw its recommendation that EngageSmart’s stockholders adopt the Merger Agreement or take certain similar actions other than, under certain circumstances, if the EngageSmart Board, acting upon the recommendation of the Special Committee, or the Special Committee determines in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties pursuant to applicable law and the EngageSmart Board, acting upon the recommendation of the Special Committee, or the Special Committee complies with the terms of the Merger Agreement.

 

•

Moreover, neither the EngageSmart Board, acting upon the recommendation of the Special Committee, nor the Special Committee may withdraw the EngageSmart Board’s recommendation that EngageSmart’s stockholders adopt the Merger Agreement or take certain similar actions unless the EngageSmart Board complies with certain procedures in the Merger Agreement, including engaging in good faith negotiations with Parent during a specified period. If EngageSmart or Parent terminates the Merger Agreement under certain circumstances, including because the EngageSmart Board, acting upon the recommendation of the Special Committee, or the Special Committee, amends, modifies or withdraws the EngageSmart Board’s recommendation that EngageSmart’s stockholders adopt the Merger Agreement, then EngageSmart must pay to Parent a termination fee.

 

•

For more information, see the section of this proxy statement captioned “The Merger Agreement—Recommendation Changes.”

Limited Guarantee

 

•

Under the Limited Guarantee, Guarantor agreed to guarantee the payment of all of the liabilities and obligations of Parent and Merger Sub under the Merger Agreement, subject to an aggregate cap equal to $288,740,000, plus amounts in respect of certain reimbursement and indemnification obligations of Parent and Merger Sub for certain costs, expenses or losses incurred or sustained by EngageSmart and its subsidiaries as specified in the Merger Agreement (the “Parent Liability Limitation”). For more information, please see the section of this proxy statement captioned “Special Factors—Limited Guarantee.”

Financing of the Merger

 

•

The obligation of Parent and Merger Sub to consummate the Merger is not subject to any financing condition. In connection with the financing of the Merger, Guarantor and Parent entered into the Equity Commitment Letter, pursuant to which, among other things, Guarantor will provide Parent with an equity commitment of up to $2,574,000,000 in cash which may be reduced in accordance with the terms set forth in the Equity Commitment Letter. The Equity Commitment (as defined in the section of this proxy statement captioned “Special Factors—Financing of the Merger”) will be available to Parent, together with available cash on hand of EngageSmart and any third party financing obtained by Parent or its affiliates as of the closing of the Merger, to fund the aggregate Per Share Price (including payments in respect of EngageSmart’s outstanding equity-based awards payable in connection with the closing of the Merger pursuant to the Merger Agreement) and to pay the fees, expenses and other amounts specified in the Merger Agreement to be paid by Parent and Merger Sub in connection with the closing of the Merger. EngageSmart has a contractual right to enforce the Equity Commitment Letter against Guarantor and, under the terms of the Merger Agreement, EngageSmart has the right to specifically enforce Parent’s obligation to consummate the Merger, subject to the satisfaction of the conditions to Parent and Merger Subs’ obligations to consummate the Merger set forth in the Merger Agreement.

 

•

Rollover Equity. Concurrently with the execution and delivery of the Merger Agreement, EngageSmart, the Rollover Stockholders and Parent entered into the Rollover Stockholder Support

 

11

Agreement. Pursuant to the Rollover Stockholder Support Agreement and subject to the terms and conditions described in the section of this proxy statement captioned “Special Factors—Financing of the Merger”, among other things, the Rollover Stockholders will contribute a portion of the shares of EngageSmart Common Stock owned by the Rollover Stockholders to a direct or indirect parent company of Parent in exchange for equity interests in such direct or indirect parent company of Parent, which contribution and exchange will happen immediately prior to the Closing and the Rollover Stockholders will indirectly own approximately 35% of Parent or such direct or indirect parent company thereof. As a result of the Merger, the shares of EngageSmart Common Stock contributed to such direct or indirect parent company of Parent by the Rollover Stockholders will be cancelled and extinguished without any conversion thereof or consideration paid therefor along with the other Owned Shares.

 

•

For more information, please see the section of this proxy statement captioned “Special Factors—Financing of the Merger.”

Conditions to the Closing of the Merger

 

•

Obligations of Parent, Merger Sub and EngageSmart. The obligations of Parent, Merger Sub and EngageSmart, as applicable, to consummate the Merger are subject to the satisfaction or waiver of certain conditions, including:

 

•

the adoption of the Merger Agreement by the Requisite Stockholder Approval;

 

•

the expiration or termination of the waiting periods applicable to the Merger pursuant to the HSR Act (which waiting period expired at 11:59 p.m., Eastern time, on December 6, 2023); and

 

•

the absence of any temporary restraining order, preliminary or permanent injunction or other judgment or order issued by any governmental authority of competent jurisdiction preventing the consummation of the Merger, and the absence of any action by any governmental authority of competent jurisdiction, statute, rule, regulation or order that prohibits, makes illegal, or enjoins the consummation of the Merger.

 

•

Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) of each of the following conditions:

 

•

the accuracy of the representations and warranties of EngageSmart in the Merger Agreement, subject to applicable materiality or other qualifiers, as of certain dates set forth in the Merger Agreement;

 

•

EngageSmart having performed and complied in all material respects with all covenants under the Merger Agreement required to be performed and complied with by it at or prior to the closing of the Merger;

 

•

receipt by Parent and Merger Sub of a customary closing certificate of EngageSmart; and

 

•

the absence of any Company Material Adverse Effect (as defined in the section of this proxy statement captioned “The Merger Agreement—Representations and Warranties”) having occurred after the date of the Merger Agreement.

 

•

Obligations of EngageSmart. The obligations of EngageSmart to consummate the Merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) of each of the following conditions:

 

•

the accuracy of the representations and warranties of Parent and Merger Sub in the Merger Agreement, subject to applicable materiality or other qualifiers, as of certain dates set forth in the Merger Agreement;

 

12

•

Parent and Merger Sub having performed and complied in all material respects with all covenants under the Merger Agreement required to be performed and complied with by Parent and Merger Sub at or prior to the closing of the Merger; and

 

•

the receipt by EngageSmart of a customary closing certificate of Parent and Merger Sub.

 

•

For more information, see the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger.”

Termination of the Merger Agreement

 

•

The Merger Agreement contains certain termination rights for EngageSmart, on the one hand, and Parent, on the other hand, including but not limited to, Parent and EngageSmart each having the right to terminate the Merger Agreement at any time prior to the Effective Time (whether prior to or after the receipt of the Requisite Stockholder Approval) by (1) mutual written agreement or (2) if the Merger is not consummated by 11:59 p.m., Eastern Time, on May 23, 2024. Additional termination rights are further described in the section of this proxy statement captioned “The Merger Agreement—Termination of the Merger Agreement.”

Termination Fees and Remedies

 

•

Payment of Termination Fee by EngageSmart. Upon termination of the Merger Agreement, and as further described in the section of this proxy statement captioned “The Merger Agreement—Company Termination Fee,” under specified circumstances, including EngageSmart terminating the Merger Agreement to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal or Parent terminating the Merger Agreement due to a Recommendation Change, in each case, pursuant to and in accordance with the “fiduciary out” provisions of the Merger Agreement, EngageSmart will be required to pay Parent the Company Termination Fee of $144,370,000 (which may be reduced to $72,185,000 in certain circumstances if such termination occurs prior to the No-Shop Period Start Date and if EngageSmart enters into an Alternative Acquisition Agreement at the time of such termination). The Company Termination Fee will also be payable by EngageSmart if the Merger Agreement is terminated under certain circumstances and prior to such termination, an Acquisition Proposal for an Acquisition Transaction has been made to EngageSmart or has been publicly announced or disclosed and not irrevocably withdrawn and any Acquisition Transaction is consummated or EngageSmart enters into an agreement providing for the consummation of any Acquisition Transaction within one year after the termination.

 

•

Specific Performance. Parent, Merger Sub and EngageSmart are entitled, in addition to any other remedy to which they are entitled at law or equity, to an injunction, specific performance and other equitable relief to prevent breaches (or threatened breaches) of the Merger Agreement and to enforce the terms of the Merger Agreement. EngageSmart has the right, subject to the terms and conditions of the Merger Agreement and the Equity Commitment Letter, to an injunction, specific performance or other equitable remedies in connection with enforcing Parent and Merger Subs’ equity financing to be funded to fund the Merger.

 

•

For more information, see the section of this proxy statement captioned “The Merger Agreement—Company Termination Fee.”

Appraisal Rights

 

•

If the Merger is consummated, holders of record or beneficial owners of EngageSmart Common Stock who (1) do not vote in favor of the Merger Proposal (whether by voting against the Merger Proposal, abstaining or otherwise not voting with respect to the Merger Proposal), (2) continuously hold (in the case of holders of record) or continuously own (in the case of beneficial owners) their applicable shares

 

13

of EngageSmart Common Stock through the effective date of the Merger, (3) properly demand appraisal of their applicable shares, (4) meet certain statutory requirements described in this proxy statement, and (5) do not withdraw their demands or otherwise lose their rights to appraisal will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL if certain conditions set forth in Section 262(g) of the DGCL are satisfied. The requirements under Section 262 of the DGCL for perfecting and exercising appraisal rights are described in further detail the section of this proxy statement captioned “Appraisal Rights,” which description is qualified in its entirety by Section 262 of the DGCL, the relevant section of the DGCL regarding appraisal rights, a copy of which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.

 

•

This means that these holders of record and beneficial owners may be entitled to have their shares of EngageSmart Common Stock appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of EngageSmart Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be fair value from the effective date of the Merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the Surviving Corporation makes a voluntary cash payment to persons entitled to appraisal, interest will accrue thereafter only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time). The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Due to the complexity of the appraisal process, any persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights. Persons considering seeking appraisal should be aware that the fair value of their shares as determined pursuant to Section 262 of the DGCL could be more than, the same as or less than the value of the consideration that they would receive pursuant to the Merger Agreement if they did not seek appraisal of their shares. For more information, see the section of this proxy statement captioned “Appraisal Rights—Determination of Fair Value.”

 

•

To exercise appraisal rights, a holder of record or a beneficial owner of EngageSmart Common Stock must (1) submit a written demand for appraisal of such holder’s shares or such beneficial owner’s shares of EngageSmart Common Stock to EngageSmart before the vote is taken on the Merger Proposal, (2) not vote, in person or by proxy, in favor of the Merger Proposal (whether by voting against the Merger Proposal, abstaining or otherwise not voting with respect to the Merger Proposal), (3) continuously hold (in the case of holders of record) or continuously own (in the case of beneficial owners) the subject shares of EngageSmart Common Stock through the effective date of the Merger, and (4) strictly comply with all other procedures for exercising appraisal rights under the DGCL. If you are a beneficial owner of shares of EngageSmart Common Stock and you wish to exercise your appraisal rights in such capacity, in addition to the foregoing requirements, your demand for appraisal must also (1) reasonably identify the holder of record of the shares of EngageSmart Common Stock for which the demand is made, (2) be accompanied by documentary evidence of your beneficial ownership of stock and a statement that such documentary evidence is a true and correct copy of what it purports to be, and (3) provide an address at which you consent to receive notices given by the Surviving Corporation hereunder and to be set forth on the verified list required by Section 262(f) of DGCL. The failure to follow exactly the procedures specified under the DGCL may result in the loss of appraisal rights. The requirements under Section 262 of the DGCL for perfecting and exercising appraisal rights are described in further detail in the section of this proxy statement captioned “Appraisal Rights,” which description is qualified in its entirety by Section 262 of the DGCL, the relevant section of the

DGCL regarding appraisal rights, a copy of which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.

 

14

Litigation Relating to the Merger

 

•

As of December 12, 2023, one complaint has been filed by a purported EngageSmart stockholder against EngageSmart, the members of the EngageSmart Board, the Rollover Stockholders, Vista, Guarantor, Parent and Merger Sub, seeking to enjoin the Merger and other relief. The complaint alleges that the proposed Merger breaches the provision in Article 4, Section 4(b) of EngageSmart’s Amended and Restated Certificate of Incorporation (the “Charter”) – which provision states that, “Except as otherwise required by law or expressly provided in this Certification of Incorporation, each share of Common Stock shall have the same powers, rights and privileges and shall rank equally, share ratably and be identical in all respects as to all matters” – by providing for different treatment of the shares of EngageSmart Common Stock owned by public stockholders as compared to the shares of EngageSmart Common Stock owned by the Rollover Stockholders in connection with the proposed Merger. The lawsuit alleges claims for breach of contract against EngageSmart for breach of the Charter, claims against the Rollover Stockholders and Vista for tortious interference with the Charter, claims for breach of fiduciary duty against the members of the EngageSmart Board, claims for breach of fiduciary duty against the Rollover Stockholders, and a claim for aiding and abetting breaches of fiduciary duty against Vista. On December 6, 2023, the plaintiff informed the Court that he was withdrawing his motion for preliminary injunction.

 

•

At this time, it is not possible to predict the outcome of the proceeding or its impact on EngageSmart or the proposed Merger. For a more detailed description of litigation relating to the Merger, see the section of this proxy statement captioned “Special Factors—Litigation Relating to the Merger.”

 

15

QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. EngageSmart encourages you to carefully read the more detailed information contained elsewhere in this proxy statement, including the annexes to this proxy statement and the other documents to which EngageSmart refers in this proxy statement. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement captioned “Where You Can Find Additional Information.”

 

Q:	Why am I receiving these materials?

 

A:

On October 23, 2023, EngageSmart entered into the Merger Agreement. Under the Merger Agreement, Parent will acquire EngageSmart for the Per Share Price. In order to complete the Merger, EngageSmart’s stockholders must vote to approve the adoption of the Merger Agreement at the Special Meeting pursuant to the Requisite Stockholder Approval. This approval is a condition to the consummation of the Merger. See the section of this proxy statement captioned “The Merger Agreement—Conditions to the Closing of the Merger.” The EngageSmart Board is furnishing this proxy statement and form of proxy card to the holders of shares of EngageSmart Common Stock as of the Record Date in connection with the solicitation of proxies of EngageSmart’s stockholders to be voted at the Special Meeting.

This proxy statement, which you should read carefully, contains important information about the Merger, the Merger Agreement, the Special Meeting and the matters to be voted on at the Special Meeting. The enclosed materials allow you to submit a proxy to vote your shares of EngageSmart Common Stock without attending the Special Meeting and to ensure that your shares of EngageSmart Common Stock are represented and voted at the Special Meeting.

Your vote is very important. Even if you plan to attend the Special Meeting, EngageSmart encourages you to submit a proxy as soon as possible.

 

Q:	What is the Merger and what effects will it have on EngageSmart?

 

A:

The Merger is the acquisition of EngageSmart by Parent. If the Merger Proposal is approved by EngageSmart’s stockholders pursuant to the Requisite Stockholder Approval and the other closing conditions under the Merger Agreement are satisfied or waived, Merger Sub will merge with and into EngageSmart, with EngageSmart continuing as the Surviving Corporation. As a result of the Merger, EngageSmart will become a wholly owned subsidiary of Parent, and EngageSmart Common Stock will no longer be publicly traded and will be delisted from the NYSE. In addition, EngageSmart Common Stock will be deregistered under the Exchange Act, and EngageSmart will no longer file periodic reports with the SEC.

 

Q:	What will I receive if the Merger is completed?

 

A:

Upon completion of the Merger, you will be entitled to receive the Per Share Price, without interest and less any applicable withholding taxes, for each share of EngageSmart Common Stock that you own, unless you have properly perfected and exercised, and not validly withdrawn or subsequently lost, your appraisal rights under the DGCL, and certain other conditions under the DGCL are satisfied. For example, if you own 100 shares of EngageSmart Common Stock, you will receive $2,300.00 in cash in exchange for your shares of EngageSmart Common Stock, without interest and less any applicable withholding taxes.

 

Q:	How does the Per Share Price compare to the market price of EngageSmart Common Stock?

 

A:	This amount constitutes a premium of approximately 23% to the unaffected closing price of EngageSmart Common Stock of $18.71 per share on October 4, 2023, the last full trading day before media reports that EngageSmart was exploring a potential transaction.

 

16

Q:	What will happen to EngageSmart Option Awards and EngageSmart RSU Awards?

 

A:	Generally speaking, EngageSmart Option Awards and EngageSmart RSU Awards will be treated as follows at the Effective Time:

 

•

Each outstanding Vested EngageSmart Option (whether vested at the Effective Time or that vests in connection with the Merger) will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Vested EngageSmart Option multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of such Vested EngageSmart Option. This amount (less any required withholding and other taxes) will be paid to the applicable holder no later than the second regularly scheduled payroll date following the Closing Date.

 

•

Each outstanding Unvested EngageSmart Option will automatically be canceled and converted into a Converted Cash Award with respect to an aggregate amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart Option immediately prior to the Effective Time multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of such Unvested EngageSmart Option. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart Option immediately prior to the Effective Time. Due to the existing change in control vesting provisions of the EngageSmart Option Awards, it is expected that there will be no Unvested EngageSmart Options at the Effective Time.

 

•

Each outstanding Vested EngageSmart RSU will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Vested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price. This amount (less any required withholding and other taxes) will be paid to the applicable holder no later than the second regularly scheduled payroll date following the Closing Date.

 

•

Each outstanding Unvested EngageSmart RSU will automatically be canceled and converted into a Converted Cash Award with respect to an aggregate amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart RSU immediately prior to the Effective Time.

 

Q:	What will happen to the ESPP?

 

A:	Generally speaking, the ESPP will be treated as follows:

 

•

From and after the date of the Merger Agreement, among other things, (1) no new individuals will be permitted to enroll in the ESPP and (2) no increase in the amount of participants’ payroll deduction elections under the ESPP will be permitted. EngageSmart has determined that the purchase period ending on November 30, 2023 was the final purchase period under the ESPP.

 

•

No later than one business day prior to the Effective Time, EngageSmart will apply any funds within each ESPP participant’s account to the purchase of whole shares of EngageSmart Common Stock in accordance with the terms of the ESPP. These shares will be deposited into the applicable participant’s account and will be treated in the same manner as any other outstanding share of EngageSmart Common Stock in connection with the consummation of the Merger.

 

17

Q:	What am I being asked to vote on at the Special Meeting?

 

A:	You are being asked to vote on the following proposals:

 

•

The Merger Proposal: the proposal to adopt the Merger Agreement, pursuant to which Merger Sub will merge with and into EngageSmart, with EngageSmart continuing as the Surviving Corporation and becoming a wholly owned subsidiary of Parent;

 

•

The Compensation Proposal: the proposal to approve, on a non-binding, advisory basis, the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger; and

 

•

The Adjournment Proposal: the proposal to approve the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.

 

Q:	When and where is the Special Meeting?

 

A:

The Special Meeting will take place virtually on [●] at [●] Eastern time. You may attend the Special Meeting solely via a live interactive webcast on the Internet at www.virtualshareholdermeeting.com/ESMT2024SM. You will be able to listen to the Special Meeting live and vote online. You will need the control number found on your proxy card or voting instruction form in order to participate in the Special Meeting (including voting your shares).

 

Q:	Who is entitled to vote at the Special Meeting?

 

A:

All of EngageSmart’s stockholders as of the close of business on [●], which is the Record Date for the Special Meeting, are entitled to vote their shares of EngageSmart Common Stock at the Special Meeting. As of December 7, 2023, there were 168,334,721 shares of EngageSmart Common Stock outstanding and entitled to vote at the Special Meeting. For each share of EngageSmart Common Stock that you own as of the close of business on the Record Date, you will have one vote on each matter submitted for a vote at the Special Meeting.

 

Q:	What vote is required to approve the Merger Proposal?

 

A:

Approval of the Merger Proposal requires the affirmative vote of (1) the holders of a majority of the outstanding shares of EngageSmart Common Stock entitled to vote thereon, and (2) the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders and entitled to vote thereon.

 

Q:	What vote is required to approve each of (1) the Compensation Proposal and (2) the Adjournment Proposal?

 

A:

Approval of the Compensation Proposal requires the affirmative vote of the holders of a majority in voting power of EngageSmart Common Stock present by means of remote communication or represented by proxy at the Special Meeting and entitled to vote on such proposal. This vote will be on a non-binding, advisory basis.

Approval of the Adjournment Proposal requires the affirmative vote of the holders of a majority in voting power of EngageSmart Common Stock present by means of remote communication or represented by proxy at the Special Meeting and entitled to vote on such proposal.

 

Q:	What happens if I fail to vote or abstain from voting on a proposal?

 

A:	If you (1) are a stockholder of record and fail to submit a signed proxy card, grant a proxy over the internet or by telephone, or vote your shares at the Special Meeting, or if you (2) hold in “street name” and you fail

 

18

to instruct your broker, bank or other nominee on how to vote your shares, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting, and such failure to vote will have the same effect as voting “AGAINST” the Merger Proposal, but will not have any effect on the outcome of the vote on the Compensation Proposal or the Adjournment Proposal (assuming a quorum is present).

With respect to the Merger Proposal, if you abstain from voting, your shares will be counted as present for purposes of determining the presence of a quorum, but such abstention will have the same effect as voting “AGAINST” the Merger Proposal. With respect to the Compensation Proposal and the Adjournment Proposal, if you abstain from voting, your shares will be counted as present for purposes of determining the presence of a quorum, but abstentions are not considered votes cast affirmatively or negatively and therefore will not have any effect on the outcome of such proposals.

 

Q:	How will EngageSmart’s directors and executive officers and certain other stockholders vote on the Merger Proposal?

 

A:

EngageSmart’s directors and executive officers have informed EngageSmart that, as of the date of this proxy statement, they intend to vote all of the shares of EngageSmart Common Stock owned directly by them in favor of the Merger Proposal, the Compensation Proposal and the Adjournment Proposal. As of December 7, 2023, EngageSmart’s directors and executive officers beneficially owned, in the aggregate, approximately 1.9% of the voting power of the shares of EngageSmart Common Stock outstanding as of December 7, 2023. For more information, see the section of this proxy statement captioned “Special Factors—Intent of EngageSmart’s Directors and Executive Officers to Vote in Favor of the Merger.”

Summit Partners, who beneficially owned approximately 14.9% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Summit Support Agreement, pursuant to which Summit agreed to vote all of the Summit Shares in favor of the Merger Proposal, subject to the terms and conditions contained in the Summit Support Agreement. In addition, the Rollover Stockholders, who beneficially owned, in the aggregate, approximately 53.6% of the voting power of the outstanding shares of EngageSmart Common Stock as of December 7, 2023, entered into the Rollover Stockholder Support Agreement pursuant to which they agreed to vote all of their shares of EngageSmart Common Stock in favor of the Merger Proposal, subject to the terms and conditions contained in the Rollover Stockholder Support Agreement. However, approval of the Merger Proposal requires the Unaffiliated Stockholder Vote, which excludes all of the shares of EngageSmart Common Stock held (1) by the Rollover Stockholders and certain of their affiliates, (2) by EngageSmart’s officers (within the meaning of Rule 16a-1(f) of the Exchange Act) and (3) by Vista and certain of its affiliates, but does not exclude the Summit Shares. For more information, see the sections of this proxy statement captioned “Special Factors—Intent of Certain Stockholders to Vote in Favor of the Merger” and “The Support Agreements,” as well as the full text of the Support Agreements, attached as Annex C and Annex D, which are incorporated by reference in this proxy statement in their entirety.

 

Q:	What do I need to do now?

 

A:

We encourage you to read this proxy statement, the annexes to this proxy statement and the documents that EngageSmart refers to in this proxy statement carefully and consider how the Merger affects you. Then, even if you expect to attend the Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card (a prepaid reply envelope is provided for your convenience), or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card), so that your shares can be voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction form provided by your bank, broker or other nominee for information on how to vote your shares. Please do not send your stock certificates with your proxy card.

 

19

Q:	What is the Special Committee, and what role did it play in evaluating the Merger?

 

A:

The EngageSmart Board formed the Special Committee to evaluate and negotiate a possible sale of EngageSmart and other strategic alternatives involving EngageSmart and provide a recommendation to the EngageSmart Board as to whether or not to approve any such transaction. The Special Committee is comprised solely of members of the EngageSmart Board who were determined by the EngageSmart Board to be independent of General Atlantic. As more fully described in the section of this proxy statement captioned “Special Factors—Reasons for the Merger; Recommendation of the Special Committee and the EngageSmart Board,” the Special Committee evaluated the Merger Agreement, the Rollover Stockholder Support Agreement, the Summit Support Agreement, the Limited Guarantee, the Equity Commitment Letter and the transactions contemplated by the Merger Agreement, including the Merger, with the assistance of its own independent financial and legal advisors and, where appropriate, EngageSmart management and EngageSmart’s outside legal advisor. At the conclusion of its review, the Special Committee, among other things, unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders, (2) recommended that the EngageSmart Board approve the Merger Agreement and the transactions contemplated thereby, including the Merger, and (3) resolved to recommend that the Unaffiliated Stockholders adopt the Merger Agreement. The Special Committee also recommended that the EngageSmart Board submit the Merger Agreement to the stockholders of EngageSmart for their adoption and approval and recommend that EngageSmart’s stockholders vote in favor of the adoption of the Merger Agreement and the approval of the Merger in accordance with the DGCL. The EngageSmart Board, acting upon the recommendation of the Special Committee, (1) determined that the Merger Agreement and the transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of EngageSmart and its stockholders, (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and other obligations thereunder, and the consummation of the Merger upon the terms and conditions set forth in the Merger Agreement, and (3) resolved to recommend that the stockholders adopt the Merger Agreement in accordance with the DGCL at any EngageSmart stockholder meeting.

 

Q:	How does the EngageSmart Board recommend that I vote?

 

A:	The EngageSmart Board, acting upon the unanimous recommendation of the Special Committee, unanimously recommends that you vote:

 

•

“FOR” the approval of the Merger Proposal;

 

•

“FOR” the approval of the Compensation Proposal; and

 

•

“FOR” the approval of the Adjournment Proposal.

You should read the section of this proxy statement captioned “Special Factors—Reasons for the Merger; Recommendation of the Special Committee and the EngageSmart Board” for a discussion of the factors that the Special Committee and the EngageSmart Board considered in deciding to recommend and/or approve, as applicable, the approval of the adoption of the Merger Agreement.

 

Q:	What happens if the Merger is not completed?

 

A:

If the Merger Agreement is not adopted as a result of the failure to obtain the Requisite Stockholder Approval, or if the Merger is not completed for any other reason, EngageSmart’s stockholders will not receive any payment for their shares of EngageSmart Common Stock. Instead: (1) EngageSmart will remain an independent public company, (2) EngageSmart Common Stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and (3) EngageSmart will continue to file periodic reports with the SEC.

 

20

In specified circumstances in which the Merger Agreement is terminated, EngageSmart has agreed to pay Parent a termination fee. For more information, see the section of this proxy statement captioned “The Merger Agreement—Company Termination Fee.”

 

Q:	What is the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger?

 

A:

The compensation that will or may become payable by EngageSmart to EngageSmart’s named executive officers in connection with the Merger is certain compensation that is based on or otherwise relates to the Merger and payable to certain of EngageSmart’s named executive officers pursuant to underlying plans and arrangements that are contractual in nature. Compensation not described in the preceding sentence that will or may become payable by Parent or its affiliates (including, following the consummation of the Merger, the Surviving Corporation) to EngageSmart’s named executive officers in connection with or following the Merger is not subject to this advisory vote. For further information, see the section of this proxy statement captioned “Proposal 2: The Compensation Proposal.”

 

Q:	Why am I being asked to cast a vote to approve the compensation that will or may become payable by EngageSmart to its named executive officers in connection with the Merger?

 

A:

EngageSmart is required by SEC rules to seek approval, on a non-binding, advisory basis, of compensation that will or may become payable by EngageSmart to its named executive officers that is based on or otherwise relates to the Merger. Approval of these compensation arrangements is not required to consummate the Merger.

 

Q:	What will happen if EngageSmart’s stockholders do not approve the Compensation Proposal?

 

A:

Approval of the compensation that will or may become payable by EngageSmart to its named executive officers that is based on or otherwise relates to the Merger is not a condition to consummation of the Merger. The vote is an advisory vote and will not be binding on EngageSmart or Parent. The underlying plans and arrangements providing for such compensation are contractual in nature and are not, by their terms, subject to stockholder approval.

Accordingly, if the Merger Agreement is adopted by EngageSmart’s stockholders and the Merger is consummated, such compensation will or may be paid to EngageSmart’s named executive officers regardless of the outcome of this advisory vote.

 

Q:	What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with EngageSmart’s transfer agent, Computershare Trust Company, N.A., you are considered, with respect to those shares, to be the “stockholder of record.” If you are a stockholder of record, this proxy statement and your proxy card have been sent directly to you by or on behalf of EngageSmart. As a stockholder of record, you may attend the Special Meeting and vote your shares at the Special Meeting using the control number on the enclosed proxy card.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares of EngageSmart Common Stock held in “street name.” If you are a beneficial owner of shares of EngageSmart Common Stock held in “street name,” this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting. You are also invited to attend the Special Meeting. However, because you are not the stockholder of record, you may not vote your shares at the Special Meeting unless you provide a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the Special Meeting.

 

21

Q:	If my broker holds my shares in “street name,” will my broker vote my shares for me?

 

A:

No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares.

If you do not provide your bank, broker or other nominee with voting instructions, your shares will not be voted on any of the proposals, which will have the same effect as if you voted “AGAINST” the Merger Proposal but will have no effect on the outcome of the vote on the Compensation Proposal or the Adjournment Proposal, except to the extent affecting the obtaining of a quorum at the meeting.

 

Q:	How may I vote?

 

A:	If you are a stockholder of record (that is, if your shares of EngageSmart Common Stock are registered in your name with Computershare Trust Company, N.A., EngageSmart’s transfer agent), there are four ways to vote:

 

•

by signing, dating and returning the enclosed proxy card (a prepaid reply envelope is provided for your convenience);

 

•

by visiting the internet address on your proxy card;

 

•

by calling the toll-free (within the United States or Canada) phone number on your proxy card; or

 

•

by attending the Special Meeting and voting at the Special Meeting using the control number on the enclosed proxy card.

The control number located on your proxy card is designed to verify your identity and allow you to vote your shares of EngageSmart Common Stock and to confirm that your voting instructions have been properly recorded when voting electronically over the internet or by telephone. Although there is no charge for voting your shares, if you vote electronically over the internet or by telephone, you may incur costs such as internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting, you are strongly encouraged to vote your shares of EngageSmart Common Stock by proxy. If you are a stockholder of record or if you provide a “legal proxy” to vote shares that you beneficially own, you may vote your shares of EngageSmart Common Stock at the Special Meeting even if you have previously voted by proxy. If you attend the Special Meeting and vote at the Special Meeting, your vote will revoke any previously submitted proxy.

If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting instruction form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the internet or by telephone. To vote over the internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting instruction form provided by your bank, broker or nominee. However, because you are not the stockholder of record, you may not vote your shares at the Special Meeting unless you provide a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the Special Meeting.

 

Q:	May I attend the Special Meeting and vote at the Special Meeting?

 

A:

Yes. You may attend the Special Meeting via live interactive webcast on the internet at www.virtualshareholdermeeting.com/ESMT2024SM. You will be able to listen to the Special Meeting live and vote online. The Special Meeting will begin at [●], Eastern time, on [●]. Online check-in will begin a few minutes prior to the Special Meeting. You will need the control number found on your proxy card or voting instruction form in order to participate in the Special Meeting (including voting your shares). As the Special Meeting is virtual, there will be no physical meeting location.

 

22

Even if you plan to attend the Special Meeting, to ensure that your shares will be represented at the Special Meeting, EngageSmart encourages you to promptly sign, date and return the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the Special Meeting and vote at the Special Meeting, your vote will revoke any proxy previously submitted.

If, as of the Record Date, you are a beneficial owner of shares held in “street name,” you may not vote your shares at the Special Meeting unless you provide a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the Special Meeting. Otherwise, you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form provided by your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals to be considered at the Special Meeting without your instructions.

 

Q:	Why did EngageSmart choose to hold a virtual Special Meeting?

 

A:

The EngageSmart Board decided to hold the Special Meeting virtually in order to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from virtually any location around the world, at no cost. However, you will bear any costs associated with your internet access, such as usage charges from internet access providers and telephone companies. EngageSmart believes this is the right choice for a company with a global footprint. A virtual Special Meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information, while saving EngageSmart and its stockholders time and money. EngageSmart also believes that the online tools that it has selected will increase stockholder communication. EngageSmart remains very sensitive to concerns that virtual meetings may diminish stockholder voice or reduce accountability. Accordingly, EngageSmart has designed its virtual format to enhance, rather than constrain, stockholder access, participation and communication.

 

Q:	What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of EngageSmart Common Stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of EngageSmart Common Stock is called a “proxy card.” You may follow the instructions on the proxy card to designate a proxy by telephone or by the Internet in the same manner as if you had signed, dated and returned a proxy card. Scott Semel and Robert P. Bennett, each with full power of substitution and re-substitution, have been designated as proxy holders for the Special Meeting by the EngageSmart Board.

 

Q:	May I change my vote after I have mailed my signed and dated proxy card?

 

A:	Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

signing another proxy card with a later date and returning it to EngageSmart prior to the Special Meeting;

 

•

submitting a new proxy electronically over the internet or by telephone after the date of the earlier submitted proxy;

 

•

delivering a written notice of revocation to EngageSmart’s Secretary; or

 

•

attending the Special Meeting and voting at the Special Meeting using the control number on the enclosed proxy card.

If you hold your shares of EngageSmart Common Stock in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote at the Special Meeting if you obtain a “legal proxy” from your bank, broker or other nominee giving you the right to vote your shares at the Special Meeting.

 

23

Q:	If a stockholder gives a proxy, how are the shares voted?

 

A:	Regardless of the method you choose to grant your proxy, the individuals named on the enclosed proxy card, with full power of substitution and re-substitution, will vote your shares in the way that you direct.

If you sign and date your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted as recommended by the EngageSmart Board with respect to each proposal. This means that they will be voted: (1) “FOR” the approval of the Merger Proposal, (2) “FOR” the approval of the Compensation Proposal, and (3) “FOR” the approval of the Adjournment Proposal, and in the proxyholders’ discretion with respect to any other business that may properly come before the Special Meeting.

 

Q:	Should I send in my stock certificates now?

 

A:

No. After the Merger is completed, any holders of physical stock certificates will receive a letter of transmittal containing instructions for how to send your stock certificates to the Payment Agent in order to receive the appropriate cash payment for the shares of EngageSmart Common Stock represented by your stock certificates. Unless you are seeking appraisal, you should use the letter of transmittal to exchange your stock certificates for the cash payment to which you are entitled. Please do not send your stock certificates with your proxy card. If you hold your shares of EngageSmart Common Stock in book-entry form, the Payment Agent will pay you the appropriate portion of the aggregate Per Share Price (subject to any applicable withholding taxes) upon receipt of a customary “agent’s message” (or such other evidence of transfer as the Payment Agent may reasonably request) and any other items specified by the Payment Agent.

 

Q:	What happens if I sell or transfer my shares of EngageSmart Common Stock after the Record Date but before the Special Meeting?

 

A:

The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the expected effective date of the Merger. If you sell or transfer your shares of EngageSmart Common Stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares and each of you notifies EngageSmart in writing of such special arrangements, you will transfer the right to receive the Per Share Price with respect to such shares, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or transfer your shares of EngageSmart Common Stock after the Record Date, EngageSmart encourages you to sign, date and return the enclosed proxy card (a prepaid reply envelope is provided for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card).

 

Q:	What should I do if I receive more than one set of voting materials?

 

A:	Please sign, date and return (or grant your proxy electronically over the internet or by telephone for) each proxy card and voting instruction form that you receive to ensure that all of your shares are voted.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction forms, if your shares are registered differently or are held in more than one account. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction form for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote all voting materials that you receive.

 

Q:	Where can I find the voting results of the Special Meeting?

 

A:	EngageSmart intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC within four business days following the Special Meeting. All reports that EngageSmart files with the

 

24

SEC are publicly available when filed. See the section of this proxy statement captioned “Where You Can Find Additional Information.”

 

Q:	Will I be subject to U.S. federal income tax upon the exchange of common stock for cash pursuant to the Merger?

 

A:

The exchange of EngageSmart Common Stock for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in the section entitled “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger”) who exchanges shares of EngageSmart Common Stock for cash in the Merger will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and the U.S. Holder’s adjusted tax basis in such shares. If you are a Non-U.S. Holder (as defined in the section entitled “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger”), the Merger will generally not result in U.S. federal income tax to you unless you have certain connections with the United States.

For a more complete description of the U.S. federal income tax consequences of the Merger, see the section entitled “Special Factors—Certain U.S. Federal Income Tax Consequences of the Merger.”

 

Q:	When do you expect the Merger to be completed?

 

A:

EngageSmart currently expects to complete the Merger in the first quarter of 2024. However, the exact timing of completion of the Merger, if at all, cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of its control.

 

Q:	What governmental and regulatory approvals are required?

 

A:	Under the terms of the Merger Agreement, the Merger cannot be completed until the waiting period applicable to the Merger under the HSR Act has expired or been terminated. The waiting period under the HSR Act expired at 11:59 p.m., Eastern time, on December 6, 2023.

 

Q:	Am I entitled to appraisal rights under the DGCL?

 

A:

If the Merger is consummated and certain conditions set forth in Section 262(g) of the DGCL are satisfied, holders of record and beneficial owners of EngageSmart Common Stock who (1) do not vote in favor of the Merger Proposal (whether by voting against the Merger Proposal, abstaining or otherwise not voting with respect to the Merger Proposal), (2) continuously hold (in the case of holders of record) or continuously own (in the case of beneficial owners) their applicable shares of EngageSmart Common Stock through the effective date of the Merger, (3) properly demand appraisal of their applicable shares, (4) meet certain statutory requirements as described in this proxy statement, and (5) do not withdraw their demands or otherwise lose their rights to appraisal, will be entitled to seek appraisal of their shares in connection with the Merger under Section 262 of the DGCL. This means that such holders of record and beneficial owners will be entitled to have their shares appraised by the Delaware Court of Chancery and to receive payment in cash of the “fair value” of their shares of EngageSmart Common Stock, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with (unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown) interest on the amount determined by the Delaware Court of Chancery to be fair value from the effective date of the Merger through the date of payment of the judgment at a rate of five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the Merger and the date of payment of the judgment, compounded quarterly (except that, if at any time before the entry of judgment in the proceeding, the Surviving Corporation makes a voluntary cash payment to each person seeking appraisal, interest will accrue thereafter only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery, and

 

25

(2) interest theretofore accrued, unless paid at that time). The Surviving Corporation is under no obligation to make such voluntary cash payment prior to such entry of judgment. Persons who wish to seek appraisal of their shares are encouraged to seek the advice of legal counsel with respect to the exercise of appraisal rights due to the complexity of the appraisal process. The DGCL requirements for perfecting and exercising appraisal rights are described in additional detail in the section of this proxy statement captioned “Appraisal Rights,” which description is qualified in its entirety by Section 262 of the DGCL regarding appraisal rights, which may be accessed without subscription or cost at the following publicly available website: https://delcode.delaware.gov/title8/c001/sc09/index.html#262.

 

Q:	Do any of EngageSmart’s directors or officers have interests in the Merger that may differ from those of EngageSmart’s stockholders generally?

 

A:

Yes. In considering the recommendations of the Special Committee and the EngageSmart Board with respect to the Merger, you should be aware that, aside from their interests as holders of EngageSmart Common Stock and equity awards, EngageSmart’s directors and executive officers may have interests in the Merger that are different from, or in addition to, your interests as a stockholder. The Special Committee and the EngageSmart Board were aware of and considered these interests to the extent that they existed at the time, among other matters. For more information, see the section of this proxy statement captioned “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

 

Q:	Who can help answer my questions?

 

A:	If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of the accompanying proxy statement or need help submitting your proxy or voting your shares of EngageSmart Common Stock, please contact EngageSmart’s proxy solicitor:

Innisfree M&A Incorporated

501 Madison Avenue, 20th Floor

New York, New York 10022

Stockholders call: (877) 717-3922 (toll-free from the U.S. and Canada) or

+1 (412) 232-3651 (from other countries)

Banks and brokers call collect: (212) 750-5833

 

26

SPECIAL FACTORS

Background of the Merger

The following chronology summarizes the key meetings and events that led to and immediately followed the signing of the Merger Agreement. This chronology does not purport to catalogue every conversation of or among the members of the EngageSmart Board, the members of the Special Committee, the representatives of EngageSmart or the Special Committee, or other parties, including Vista and General Atlantic.

EngageSmart completed its initial public offering on September 27, 2021. As of the completion of the initial public offering, General Atlantic owned approximately 60% of the outstanding shares of EngageSmart Common Stock and, as of the date of this proxy statement, General Atlantic owns approximately 53.6% of the outstanding shares of EngageSmart Common Stock. EngageSmart is also a party to a Stockholders Agreement (the “Stockholders Agreement”), entered into as of September 22, 2021, with General Atlantic (IC) L.P., Summit and Robert Bennett, the Chief Executive Officer of EngageSmart, under which the parties thereto agreed to board composition and director designation rights and various other governance matters, including that for so long as General Atlantic beneficially owns at least 25% of the outstanding shares of EngageSmart Common Stock, General Atlantic’s consent is required for any acquisition or disposition where aggregate consideration is greater than $150,000,000 or any transaction in which any person or group acquires more than 50% of the then outstanding capital stock of EngageSmart or the power to elect a majority of the members of the EngageSmart Board.

The EngageSmart Board regularly evaluates EngageSmart’s strategic direction and ongoing business plans with a view toward strengthening EngageSmart’s businesses and enhancing stockholder value. As part of this evaluation, the EngageSmart Board has, from time to time, considered a variety of strategic alternatives. These have included, among others, (1) the continuation of, and potential improvements to, current business plans; (2) the investment in, and development of, new products and services, and expansion into new markets; (3) capital raising activities; (4) potential expansion opportunities through acquisitions, partnerships or other commercial relationships; and (5) divestitures of portions of EngageSmart’s businesses. On several occasions since EngageSmart’s initial public offering, third parties have expressed high level interest in acquiring portions of EngageSmart’s businesses, but no proposals have been made to either EngageSmart management or to General Atlantic for an acquisition of the entire company or a controlling stake in EngageSmart or a merger with EngageSmart, except as described below.

Since EngageSmart’s initial public offering, members of EngageSmart senior management have regularly interacted with representatives of General Atlantic in connection with General Atlantic’s evaluation of EngageSmart’s strategic direction and ongoing business plans and potential strategic alternatives, including providing non-public information to General Atlantic as required by the Stockholders Agreement. These interactions have included frequent conversations between Mr. Bennett and Paul Stamas, Chairman of the EngageSmart Board and a managing director of General Atlantic.

On March 31, 2022, Mr. Stamas had an introductory breakfast with a representative of Vista as part of General Atlantic’s ordinary course business practices of having discussions with private equity sponsors and other participants in the industries in which General Atlantic’s portfolio companies operate. During this meeting, the parties discussed EngageSmart and its businesses. No specific terms of a potential transaction were discussed.

Following this breakfast, on April 1, 2022, Mr. Stamas introduced the representative of Vista to Mr. Bennett over email. After this introduction, Mr. Bennett and representatives of Vista scheduled an introductory meeting, which occurred on April 22, 2022. During this meeting, representatives of Vista and Mr. Bennett discussed EngageSmart and the industry in which it operates and Vista’s interest in learning more about EngageSmart and its businesses. No specific terms of a potential transaction were discussed.

On May 3, 2022, the EngageSmart Board held a regularly scheduled meeting, also attended at various times by management of EngageSmart. Among other matters discussed over the course of this meeting, during an

 

27

executive session attended by representatives of Goldman Sachs & Co., LLC (“Goldman Sachs”), the EngageSmart Board discussed with representatives of Goldman Sachs certain equity capital markets and follow-on offering considerations as well as certain strategic alternatives that might be available to EngageSmart, including remaining a standalone company, separating into two businesses, completing a transformational merger, divesting certain of its businesses, separating into two public companies or pursuing additional business acquisitions. In connection with this meeting, the EngageSmart Board received projected financial information prepared by management in the ordinary course for purposes of internal strategic planning and not during or in preparation for any transaction involving EngageSmart (as summarized under the header “Additional Projected Financial Information—May 2022 Projected Financial Information” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”).

On May 16, 2022, Mr. Stamas had a follow-up call with a representative from Vista. During this call, the parties discussed EngageSmart and its businesses. No specific terms of a potential transaction were discussed.

On May 31, 2022, representatives of Vista held another call with Mr. Bennett as a follow-up to the April 22, 2022 meeting to further discuss EngageSmart and its businesses, and it was discussed that Vista would be interested in receiving more information about EngageSmart. No specific terms of a potential transaction were discussed.

On June 9, 2022, Mr. Bennett, Cassandra Hudson, the Chief Financial Officer of EngageSmart, and another senior executive of EngageSmart met with representatives of Vista while attending William Blair & Company’s 42nd Annual Growth Stock Conference in Chicago, Illinois, during which meeting it was discussed that Vista would be interested in future meetings with EngageSmart management and receiving more information about EngageSmart. No specific terms of a potential transaction were discussed.

On June 23, 2022, in furtherance of the previous discussions between representatives of Vista and representatives of EngageSmart, representatives of Vista sent representatives of EngageSmart a proposed agenda for a management presentation, scheduled for June 29, 2022, and an initial diligence request list.

On June 27, 2022, the EngageSmart Board held a meeting, also attended by management of EngageSmart and a representative of Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden”), anticipated counsel to a special committee of the EngageSmart Board proposed to be formed at that meeting in contemplation of the possibility that Vista may submit a proposal for a potential transaction with EngageSmart. The EngageSmart Board discussed the status of discussions with Vista, Vista’s interest in learning about EngageSmart and its businesses and a potential transaction with Vista (although no proposal had been made at such time and EngageSmart had not made any determination to pursue such a potential transaction). Mr. Stamas noted that the discussions with Vista regarding Vista’s interest in EngageSmart were initiated by Vista and that General Atlantic might be interested in joining Vista in a transaction with respect to EngageSmart but that no such decision had yet been made by General Atlantic. The representative of Skadden discussed with the EngageSmart Board its fiduciary duties in connection with the review and evaluation of a potential transaction with Vista that might involve a proposal by General Atlantic. The representative of Skadden discussed the formation of a special committee whose members were independent of General Atlantic and disinterested with respect to a potential transaction involving General Atlantic, empowered to hire its own counsel and financial advisors and empowered to negotiate any potential transaction on behalf of EngageSmart. The representative of Skadden then discussed with the EngageSmart Board information relevant to assessing the independence of the proposed members of such a committee, Deborah A. Dunnam, Matthew G. Hamilton, and Diego Rodriguez, including that Mr. Hamilton, a managing director of Summit, had confirmed that Summit would not have interests in a potential transaction that differed materially from those of the public stockholders and that Summit and General Atlantic had invested in the same portfolio companies only in a limited number of cases (and that Mr. Hamilton had participated in one or more of such cases). Following discussion of these considerations and after determining that each of the proposed members of the committee was independent from General Atlantic and disinterested with respect to a potential transaction, the EngageSmart Board voted to form the Special Committee, comprised of Ms. Dunnam,

 

28

Mr. Hamilton and Mr. Rodriguez, to evaluate and negotiate a possible sale transaction involving EngageSmart and other strategic alternatives and provide a recommendation to the EngageSmart Board as to whether or not to approve any such transaction. The EngageSmart Board further voted that the Special Committee would be empowered to retain its own independent financial and legal advisors, and that the EngageSmart Board would not implement any such transaction absent the recommendation of the Special Committee.

On June 28, 2022, EngageSmart entered into a non-disclosure agreement with Vista, which contained a standstill provision that expired on the earlier of (1) June 28, 2023 and (2) EngageSmart’s public announcement of its entry into a change of control transaction. The non-disclosure agreement was later amended and restated in its entirety by the non-disclosure agreement entered into by EngageSmart and Vista on September 22, 2023, which also contained a standstill provision that is no longer in effect following the entry into the Merger Agreement and the announcement of the transactions contemplated thereby, as described below.

Also on June 28, 2022, following the execution of the non-disclosure agreement, Mr. Bennett, Ms. Hudson and Scott Semel, the Chief Legal Officer and Secretary of EngageSmart, had dinner in Boston, Massachusetts with a representative of Vista to discuss EngageSmart and its businesses and Vista’s interest in a potential strategic transaction involving EngageSmart. No specific terms of a potential transaction were discussed.

On June 29, 2022, senior management of EngageSmart held a management presentation based on non-public information with representatives of Vista. This management presentation did not include any prospective financial information of EngageSmart.

On June 30, 2022, EngageSmart granted representatives of Vista access to a virtual data room. Between June 30, 2022 and July 15, 2022, EngageSmart provided limited confidential due diligence information in response to due diligence requests from Vista.

On July 1, 2022, the Special Committee held a meeting, attended by Mr. Semel, Ms. Hudson and representatives of Skadden, to discuss matters related to a potential transaction with Vista that might involve participation by General Atlantic. The Special Committee determined to engage Skadden as its counsel, after the representative of Skadden confirmed that no work had been done by Skadden for General Atlantic in several years, that, while there were undoubtedly General Atlantic ownership positions in clients represented by Skadden, such representative of Skadden could not find evidence of meaningful work being directed to Skadden by General Atlantic, and that Skadden had not previously been engaged by EngageSmart. The Special Committee also discussed potential financial advisors to be engaged by the Special Committee at an appropriate time. Mr. Semel and Ms. Hudson discussed with the Special Committee the meetings that had occurred to date between EngageSmart management and representatives of Vista concerning a potential transaction that might involve participation by General Atlantic. The Special Committee also discussed any potential role of General Atlantic and Summit in connection with such a transaction. Mr. Hamilton again confirmed that Summit would not have interests in a potential transaction that differed materially from those of the public stockholders.

On July 7, 2022, representatives from General Atlantic had a call with representatives from Vista regarding Vista’s potential interest in a potential transaction involving EngageSmart. The representatives from General Atlantic noted that General Atlantic would only be supportive of a potential transaction if it would be attractive to and supported by the public stockholders and that, depending on the terms of the proposal and subject to review and approval by the Special Committee and the EngageSmart Board, General Atlantic might be willing to retain and roll over a portion of its shares of EngageSmart Common Stock.

On July 19, 2022, senior management of EngageSmart held a follow-up meeting with representatives of Vista to discuss EngageSmart and its businesses.

On July 27, 2022, representatives of Vista had a call with Mr. Bennett and communicated to Mr. Bennett that Vista was pausing its exploration of a potential transaction involving EngageSmart at the time, citing macroeconomic conditions.

 

29

On July 29, 2022, representatives of Vista had a call with representatives from General Atlantic and communicated that Vista was pausing its exploration of a potential transaction involving EngageSmart at the time, citing macroeconomic conditions.

On August 2, 2022, the EngageSmart Board held a regularly scheduled meeting, also attended at various times by senior management of EngageSmart. Among other matters, EngageSmart senior management discussed with the EngageSmart Board the ongoing differences between the SMB Solutions and Enterprise Solutions businesses and articulated ways in which synergies could be generated both within each segment and through the ownership of both segments and whether EngageSmart could realize the full value of each of the segments while they were both owned by EngageSmart.

On October 27, 2022, the EngageSmart Board held a regularly scheduled meeting, also attended at various times by management of EngageSmart. Among other matters, the EngageSmart Board discussed that EngageSmart no longer had any strategic matters in the pipeline requiring the involvement of the Special Committee and considered suspending the Special Committee until any such matters arose. Following discussion, the EngageSmart Board suspended the Special Committee. One of the additional matters also discussed at this regularly scheduled meeting included a business update on EngageSmart’s SMB Segment, which included discussions on projected financial information related to the SMB Segment prepared by management (as summarized under the header “Additional Projected Financial Information—October 2022 Projected Financial Information” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”).

As part of its ordinary course business practices, throughout the first half of 2023 General Atlantic had informal discussions with other sponsors where EngageSmart was occasionally discussed.

In March 2023, pursuant to an underwriting agreement dated February 28, 2023, as described under the header “Follow-On Offering” in the section of this proxy statement captioned “Important Information Regarding EngageSmart—Prior Public Offerings”, certain of EngageSmart’s stockholders, including affiliates of General Atlantic and Summit and certain members of EngageSmart’s management, sold an aggregate of 9,200,000 shares of EngageSmart Common Stock for $19.00 per share. The closing price of EngageSmart Common Stock on February 27, 2023, the last trading day prior to the announcement of this offering, was $21.13 per share.

On March 13, 2023, Mr. Bennett, Ms. Hudson and Mr. Canzano met with management of Party A, a publicly traded software company in the payments sector, at the request of Party A (after the parties entered into a non-disclosure agreement, dated March 10, 2023, which did not contain a standstill provision). (Representatives of Party A had from time to time, in the years prior to this meeting, met with representatives of EngageSmart and expressed interest in learning more about certain of EngageSmart’s businesses, and Party A participated in EngageSmart’s 2023 process for divesting its HealthPay24 business.) At this meeting, representatives of Party A discussed their views that exploring a merger of Party A and EngageSmart would be in the interests of both companies and their respective stockholders, but no proposal was made concerning the economic terms of such a transaction. Given the size of the other company relative to EngageSmart, a significant component of the consideration offered to EngageSmart stockholders in any such merger would have involved stock of Party A (as implied by the merger structure discussed by Party A at this meeting).

On April 26, 2023, a representative from Vista had a meeting with a representative from General Atlantic, during which meeting the representative from Vista inquired about EngageSmart and its business performance. No specific terms of a potential acquisition were discussed.

On May 1, 2023, at the request of representatives of General Atlantic, members of senior management of EngageSmart met with Preston McKenzie and David Mangum, members of the EngageSmart Board associated with General Atlantic, to discuss detailed business and financial information of EngageSmart, which meeting was consistent with regular interactions between EngageSmart’s senior management and representatives of General Atlantic in connection with General Atlantic’s evaluation of EngageSmart’s strategic direction and ongoing

 

30

business plans. The information discussed included projected financial information prepared by management (as summarized under the header “Additional Projected Financial Information—May 2023 Projected Financial Information” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”).

On May 2, 2023, the EngageSmart Board held a regularly scheduled meeting, also attended at various times by management of EngageSmart. Among other matters, management of EngageSmart discussed with the EngageSmart Board recent interaction with Party A, and it was the view of the EngageSmart Board that pursuing a potential merger with Party A was not in the best interests of EngageSmart and its stockholders at that time, as the strategic rationale for a combination with Party A was limited because Party A had potential revenue synergies with only one of EngageSmart’s businesses, and because those synergies would be difficult to validate.

In the months following the May 2, 2023 EngageSmart Board meeting, Mr. Stamas and Mr. Bennett held a number of conversations to discuss, among other things, the potential benefits of a separation of SMB Solutions and Enterprise Solutions and the strategic alternatives available to EngageSmart to achieve such a separation.

On May 8, 2023, a representative from General Atlantic had a call with a representative from Party B, a financial sponsor. During the call, the representative from Party B expressed interest, in general terms, in exploring an investment in or other strategic transaction involving EngageSmart.

On June 7, 2023, Mr. Stamas had a call with a representative from Party B during which the representative from Party B reiterated its interest in exploring a strategic transaction involving EngageSmart.

Also on June 7, 2023, Mr. Stamas had a meeting, which was unsolicited, with a representative from Party G. During this meeting, the representative from Party G expressed interest, in general terms, in EngageSmart and its businesses.

In July 2023, representatives of General Atlantic began discussing with EngageSmart management their desire that EngageSmart should consider exploring third party interest in a potential strategic transaction involving EngageSmart that would result in General Atlantic retaining its controlling ownership of the outstanding EngageSmart Common Stock while (1) enabling one or more new sponsors to invest in EngageSmart and (2) allowing EngageSmart’s existing stockholders to receive a cash payment for their investment thereby providing immediate value to EngageSmart’s public stockholders. The representatives of General Atlantic indicated that General Atlantic wished to remain a controlling stockholder following the transaction in order to potentially enable future tax efficient spinoff structures for a separation of EngageSmart’s businesses and requested that EngageSmart management provide information to facilitate tax structuring analysis by General Atlantic’s outside counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”).

Between June 22, 2023 and July 17, 2023, representatives of General Atlantic had a series of calls with representatives of Goldman Sachs to discuss a potential strategic transaction involving EngageSmart, with particular focus on how such a transaction could be structured in order to enable future tax efficient spinoff structures for a separation of EngageSmart’s businesses. Following those discussions, it was the assessment of General Atlantic, taking into account the views expressed by representatives of Goldman Sachs, that a process focused on soliciting interest in a potential transaction that would continue General Atlantic’s controlling ownership would be more likely to generate attractive offers than an open-ended process without guidance to potential investors regarding General Atlantic’s preferred structure.

On July 12, 2023, a representative from Party C, a financial sponsor, called, without solicitation, Mr. Stamas expressing interest in the EngageSmart businesses and indicating that Party C would like to be considered if EngageSmart ever considered strategic alternatives.

On July 17, 2023, a representative from General Atlantic had a call with a representative from Party B, during which the representative from Party B reiterated Party B’s interest in exploring a potential transaction with EngageSmart. The representative from General Atlantic indicated that EngageSmart was potentially beginning a process of exploring potential transactions.

 

31

On July 21, 2023, Ms. Dunnam, Mr. Hamilton and Mr. Rodriguez (the members of the Special Committee, as previously constituted on June 27, 2022 prior to its suspension on October 27, 2022), held a meeting, also attended by Mr. Semel and representatives of Skadden (as counsel to the Special Committee in contemplation of the potential revocation of the Special Committee’s suspension). These directors discussed the desire expressed by General Atlantic that EngageSmart explore third party interest in a potential transaction involving EngageSmart that would continue General Atlantic’s controlling ownership in EngageSmart while (1) enabling one or more new sponsors to invest in EngageSmart and (2) allowing EngageSmart’s existing stockholders to receive a cash payment for their investment. These directors also discussed that the EngageSmart Board would need to revoke the suspension of the Special Committee and reconfirm its mandate and authority in order for the Special Committee to be properly constituted and that the matters discussed at this meeting would be presented to and considered by the Special Committee after the EngageSmart Board revoked its suspension. A representative of Skadden then discussed with these directors the legal considerations for directors under Delaware law in connection with a potential transaction, including the need for each director considering the transaction to be independent from General Atlantic and not otherwise interested with respect to a potential transaction involving EngageSmart, and the relevance of Kahn v. M&F Worldwide Corp. and its progeny (“MFW”) to a potential transaction. Mr. Hamilton confirmed that Summit would not have interests in a potential transaction that differed materially from those of the public stockholders. The representative of Skadden invited each of the three directors to contact Skadden individually after the call to discuss any additional considerations affecting their independence or otherwise their ability to serve on the Special Committee. The representative of Skadden informed these directors that a representative of Paul Weiss had confirmed that General Atlantic intended to deliver a letter to the EngageSmart Board (an “MFW Letter”) confirming that it would engage in a potential transaction only if, in addition to any other vote required, a potential transaction was (1) approved by a special committee of independent directors empowered to freely select its own legal and financial advisors and to consider (including the ability to reject) any proposal by General Atlantic regarding a potential transaction and (2) subject to a non-waivable condition requiring approval of a majority of the shares of EngageSmart Common Stock not owned by General Atlantic, and such approval was in fact obtained before consummation of a potential transaction. Ms. Dunnam, Mr. Hamilton and Mr. Rodriguez then discussed potential next steps anticipated by EngageSmart involving outreach to new sponsors in order for General Atlantic to determine whether or not to make a proposal regarding a potential transaction involving EngageSmart. These directors discussed that General Atlantic had indicated that it did not wish to solicit third party interest in a whole company acquisition, as General Atlantic wished to remain a controlling stockholder following the transaction in order to, among other things, potentially enable future tax efficient spinoff structures for a separation of EngageSmart’s businesses, but that General Atlantic had indicated it might be receptive to exploring alternative acquisition proposals that might materialize following sponsor outreach if General Atlantic viewed the value associated with such a proposal as sufficiently high. These directors also discussed the potential engagement of Goldman Sachs by EngageSmart to conduct initial outreach to determine interest from potential new sponsors, noting that Goldman Sachs would not be an advisor to the Special Committee given its long-standing relationship with EngageSmart and General Atlantic, and that the Special Committee would be able to engage its own independent financial advisor in the near term, once the EngageSmart Board had revoked its suspension. These directors then discussed that it was proposed that EngageSmart would provide confidential due diligence information to General Atlantic and prospective new sponsors under non-disclosure agreements if the proposed outreach process progressed. No decisions were made by Ms. Dunnam, Mr. Hamilton and Mr. Rodriguez at this meeting given that the prior suspension of the Special Committee had not yet been revoked, and these directors planned a meeting of the Special Committee after the upcoming EngageSmart Board meeting, for the purpose of determining whether to authorize EngageSmart to work with Goldman Sachs and General Atlantic in the process of exploring new sponsor interest in a potential take private transaction in which a new sponsor would be a minority investor and General Atlantic would retain a controlling interest in EngageSmart, provided that this process would not include any discussion of substantive economic terms with potential counterparties and that the process would involve periodic updates to the Special Committee.

On July 23, 2023, the EngageSmart Board held a meeting, also attended by management of EngageSmart and representatives of Skadden (as counsel to the Special Committee in contemplation of the potential revocation of

 

32

the Special Committee’s suspension) and Goldman Sachs. Mr. Stamas explained General Atlantic’s desire that EngageSmart undertake a process to explore third party interest in a potential take private transaction involving EngageSmart that would continue General Atlantic’s controlling ownership of EngageSmart while (1) enabling one or more new sponsors to invest in EngageSmart and (2) allowing EngageSmart’s existing stockholders to receive a cash payment for their investment. Mr. Stamas indicated that given General Atlantic’s ongoing relationships and contacts with other private equity firms, General Atlantic believed that there would be interest in a minority investment of this nature, in particular in a take private transaction. Mr. Stamas then discussed General Atlantic’s view that a potential transaction of this nature could deliver attractive value to EngageSmart’s minority stockholders, in particular noting that General Atlantic remaining a controlling stockholder could potentially enable future tax efficient spinoff structures for a separation of the EngageSmart businesses as a private company, which could increase the attractiveness of a minority transaction involving EngageSmart to a new investor. Mr. Stamas explained that General Atlantic wished to remain a controlling stockholder of EngageSmart given its view of potential value associated with future tax efficient spinoff structures for a separation of EngageSmart’s businesses under private ownership and that it was General Atlantic’s view that such a process would be more likely to generate attractive offers than an open-ended process without guidance to potential investors regarding General Atlantic’s preferred structure, but confirmed that if third parties contacted in the process expressed interest in an alternative acquisition structure, General Atlantic could potentially become open to further exploring such an alternative proposal if General Atlantic viewed the value associated with such a proposal as sufficiently high. Mr. Stamas explained that additional due diligence would be needed to assess the feasibility of a tax efficient spinoff structure. Mr. Stamas then confirmed that General Atlantic intended to deliver an MFW Letter to the EngageSmart Board. A representative of Skadden discussed with the members of the EngageSmart Board the legal considerations for directors under Delaware law in connection with a potential transaction given General Atlantic’s status as a controlling stockholder of EngageSmart, including the relevance of the MFW Letter to a potential transaction. A representative of Skadden reviewed with the EngageSmart Board information relevant to whether Ms. Dunnam, Mr. Hamilton and Mr. Rodriguez were disinterested with respect to General Atlantic and a potential transaction. The representative of Skadden explained to the EngageSmart Board that Ms. Dunnam had been recently introduced to a professional opportunity by General Atlantic and would not serve as a member of the Special Committee. The representative of Skadden also explained that Mr. Hamilton had confirmed that Summit would not have interests in a potential transaction that differed materially from those of the public stockholders. Following discussion and consideration, the EngageSmart Board revoked the prior suspension on October 27, 2022 of the Special Committee of the EngageSmart Board established on June 27, 2022, confirmed that the Special Committee would retain all powers and authority originally conferred when it was established on June 27, 2022, and determined that the proposed members of the Special Committee, Mr. Hamilton and Mr. Rodriguez, were independent from General Atlantic and disinterested with respect to proposals that may be made by General Atlantic. Representatives of Goldman Sachs then joined the meeting and discussed with the EngageSmart Board an illustrative overview of a process to determine third party interest in a potential transaction as well as an illustrative timeline for a potential transaction, in the event the Special Committee agreed with conducting an outreach process and ultimately considering a potential transaction if there was third party interest. Representatives of Skadden confirmed that the Special Committee would meet after the EngageSmart Board meeting, for the purpose of determining whether to authorize EngageSmart to work with Goldman Sachs and General Atlantic in the process of exploring new sponsor interest in a potential take private transaction in which a new sponsor would be a minority investor and General Atlantic would retain a controlling interest in EngageSmart. Representatives of Skadden confirmed that any outreach conducted by Goldman Sachs to potential investors would not include any discussion of substantive economic terms and that the process would involve periodic updates to the Special Committee, including that the Special Committee would review the list (and any changes to the list) of prospective investors to be contacted by Goldman Sachs.

Also on July 23, 2023, after the meeting of the EngageSmart Board, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Skadden. The Special Committee discussed General Atlantic’s request that EngageSmart explore third party interest in a potential transaction involving EngageSmart that would continue General Atlantic’s controlling ownership of EngageSmart while (1) enabling one or more new sponsors

 

33

to invest in EngageSmart and (2) allowing EngageSmart’s existing stockholders to receive a cash payment for their investment, revisiting the prior discussion of this topic at the meeting on July 21, 2023 prior to the EngageSmart Board’s revocation of the suspension of the Special Committee and prior to Ms. Dunnam’s departure from the Special Committee. The Special Committee discussed the fact that they would need to be fully informed as to the impact of possible future tax efficient spinoff structures for a separation of EngageSmart’s businesses and the valuation implications for existing and prospective investors in EngageSmart. It was discussed that as long as General Atlantic remained a controlling stockholder of EngageSmart, and assuming satisfaction of the other necessary conditions to be assessed in due diligence, a tax efficient spinoff could be achieved by EngageSmart as a public company (assuming such a transaction were otherwise desirable for stockholders and EngageSmart completed the operational, legal and other steps that would be required to effect such a spinoff) after the end of the requisite holding period required under tax regulations (which holding period was expected to end in the near term) and did not depend on the completion of the transaction proposed by General Atlantic. After discussion, the Special Committee also agreed to instruct EngageSmart’s management to prepare long-term projections to be provided to prospective new investors and to General Atlantic, which projections the Special Committee would first review and approve prior to any such dissemination. The Special Committee also discussed that such projections would be used to inform the Special Committee’s view of valuation in assessing future proposals (if any) for a potential transaction as well as other strategic alternatives. The Special Committee also discussed that EngageSmart proposed to engage Goldman Sachs given its long-standing relationship with EngageSmart, including its role as lead book-running manager for EngageSmart’s initial public offering and its role as joint book-running manager for EngageSmart’s recent secondary offerings, and knowledge of its businesses, but that the Special Committee would benefit from engaging its own independent financial advisor in the near term. The Special Committee further discussed that General Atlantic had indicated that it was only willing at that time to expressly solicit interest for a potential transaction in which General Atlantic remained a controlling stockholder and was not presently willing to solicit interest in an alternative acquisition structure. It was the consensus of the Special Committee that it would not be in the best interests of stockholders unaffiliated with General Atlantic if the Special Committee insisted at that time on soliciting interest in an alternative transaction that General Atlantic was then unwilling to solicit interest for, because General Atlantic was a controlling stockholder and its support would be required in order for any such transaction to be effected. Following discussion, the Special Committee authorized EngageSmart to proceed to work with Goldman Sachs and General Atlantic in the process of exploring new sponsor interest in a potential take private transaction in which a new sponsor would be a minority investor and General Atlantic would retain a controlling interest in EngageSmart, provided that this process would not include any discussion of substantive economic terms and that the process would involve periodic updates to the Special Committee, including as to the initial outreach list of prospective investors to be contacted by Goldman Sachs and changes to this list. The Special Committee further authorized EngageSmart to provide non-public information to General Atlantic and to potential new sponsors under non-disclosure agreements with EngageSmart (which non-disclosure agreements were negotiated by Skadden on behalf of the Special Committee).

Also on July 23, 2023, Goldman Sachs provided a letter to Mr. Bennett, which letter was also shared with the EngageSmart Board, describing the relationships between Goldman Sachs, on the one hand, and each of General Atlantic and Summit, on the other hand, for the EngageSmart Board’s consideration in connection with EngageSmart’s potential engagement of Goldman Sachs.

During the days following the July 23, 2023 Special Committee meeting, members of the Special Committee discussed with a representative of Skadden considerations around engaging an independent financial advisor. It was the consensus of the members of the Special Committee that it would be desirable to seek to engage Evercore as financial advisor to the Special Committee given prior experiences with Evercore on M&A advisory matters in the industry and its reputation for similar engagements on behalf of special committees. On July 27, 2023, Evercore provided a letter to Skadden, which Skadden provided to the Special Committee on July 28, 2023, describing Evercore’s relationships with General Atlantic and EngageSmart, which the members of the Special Committee did not view as interfering with Evercore’s role as an advisor to the Special Committee.

 

34

On July 31, 2023, General Atlantic delivered an MFW Letter to the EngageSmart Board, confirming that General Atlantic would engage in a potential transaction only if, in addition to any other vote required, a potential transaction was (1) approved by the Special Committee and (2) subject to a non-waivable condition requiring approval of a majority of the shares of EngageSmart Common Stock not owned by General Atlantic, and such approval was in fact obtained before consummation of a potential transaction. The MFW Letter also confirmed that if the Special Committee did not approve the transaction, or the unaffiliated stockholders of EngageSmart did not approve the transaction, such determination would not adversely affect General Atlantic’s future relationship with EngageSmart.

On August 6, 2023, representatives of Evercore, Goldman Sachs and Skadden discussed the strategy for proposed initial outreach to prospective new sponsors potentially interested in a transaction involving EngageSmart. Representatives of Evercore provided initial feedback and noted that the list of potential investors and the script for initial outreach would need to be reviewed with the Special Committee before Goldman Sachs could proceed. Representatives of Goldman Sachs indicated that General Atlantic also intended to review these matters.

On August 8, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Skadden. Representatives of Skadden discussed with the Special Committee the terms for the Special Committee’s proposed engagement of Evercore, noting Evercore’s relationships disclosures reviewed by representatives of Skadden with the members of the Special Committee on July 28, 2023. Representatives of Skadden also discussed EngageSmart’s proposed engagement of Goldman Sachs (which, as previously discussed with the Special Committee, had a long-standing relationship with EngageSmart and knowledge of its businesses), noting that, although this proposed engagement would require Special Committee approval, the EngageSmart Board would, assuming the Special Committee authorized it as a threshold matter, make the decision of whether to engage Goldman Sachs, as Goldman Sachs would be a financial advisor to EngageSmart (and not the Special Committee). The Special Committee approved the Special Committee’s entry into the engagement letter with Evercore as financial advisor to the Special Committee and, subject to the approval of the EngageSmart Board, approved EngageSmart’s entry into the engagement letter with Goldman Sachs as EngageSmart’s financial advisor. Next, representatives of Evercore joined the meeting and discussed with the Special Committee the list of prospective investors and the contents of the proposed outreach script in connection with the proposed exploration of a potential transaction, noting the fact that such materials did not yet reflect feedback from General Atlantic given time constraints but that the Special Committee would be updated as to any changes proposed by General Atlantic and would have an opportunity to provide any further feedback before deciding whether to approve the list of prospective investors and the proposed outreach script. Representatives of Evercore and the Special Committee discussed the potential level of interest in a minority investment alongside General Atlantic as compared to a whole company or other transaction, the risk of leaks and management distraction associated with broad outreach and the possibility that if certain investors were contacted and allowed to engage before others that a later outreach might not generate additional or competitive interest. It was discussed that General Atlantic had indicated that it was not presently willing to solicit interest in a whole company transaction, which meant that no outreach to strategic parties was proposed at such time and that General Atlantic was expected to prioritize outreach to investors that it viewed as likely to be interested in a minority investment with General Atlantic continuing as the controlling stockholder of EngageSmart in order to potentially enable future tax efficient spinoff structures for a separation of EngageSmart’s businesses. The Special Committee discussed with representatives of Evercore and Skadden that it was unclear whether there would be interest following any initial outreach and how the response would impact next steps. It was discussed that after feedback from initial investor outreach and after review of preliminary valuation scenarios with Evercore based on the long-term projections currently being prepared by management under the instruction of the Special Committee and potential strategic alternatives, the Special Committee would have additional future opportunities to halt EngageSmart’s exploration of a potential transaction or condition further exploration of a potential transaction on outreach to additional parties or concurrent exploration of a whole company or other transaction.

 

35

Following the August 8, 2023 Special Committee meeting, the Special Committee and EngageSmart entered into an engagement letter with Evercore (which letter was dated August 6, 2023). Following the August 8, 2023 Special Committee meeting, the EngageSmart Board approved EngageSmart’s entry into an engagement letter with Goldman Sachs, which letter provides that Goldman Sachs became entitled to receive a fee of $10,000,000 upon execution of a definitive agreement for the consummation of a transaction involving EngageSmart and will be entitled to receive an additional fee (currently estimated, in the Merger, to be approximately $26,000,000) upon consummation of such transaction. EngageSmart entered into this engagement letter with Goldman Sachs on August 8, 2023.

Also on August 8, 2023, given Vista’s prior interest in EngageSmart, Mr. Bennett emailed a representative of Vista who had been involved in the discussions in 2022 and asked about Vista’s view of EngageSmart’s performance relative to Vista’s prior expectations. In the email, Mr. Bennett did not make any references to a potential transaction involving EngageSmart.

On August 9, 2023, representatives of General Atlantic provided feedback to EngageSmart and Goldman Sachs on the contents of the outreach script and the list of prospective investors (with prioritization), which feedback reflected that General Atlantic was not presently willing to solicit interest in a whole company transaction and desired to prioritize outreach to investors that it viewed as likely to be interested in a minority investment with General Atlantic continuing as the controlling stockholder of EngageSmart in order to, among other things, potentially enable future tax efficient spinoff structures for a separation of EngageSmart’s businesses.

Later on August 9, 2023, the Special Committee reviewed the proposed changes from General Atlantic to the outreach script and the list of potential investors (with prioritization) and confirmed that Goldman Sachs could proceed to initiate outreach. The outreach script included that Goldman Sachs had been retained alongside Evercore as EngageSmart considered various value creating alternatives, that EngageSmart and General Atlantic believed a potential path to unlock value involved the separation of SMB Solutions and Enterprise Solutions and that interest was being solicited for a take private transaction where General Atlantic retained control (potentially preserving the ability for a tax efficient separation of SMB Solutions and Enterprise Solutions). The list of prospective investors (reviewed by the Special Committee after proposed changes from General Atlantic) contemplated initial outreach to eight prospective financial sponsors, consisting of Party B, Party C, Party D, Party E, Party F, Party G, Party H and Party I (the “Initially Contacted Parties”), which list reflected General Atlantic’s desire at that time to solicit interest only for a take private transaction where General Atlantic retained control, as these sponsors were expected to be more receptive to a minority investment. In addition, there was a separate list of additional sponsors for future consideration for additional outreach, also reviewed by the Special Committee. Vista and Party J, Party K and Party L (each financial sponsors) were not included in the Initially Contacted Parties, but were identified on this separate list for future consideration for additional outreach. These sponsors were not among the Initially Contacted Parties because, among other reasons, at the time General Atlantic and Goldman Sachs expected these sponsors to be potentially less receptive to a minority investment.

Between August 14, 2023 and August 23, 2023, each of the Initially Contacted Parties entered into non-disclosure agreements with EngageSmart, all of which contained standstill provisions that no longer remain in effect following the entry into the Merger Agreement and the announcement of the transactions contemplated thereby.

On August 15, 2023, a representative from Vista emailed representatives from General Atlantic to schedule a call, which occurred on August 21, 2023. On the call, Vista expressed that they had continued to follow EngageSmart since the disengagement in 2022 and remained interested if there was ever mutual interest in pursuing a potential transaction. The representatives of General Atlantic did not make any references to EngageSmart having initiated a transaction process.

On August 18, 2023, representatives of a nationally recognized investment bank separately contacted Mr. Bennett and a representative from General Atlantic and indicated they had heard EngageSmart was conducting a strategic process.

 

36

Between August 22, 2023 and September 14, 2023, senior management of EngageSmart held management presentations based on non-public information with representatives of the Initially Contacted Parties, also attended by representatives of Evercore and Goldman Sachs. The management presentations occurring prior to September 5, 2023 did not include any prospective financial information of EngageSmart.

On August 26, 2023, a representative of a sponsor Party M (a financial sponsor not included on the list of potential counterparties to be contacted by EngageSmart) contacted, without solicitation, a representative of Goldman Sachs and indicated they had heard EngageSmart was conducting a strategic process and that Party M may be interested in participating in such a process.

On August 30, 2023, a representative of a sponsor Party N (a financial sponsor not included on the list of potential counterparties to be contacted by EngageSmart) contacted, without solicitation, a representative of Goldman Sachs and indicated they had heard EngageSmart was conducting a strategic process.

On August 31, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden and, for the beginning of the meeting, management of EngageSmart and representatives of Goldman Sachs. Management of EngageSmart discussed with the Special Committee the management projections for the purposes of sharing with prospective investors interested in exploring a potential transaction involving EngageSmart, including the key assumptions underlying the management projections and the risks and opportunities affecting EngageSmart’s businesses (such management projections included the Projections as summarized under the header “Projections” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”). After this discussion, management of EngageSmart (other than Mr. Semel) and representatives of Goldman Sachs left the meeting. Representatives of Evercore then updated the Special Committee on the process for determining investor interest in a potential transaction involving EngageSmart and reviewed proposed next steps. Representatives of Evercore and the Special Committee also discussed the risk of a leak related to the process and the impact on participants in the process and on EngageSmart’s employees and operations, including a discussion of the inbound calls in the past week. Representatives of Evercore then discussed with the Special Committee their perspectives on the management projections, including the key assumptions and the risks and opportunities affecting EngageSmart’s businesses as well as benchmarking against analyst projections and operating metrics of select other industry participants. Following discussion, the Special Committee authorized EngageSmart to share the management projections with General Atlantic (which was a necessary step because no transaction would be able to proceed without the support of General Atlantic) and with prospective investors interested in a potential transaction. It was discussed that, in the event General Atlantic proposed changes to the management projections, these changes would need to be reviewed by the Special Committee. Representatives of Evercore also discussed with the Special Committee the additional information that would be required from management of EngageSmart to develop extrapolations to the management projections for purposes of a discounted cash flow analysis to be included in Evercore’s review of potential strategic alternatives and valuation perspectives with the Special Committee, and following discussion, the Special Committee instructed Evercore to work with management of EngageSmart in order to obtain this information.

Following the August 31, 2023 Special Committee meeting, a representative of Skadden provided the EngageSmart Board with the management projections previously reviewed by the Special Committee and authorized for use with prospective investors interested in a potential transaction.

On September 5, 2023, Mr. Bennett and the representative of Vista whom Mr. Bennett emailed on August 8, 2023 met in San Francisco, California. At this meeting, the representative of Vista provided positive views on EngageSmart’s performance compared to Vista’s internal expectations, noting a heightened interest in EngageSmart’s SMB Solutions business segment as compared to its Enterprise Solutions business segment. Mr. Bennett did not discuss any matters with the Vista representative related to the strategic process.

 

37

Also on September 5, 2023, a representative of General Atlantic contacted a representative of Goldman Sachs indicating it had no comments with respect to the management projections previously reviewed by the Special Committee and provided to the EngageSmart Board.

Commencing on September 5, 2023, representatives of Goldman Sachs shared the management projections with all eight of the Initially Contacted Parties. In the case of the Initially Contacted Parties who had already received management presentations without prospective financial information before September 5, 2023, these Initially Contacted Parties were offered (and each, other than Party I accepted) an additional financial presentation by EngageSmart management, which financial presentations were attended by representatives of Evercore and Goldman Sachs. In connection with and following these additional financial presentations, EngageSmart provided limited confidential due diligence materials, where requested, to the Initially Contacted Parties who remained engaged in evaluation of a potential transaction.

On September 9, 2023, Party I indicated it was no longer interested in participating in the process for a potential transaction involving EngageSmart, citing its belief that EngageSmart was currently fully valued and concerns about transaction size.

On September 15, 2023, Party H indicated it was no longer interested in participating in the process for a potential transaction involving EngageSmart, citing its belief that EngageSmart was already fully valued but that it was interested in assessing a transaction involving the separation of EngageSmart’s SMB Solutions business if there was an opportunity to discuss such a transaction in the future.

On September 18, 2023, representatives of Goldman Sachs conveyed to representatives of Evercore that General Atlantic had proposed (and Goldman Sachs agreed) that Vista should be considered for inclusion in EngageSmart’s strategic process as well. Representatives of Evercore agreed to convey that proposal to the Special Committee, and they indicated that Evercore would also solicit the Special Committee’s views on whether to also invite any other parties, beyond the Initially Contacted Parties, to participate in the strategic process at that time.

Also on September 19, 2023, following discussions with the Special Committee and having received its input, representatives of Evercore again contacted representatives of Goldman Sachs, indicating that the Special Committee had approved inviting Vista to participate in the strategic process, and raising whether Party J (included on the separate list of additional sponsors for future consideration for additional outreach), Party M and Party N should be invited to participate as well, given the status of feedback from the Initially Contacted Parties. After further discussions between Evercore and Goldman Sachs (reflecting feedback from General Atlantic), and following Evercore’s further consultation with the Special Committee, it was agreed that Vista and Party J would be included in the process, but that, based on the lack of meaningful detail or engagement in connection with their inquiries, Party M and Party N would not be included at that time, but that further consideration could be given to including Party M and Party N at another time if circumstances changed.

On September 19, 2023 through September 21, 2023, at the direction of the Special Committee, representatives of Goldman Sachs contacted Vista and representatives of Evercore and Goldman Sachs contacted Party J, in each case using the outreach script previously approved by the Special Committee for use with the Initially Contacted Parties and, following this outreach, sent draft non-disclosure agreements to Vista and Party J.

Also on September 19, 2023, a representative of Vista spoke with Mr. Stamas about the fact that EngageSmart was conducting a strategic process.

On September 22, 2023, EngageSmart entered into an amended and restated non-disclosure agreement with Vista, (which amended and restated the non-disclosure agreement between the parties dated June 28, 2022), in connection with the potential transaction involving EngageSmart, which contained a standstill provision that is no longer in effect following the entry into the Merger Agreement and the announcement of the transactions

 

38

contemplated thereby. Also on September 22, 2023, following the execution of the amended and restated non-disclosure agreement, representatives of Goldman Sachs shared with Vista the management projections which contained updates to the cash flow walk to account for the passage of time and refinements to historical modeling of capital expenditures and assumptions related to net working capital (which updates were substantially concurrently provided to the Initially Contacted Parties then participating in the process).

Between September 22, 2023 and October 9, 2023, EngageSmart provided limited confidential due diligence materials, where requested, to Vista.

On September 25, 2023, a representative of a nationally recognized investment bank contacted Mr. Bennett and indicated they had heard EngageSmart was conducting a strategic process.

On September 26, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden and, for the beginning of the meeting, management of EngageSmart and representatives of Goldman Sachs. Management of EngageSmart discussed with the members of the Special Committee the extrapolated projections for years 2028 through 2037 developed by EngageSmart management at the request of the Special Committee for use by Evercore in its valuation analysis, including key assumptions underlying the extrapolated projections, the risks and opportunities affecting EngageSmart’s businesses, and the uncertainty inherent in creating long-range projections for EngageSmart’s businesses and the factors that could potentially result in the extrapolated projections being too low or too high relative to actual future performance (such extrapolated projections included the Extrapolations as summarized under the header “Extrapolations” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”). After EngageSmart management (other than Mr. Semel) and representatives of Goldman Sachs departed the meeting, representatives of Evercore discussed with the members of the Special Committee potential strategic alternatives for EngageSmart and its businesses, including remaining a standalone public company, separating the SMB Solutions and Enterprise Solutions businesses through a tax efficient or taxable transaction, selling EngageSmart in a change of control transaction or, consistent with the structure for a potential transaction that General Atlantic desired to explore investor interest for, selling a minority stake without a change of control, and preliminary valuation analyses. The Special Committee discussed the risks and opportunities associated with each of the potential strategic alternatives. Following this discussion, representatives of Evercore and Skadden then discussed with the members of the Special Committee the proposed content and timing for a bid process letter to be shared with potential investors who expressed continued interest after EngageSmart management presentations. It was discussed that representatives of General Atlantic had communicated that General Atlantic desired at the current time to explore investor interest only in connection with selling a minority ownership stake in EngageSmart without a change of control, and that it was not willing at the current time to expand the scope of a potential transaction to be solicited in a bid process letter. Following discussion, the Special Committee determined that it would be in the best interests of EngageSmart’s stockholders unaffiliated with General Atlantic to continue to explore investor interest in a potential transaction involving selling a minority stake in EngageSmart without a change of control, including by sending the bid process letter to interested parties, and to continue to review other strategic alternatives. During this meeting, representatives of Evercore and Skadden provided an update on interactions with Vista and Party J, noting that Vista appeared highly engaged and had already asked to work with consulting and accounting advisors it had previously engaged in 2022 and that Party J appeared to be moving more slowly.

On September 26, 2023, in accordance with the process outlined to the Special Committee by Evercore, Evercore and Goldman Sachs sent a bid process letter to Vista and the six Initially Contacted Parties still engaged in the process for a potential transaction involving EngageSmart, which consisted of Party B, Party C, Party D, Party E, Party F and Party G. The bid process letter specified that each of the Initially Contacted Parties should submit its preliminary indication of interest by October 5, 2023.

On September 27, 2023, management of EngageSmart held a management presentation based on non-public diligence information with representatives of Vista, also attended by representatives of Evercore and Goldman Sachs.

 

39

On September 28, 2023, EngageSmart entered into a non-disclosure agreement with Party J in connection with the potential transaction involving EngageSmart, which contained a standstill provision that no longer remains in effect following the entry into the Merger Agreement and the announcement of the transactions contemplated thereby. Also on September 28, 2023, following the execution of the non-disclosure agreement, representatives of Goldman Sachs shared with Party J the management projections which contained updates to the cash flow walk previously provided to Vista on September 22, 2023 (which updates had also been substantially concurrently provided on or around September 22, 2023 to the Initially Contacted Parties then participating in the process).

Between September 28, 2023 and October 9, 2023, EngageSmart provided limited confidential due diligence materials, where requested, to Party J.

On September 28, 2023, Evercore and Goldman Sachs sent a bid process letter to Party J. This bid process letter specified that Party J should submit its preliminary indication of interest by October 5, 2023.

On September 29, 2023, management of EngageSmart met with representatives of Vista to discuss the management projections. This meeting was attended by representatives of Evercore and Goldman Sachs.

In early October 2023, EngageSmart management updated assumptions related to taxes and net working capital that affected the calculation of EngageSmart’s projected unlevered free cash flow (such updated assumptions are reflected in the October Unlevered Free Cash Flow as summarized under the header “Unlevered Free Cash Flow” in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”). On October 2, 2023 and October 3, 2023, at the direction of EngageSmart management, representatives of Goldman Sachs made available these updated management projections via email to Party B, Party C, Party D, Party E, Party J and Vista. On October 4, 2023, representatives of Evercore updated the Special Committee on these changes over email for their review, also sharing updated preliminary financial analyses.

On October 3, 2023, management of EngageSmart held a management presentation based on non-public diligence information with representatives of Party J, also attended by representatives of Evercore and Goldman Sachs.

On October 4, 2023, Party G indicated it was no longer interested in participating in the process for a potential transaction involving EngageSmart, citing concerns related to valuation.

Also on October 4, 2023, Party F indicated it was no longer interested in participating in the process for a potential transaction involving EngageSmart, citing potential growth deceleration as EngageSmart’s SMB Solutions business grows larger, uncertainty as to potential partners down the line and its belief that EngageSmart was already fully valued.

Also on October 4, 2023, management of EngageSmart met with representatives of Party J to discuss the management projections. This meeting was attended by representatives of Evercore and Goldman Sachs.

On October 5, 2023, Reuters published an article reporting that General Atlantic was exploring a sale of EngageSmart, that several private equity firms were participating in the process, that the first-round of bidding was underway and that initial offers were due later that day (the “Reuters Article”). Following the publication of the Reuters Article, between October 5, 2023 and October 8, 2023, representatives of Goldman Sachs and Evercore received unsolicited inbound communications with respect to interest in a potential transaction involving EngageSmart from eight parties not included on the list of potential counterparties to be contacted in the initial outreach, including Party K and Party M. The closing price of EngageSmart Common Stock on October 4, 2023, the last trading day prior to the Reuters Article, was $18.71 per share.

Also on October 5, 2023, management of EngageSmart met with representatives of Party J to further discuss the management projections. This meeting was attended by representatives of Evercore and Goldman Sachs.

 

40

Also on October 5, 2023 and October 6, 2023, the four remaining Initially Contacted Parties, Party B, Party C, Party D and Party E, each submitted written preliminary indications of interest to Evercore and Goldman Sachs with respect to a potential transaction involving the acquisition of up to 49% of the outstanding shares of EngageSmart Common Stock in a going private transaction, with General Atlantic continuing as the controlling stockholder of EngageSmart following the transaction (the “October 5 and 6 Proposals”). The letter submitted by Party C contemplated the acquisition of 49% of EngageSmart Common Stock for between $20.50 and $21.00 per share in cash, financed using equity capital and debt. The letter submitted by Party E contemplated the acquisition of up to 49% of EngageSmart Common Stock for $20.59 per share in cash, financed using equity capital and debt. The letter submitted by Party B contemplated an investment of a total of between $200 and $300 million based on cash consideration of between $20.00 and $22.00 per share (which represented, at most, 9% of EngageSmart’s outstanding equity), financed entirely through equity capital. The letter submitted by Party D contemplated the acquisition of 49% of EngageSmart Common Stock for between $17.00 and $20.00 per share of EngageSmart Common Stock in cash, financed using equity capital and debt. Each of the October 5 and 6 Proposals remained subject to completion of further due diligence.

In the days following submission of the October 5 and 6 Proposals, representatives of Evercore and Goldman Sachs jointly spoke with each of the four remaining Initially Contacted Parties to better understand their respective proposals. During the conversation with Party B, Party B confirmed that, although its letter indicated it was open to discussing a greater investment amount should that be desired by General Atlantic or other new sources of capital, it would not be in a position to undertake a significantly larger transaction. During the conversation with Party C, representatives of Party C expressed that its typical transaction would have involved a change of control and implied it could not find additional value above the highest per share price in its proposed valuation range. During the conversation with Party D, Party D offered feedback that implied that it would not be in a position to improve its proposed valuation range.

On October 9, 2023, Vista submitted a written preliminary indication of interest to Evercore and Goldman Sachs contemplating the acquisition of 49% of EngageSmart Common Stock for between $22.00 and $23.00 per share in cash, with an assumption that General Atlantic would retain and roll over 51% of the existing shares of EngageSmart Common Stock (the “October 9 Vista Proposal”). The October 9 Vista Proposal indicated that Vista would obtain financing commitments to finance the transaction and requested permission for Vista to engage with a list of proposed debt financing sources, but noted that the transaction would not be subject to any financing conditions. The October 9 Vista Proposal expressed interest in partnering with existing management but stated that the proposal was not contingent on any individual signing an employment agreement prior to closing. The October 9 Vista Proposal also indicated that Vista could complete due diligence within seven days after receiving requested data and access and execute a definitive agreement within eight to ten business days of receiving requested due diligence information and access to management. In addition, the October 9 Vista Proposal specified that Vista expected the transaction to be expressly conditioned on the procedures described in MFW.

Following submission of the October 9 Vista Proposal, representatives of Evercore and Goldman Sachs jointly spoke with representatives of Vista, who expressed Vista’s desire to move quickly on the timeline indicated in its letter and said that Vista did not intend to continue working past that timeline if EngageSmart was not then prepared to enter into and announce a transaction.

Also on October 9, 2023, representatives of Party J contacted representatives of Goldman Sachs to deliver oral feedback that it was not submitting a proposal, noting its view of potential growth deceleration of EngageSmart’s businesses, but that if Party J had submitted a proposal, it would have submitted a proposal to acquire up to 49% of EngageSmart Common Stock for $19.00 per share in cash.

On October 10, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore updated the Special Committee on interactions with prospective investors interested in exploring a potential transaction involving EngageSmart, including the four

 

41

October 5 and 6 Proposals, the October 9 Vista Proposal and oral feedback from Party J on October 9, 2023. Representatives of Evercore discussed with the Special Committee the additional information from investors during calls after receipt of their letters. Representatives of Evercore also discussed with the Special Committee the feedback from potential investors contacted in the process that had disengaged after receiving management presentations as well as inbound contacts from various parties received both before and after the Reuters Article. Following discussion, the Special Committee determined that, given the level of outreach already conducted by EngageSmart, the feedback received, the fact that General Atlantic was not currently willing to solicit interest in a transaction other than selling a minority stake without a change of control and the risk of disruption to the current transaction process (which could put the existing bids at risk by introducing delay and additional leak potential) and distraction to management involved with outreach to additional parties, that EngageSmart should not invite the parties who had expressed inbound interest into the process or contact additional parties at such time (except that representatives of Evercore were asked to explore additional outreach to Party K, Party O and Party P (each financial sponsors) after discussion with representatives of Goldman Sachs and the collective view of Evercore and Goldman Sachs that such parties were the most likely parties who had expressed inbound interest to potentially transact). Following discussion, the Special Committee determined that Party C, Party E and Vista should be informed they were being invited to a final round of bidding, that Party D should be informed it would not progress due to its lower proposed valuation range and that Party B should be allowed to continue its due diligence in the event another investor was interested in working with Party B as an equity source. Representatives of Evercore then discussed with the Special Committee the proposed messaging to each of Party C, Party E and Vista, taking into consideration that Vista’s bid range was then the highest and Vista’s messaging around desired timing. Following discussion, the Special Committee determined that all three bidders should be informed that EngageSmart anticipated setting a final bid date of roughly four weeks away and that Vista should be informed that, if it wished to complete its due diligence more quickly than the final bid date timeline, EngageSmart would be willing to support Vista’s efforts, taking into account the constraints on EngageSmart’s time in concurrently working with other bidders. Representatives of Evercore then discussed with the members of the Special Committee the access to debt financing sources requested by Vista in the October 9 Vista Proposal and General Atlantic’s proposal that General Atlantic would lead the process for seeking debt financing given that it proposed that it would remain a controlling investor of EngageSmart post-closing, including the potential benefits of having General Atlantic lead the debt financing workstream. Following discussion, the Special Committee determined that having General Atlantic initiate discussions with lenders was beneficial for EngageSmart’s process. The Special Committee then discussed with representatives of Skadden and Evercore the potential treatment of outstanding unvested management equity awards in the transaction, noting that none of the bid letters specified a proposal in this regard, as well as the equity capitalization assumptions that had been provided to investors and which did not assume the full acceleration and cash-out of unvested equity awards.

Between October 12, 2023 and October 13, 2023, following confirmation by representatives of Goldman Sachs that General Atlantic agreed with the additional outreach, representatives of Evercore and Goldman Sachs contacted Party K, Party O and Party P to explore their interest in participating in the process. None of these parties expressed an interest in participating at that time.

On October 13, 2023, EngageSmart granted representatives of Party B, Party C, Party E and Vista access to a virtual data room hosted by EngageSmart containing confidential due diligence materials.

Between October 13, 2023 and October 23, 2023, EngageSmart provided confidential due diligence materials and offered access to management to Party B, Party C, Party E and Vista to assist with their evaluation and submission of revised proposals for a potential transaction involving EngageSmart.

Also on October 13, 2023, Vista submitted to representatives of Goldman Sachs a request to have dinner with Mr. Bennett and Ms. Hudson.

On October 15, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore discussed with members of the Special Committee

 

42

interactions with prospective investors interested in exploring a potential transaction involving EngageSmart, the next steps in due diligence for each of these parties, and the status of additional interest from other parties potentially interested in a transaction at that time. Representatives of Evercore also discussed with the members of the Special Committee the request from Vista for a dinner meeting with Mr. Bennett and Ms. Hudson and the fact that Vista had committed that the dinner meeting would not involve any discussion of transaction terms or post-closing management compensation or roles. Following discussion, the Special Committee determined that this dinner meeting should be allowed to proceed so long as a representative of Evercore was present.

On October 16, 2023, a representative of Party C contacted representatives of Goldman Sachs to request a diligence session and dinner meeting with Mr. Bennett, Ms. Hudson and members of senior management of SMB Solutions for the week of October 23, 2023.

On October 17, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore updated the Special Committee on interactions with prospective investors interested in a potential transaction involving EngageSmart, including that Vista continued to progress its due diligence at the accelerated pace proposed in the October 9 Vista Proposal, that Party C had requested a dinner meeting with senior management for the week of October 23, 2023 (to be attended by a representative of Evercore) but was moving significantly more slowly than Vista, and that Party E appeared to be less engaged than Party C. Additionally, representatives of Evercore discussed with members of the Special Committee the considerations around setting a final bid deadline in the range of November 9, 2023 to November 14, 2023, including the risks that if an earlier deadline were set, Party C or Party E might not have sufficient time to complete their review and would disengage. Representatives of Skadden discussed with the members of the Special Committee key aspects of a draft merger agreement under discussion between Skadden and Paul Weiss, including that a structure with a pre-closing dividend would have adverse consequences for certain stockholders unaffiliated with General Atlantic, the fact that General Atlantic had not yet determined whether it desired to retain its current approximately 54% ownership of the post-closing company or reduce its ownership to 51% and the existence of provisions related to the Special Committee’s ability to solicit other proposals, to change its recommendation or to terminate the merger agreement in respect of a superior proposal upon payment of a termination fee. Representatives of Skadden also discussed with the Special Committee the potential treatment of outstanding management equity awards under the merger agreement. Following discussion of the potential benefits to the unaffiliated stockholders of encouraging employee retention through the closing of a transaction, the Special Committee determined that the draft merger agreement to be presented to investors should provide for full acceleration and cash-out of unvested equity awards. (The draft merger agreement discussed with the Special Committee at this meeting was never finalized and was not shown to any of the potential new sponsors because, as described below, Vista submitted its own proposed form of merger agreement along with its revised bid on October 20, 2023, which contemplated an acquisition of control of EngageSmart.)

On October 18, 2023, representatives of Vista met with Mr. Bennett, Ms. Hudson, Mr. Canzano and representatives of Evercore and Goldman Sachs for dinner in Boston, Massachusetts. There was no discussion of transaction terms or post-closing management compensation or roles.

On October 19, 2023, at the request of Vista, representatives of Vista held a call with representatives of General Atlantic, Evercore and Goldman Sachs. During this call, the parties discussed the status of the debt financing workstream and potential post-closing governance terms between Vista and General Atlantic as well as various operational topics.

On October 20, 2023, Vista submitted a written revised non-binding proposal to acquire 100% of the outstanding shares of EngageSmart Common Stock for $22.75 per share in cash, contingent on General Atlantic rolling over a portion of its existing shares of EngageSmart Common Stock representing 40% of the post-closing equity capitalization of EngageSmart (the “October 20 Proposal”). Vista proposed fully committed equity financing for the cash merger consideration. Vista also indicated it had completed all due diligence and was ready to finalize definitive agreements on a very expedited timeline. Vista indicated that if EngageSmart was not willing

 

43

to proceed on Vista’s expedited timeline, it would reevaluate its participation in the process. In addition, the October 20 Proposal specified that Vista expected the transaction to be expressly conditioned on the procedures described in MFW. As part of the October 20 Proposal, Kirkland & Ellis LLP, legal counsel to Vista (“Kirkland”), submitted proposed draft transaction documentation, including a draft merger agreement, a draft equity commitment letter, a draft limited guarantee and a draft post-closing governance term sheet. The draft merger agreement submitted by Kirkland contemplated that the transaction would be conditioned on the adoption of the Merger Agreement by the affirmative vote of (1) the holders of a majority of all of the outstanding shares of EngageSmart Common Stock and (2) the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders. In addition, the draft merger agreement submitted by Kirkland, among other things, (a) did not contemplate a go-shop period during which EngageSmart would be permitted to solicit alternative acquisition proposals, (b) contemplated that EngageSmart would reimburse Parent for certain expenses incurred by Parent in connection with the transaction if the merger agreement was terminated as a result of the failure to obtain stockholder approvals required for the transaction and (c) contemplated that vested EngageSmart equity awards would be cashed out in connection with closing of the transaction and unvested EngageSmart equity awards would be converted into cash awards subject to vesting and payment following closing of the transaction. (Kirkland also later provided through Skadden a draft support agreement to be entered into between General Atlantic, Parent and EngageSmart and a draft support agreement to be entered into between Summit, Parent and EngageSmart.)

Concurrent with the delivery of the October 20 Proposal, representatives of Vista held a call with representatives of General Atlantic, Evercore and Goldman Sachs to provide additional context for the October 20 Proposal. In this call, representatives of Vista communicated that Vista was unwilling to further discuss acquiring a minority stake without a change of control and that Vista desired to sign and announce a transaction by Monday, October 23, 2023.

On October 20, 2023 at 3:50 P.M. Eastern Time, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore updated the members of the Special Committee on the terms of the October 20 Proposal and additional communications from Vista about the October 20 Proposal. Representatives of Evercore updated the Special Committee that General Atlantic had provided initial feedback on the October 20 Proposal through representatives of Goldman Sachs that General Atlantic was potentially willing to pursue a transaction involving a sale of control as proposed by Vista, subject to satisfactory terms as to price and governance, given, among other things, the price per share offered by Vista as compared to the other potential counterparties and the unaffected trading price of EngageSmart Common Stock on October 4, 2023, the last trading day prior to the Reuters Article, of $18.71 per share, the level of interest expressed by parties in acquiring a minority stake without a change of control, the speed with which Vista was willing to enter into a definitive agreement, the uncertainty of achieving such a transaction on favorable terms or at all and the uncertainty over risks and opportunities affecting EngageSmart’s businesses. Representatives of Skadden discussed fiduciary duty considerations for the Special Committee in connection with its review and evaluation of the October 20 Proposal and potential next steps. The Special Committee discussed the process conducted to solicit interest in a transaction involving selling a minority stake without a change of control, the feedback from various parties who had participated or declined to participate in the process and the inbound contacts from various parties received both before and after the Reuters Article, including the risk that Vista would disengage if EngageSmart delayed engaging with Vista in order to solicit additional interest in a control transaction as well as the risk of disruption to the process with Party C and Party E if those parties were asked to consider a control transaction on an expedited timeframe (including considering the level of due diligence remaining for Party C and Party E at such time). The Special Committee discussed whether Vista would be willing to pursue an acquisition of EngageSmart without equity rollover by General Atlantic, and representatives of Evercore indicated that this had not been proposed by Vista and that, even if Vista and General Atlantic were amenable to such a transaction, it was unclear whether Vista would pay more per share to acquire 100% of EngageSmart for cash and that it was unclear whether Vista would be able to provide fully committed equity financing to fund a transaction of that size. The Special Committee discussed potential strategies for seeking to maximize the per share price that Vista would pay to stockholders unaffiliated with General Atlantic

 

44

and other transaction terms important to the unaffiliated stockholders, while limiting the risk that General Atlantic would request changes to governance or other terms proposed by Vista that would impact the per share price and other transaction terms important to the unaffiliated stockholders. Representatives of Skadden then discussed key legal issues for the Special Committee to consider negotiating in connection with Vista’s proposed transaction documentation for the October 20 Proposal, including the addition of a go-shop period during which EngageSmart would be permitted to solicit alternative acquisition proposals, the elimination of expense reimbursement triggered by the failure to obtain stockholder approvals required for the transaction and the treatment of unvested equity awards. Representatives of Skadden and Evercore discussed with the members of the Special Committee different potential structures for a go-shop provision. The Special Committee discussed with representatives of Evercore and Skadden potential next steps, in light of the fact that any counterproposal to the October 20 Proposal made by the Special Committee would require support from General Atlantic since no transaction with Vista could occur without the support of General Atlantic. Following discussion, the Special Committee directed Evercore to continue to develop its views of potential strategies for seeking to maximize the per share price that Vista would pay to stockholders unaffiliated with General Atlantic, in order for the Special Committee to develop a counterproposal to the October 20 Proposal, and to continue to obtain feedback from General Atlantic as to its views of the October 20 Proposal and a counterproposal.

On October 20, 2023 at 6:00 P.M. Eastern Time, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore discussed with the members of the Special Committee preliminary financial analyses with respect to the October 20 Proposal based on the Projections, the Extrapolations and the October Unlevered Free Cash Flow. The Special Committee then continued discussion on the topics previously discussed at the meeting occurring earlier that afternoon. Representatives of Evercore updated the Special Committee that General Atlantic had communicated through representatives of Goldman Sachs that General Atlantic was continuing to evaluate its view of the price per share and the governance structure in the October 20 Proposal. Following further discussion, the Special Committee directed Evercore to make a counterproposal to Vista (the “October 20 Counterproposal”) consisting of $24.00 per share in cash and changes to Vista’s proposed merger agreement to (1) include a go-shop provision with a 45-day go-shop period, structured so that any party making a proposal during that period viewed by the Special Committee as reasonably likely to lead to a superior proposal would benefit from a 50% reduced termination fee if the deal were terminated to accept a superior proposal from that party at any time before the stockholder vote, (2) eliminate expense reimbursement for Vista triggered by the failure to obtain stockholder approvals required for the transaction and (3) include full acceleration and cash-out of unvested equity awards at closing. The Special Committee directed Evercore to share the October 20 Counterproposal with General Atlantic before communicating the October 20 Counterproposal to Vista, given that no transaction with Vista was possible absent support of General Atlantic.

Following this meeting, in accordance with the directions of the Special Committee, representatives of Evercore communicated the October 20 Counterproposal to Goldman Sachs, and representatives of Goldman Sachs shared this with General Atlantic. General Atlantic responded through representatives of Goldman Sachs that it was supportive of the October 20 Counterproposal, as long as it was communicated concurrently with General Atlantic’s view of governance changes to the October 20 Proposal.

On October 20, 2023 at 9:30 P.M. Eastern Time, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore updated the members of the Special Committee that General Atlantic was supportive of the October 20 Counterproposal, as long as it was communicated concurrently with General Atlantic’s view of changes to the October 20 Proposal in regards to the post-closing governance framework. Representatives of Evercore and Skadden then discussed with the members of the Special Committee their understanding of the governance changes General Atlantic wished to propose, based on communications from representatives of Goldman Sachs and Paul Weiss, including as to the number of board seats to be appointed by General Atlantic, veto rights over certain matters, transfer rights and liquidity rights (the “General Atlantic Governance Counterproposal”). The members of the Special Committee discussed the General Atlantic Governance Counterproposal with representatives of Evercore and Skadden,

 

45

including the potential impact on Vista’s view of the October 20 Counterproposal and the fact that no transaction with Vista was possible absent support of General Atlantic and agreement between Vista and General Atlantic on the post-closing governance framework. Following discussion of the potential sequencing for communicating the October 20 Counterproposal and the General Atlantic Governance Counterproposal to Vista, the Special Committee directed Evercore to communicate the October 20 Counterproposal to Vista on a call that evening and for discussion of the General Atlantic Governance Counterproposal to occur in a subsequent call, attended by Evercore.

Following this meeting, in accordance with the directions of the Special Committee, representatives of Evercore and Goldman Sachs had a call with representatives of Vista to communicate the October 20 Counterproposal. Subsequently, representatives of General Atlantic had a call with representatives of Vista, also attended by representatives of Evercore and Goldman Sachs, to discuss the General Atlantic Governance Counterproposal with representatives of Vista. Representatives of Vista indicated to representatives of Evercore and Goldman Sachs that it would not be in a position to respond that evening.

On October 20, 2023, Evercore provided a letter to Skadden, which Skadden provided to the Special Committee on October 22, 2023, describing Evercore’s relationships with Vista, General Atlantic and EngageSmart (there had been no change to the relationships disclosed with respect to General Atlantic and EngageSmart in Evercore’s letter dated July 27, 2023), which the members of the Special Committee did not view as interfering with Evercore’s role as an advisor to the Special Committee.

On the morning of October 21, 2023, Vista responded to the October 20 Counterproposal by conveying to representatives of Evercore and Goldman Sachs an oral revised non-binding proposal consisting of increased consideration of $23.00 per share in cash, rejecting the proposed go-shop provision, accepting the elimination of expense reimbursement for Vista triggered by the failure to obtain stockholder approvals required for the transaction and rejecting the proposed full acceleration and cash-out of unvested equity awards at closing (the “October 21 Proposal”). At this time, Vista had not yet responded to the General Atlantic Governance Counterproposal.

Later on the morning of October 21, 2023, Mr. Bennett contacted Mr. Stamas to discuss his perspectives on the October 21 Proposal and express his concerns as to Vista’s proposed treatment of equity awards. In this conversation, Mr. Bennett recommended to Mr. Stamas that in addition to whatever price improvements for stockholders were sought by General Atlantic and the Special Committee, EngageSmart should ask Vista for at least one year of additional vesting credit for all unvested equity awards, in order to appropriately balance the expectations of employees (which related to the potential benefits to stockholders of encouraging employee retention through the closing of a transaction) and Vista’s focus on post-closing retention. Mr. Stamas communicated to Mr. Bennett that he did not believe the October 21 Proposal to be unfair with respect to the proposed treatment of equity awards, but was supportive of EngageSmart proposing one year of additional vesting credit for all unvested equity awards for all the reasons expressed by Mr. Bennett.

Also on the morning of October 21, 2023, representatives of Goldman Sachs communicated to representatives of Evercore that General Atlantic desired to respond to the October 21 Proposal in a manner that would maximize the chances of getting Vista to pay $23.50 per share of EngageSmart Common Stock.

On October 21, 2023 at 1:30 P.M. Eastern Time, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden, to discuss the October 21 Proposal. Representatives of Evercore also updated the Special Committee on the views expressed by General Atlantic as to the October 21 Proposal. A representative of Skadden updated the Special Committee on the conversation between Mr. Bennett and Mr. Stamas earlier that day. The Special Committee discussed with representatives of Skadden and Mr. Semel the aggregate value of one year of additional vesting credit for all unvested equity awards, in order to appropriately balance the expectations of employees (which related to the potential benefits to the unaffiliated stockholders of encouraging employee retention through the closing of a transaction) and Vista’s focus on post-

 

46

closing retention, and the impact on the weighted average remaining vesting period of outstanding equity awards. The Special Committee discussed with representatives of Evercore and Skadden the potential benefits of proposing a go-shop provision that might be acceptable to Vista, focusing on a 30-day go-shop period structured so that a 50% lower termination fee would be payable by EngageSmart solely if EngageSmart terminated the merger agreement to enter into a definitive agreement for a superior proposal within such 30-day period. Following further discussion of potential strategies for negotiating improvements to the October 21 Proposal, the Special Committee directed representatives of Evercore to convey a counterproposal consisting of $23.50 per share, one year of additional vesting credit for all equity awards and a 30-day go-shop provision with a 50% lower termination fee payable by EngageSmart that would apply solely if EngageSmart terminated the merger agreement to enter into a definitive agreement for a superior proposal within such 30-day period (the “October 21 Counterproposal”). The Special Committee directed Skadden to provide revised transaction documents to Kirkland immediately after Evercore’s delivery of the October 21 Counterproposal. It was discussed that Paul Weiss was expected to immediately thereafter share revised transaction documents reflecting the General Atlantic Governance Counterproposal.

Following this meeting, in accordance with the directions of the Special Committee, representatives of Evercore and Goldman Sachs informed representatives of Vista of the October 21 Counterproposal and thereafter Skadden provided revised transaction documents to Kirkland. Following delivery of the transaction documents to Kirkland, Paul Weiss shared revised transaction documents reflecting the General Atlantic Governance Proposal with Kirkland. During the period leading up to the announcement of the Transaction, representatives of Skadden, Paul Weiss and Kirkland negotiated the resolution of additional matters in the transaction documents, including the scope of the conditions to closing, the regulatory efforts obligations of the parties, General Atlantic’s ability to engage potential topping bidders if the Special Committee determines that they have made an acquisition proposal that is, or is reasonably likely to lead to, a superior proposal, the termination date and the size of the termination fee payable by EngageSmart and the limitations on liability of the parties following termination, as well as the terms of the support agreement to be entered into by Parent, General Atlantic and EngageSmart. In addition, during this period, representatives of Paul Weiss and Kirkland negotiated the resolution of post-closing governance matters.

On October 22, 2023, Vista responded to the October 21 Counterproposal by conveying to representatives of Evercore and Goldman Sachs a revised oral non-binding proposal consisting of $23.00 per share in cash, accepting the proposed 30-day go-shop provision and rejecting the proposed one year of additional vesting credit for all awards (the “October 22 Proposal”). Vista also communicated to representatives of Evercore and Goldman Sachs that the request for acceleration of unvested equity awards was not acceptable to Vista and that a deal at $23.00 per share was the highest price per share that Vista was willing to pay.

Following receipt of the October 22 Proposal, representatives of Goldman Sachs communicated to representatives of Evercore that General Atlantic would be willing to proceed to finalize a transaction on the basis of the October 22 Proposal if Mr. Bennett was supportive of the October 22 Proposal and proposed that a representative of Evercore speak with Mr. Bennett. A representative of Evercore then called Mr. Bennett to discuss his views on the October 22 Proposal. During this conversation, Mr. Bennett expressed concerns to the representative of Evercore as to Vista’s proposed treatment of unvested equity awards and in particular its impact on non-executive employees, but following additional discussion including as to market practices regarding treatment of equity awards in take private transactions, Mr. Bennett confirmed he was supportive of EngageSmart seeking to finalize a transaction on the basis of the October 22 Proposal.

Also on October 22, 2023, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore discussed with the Special Committee the October 22 Proposal and Vista’s additional feedback on the price per share and acceleration of unvested equity awards. Representatives of Evercore also updated the Special Committee on the views expressed by General Atlantic and by Mr. Bennett. Representatives of Skadden discussed with the members of the Special Committee fiduciary duty considerations in responding to the October 22 Proposal. The Special Committee discussed the risk that Vista

 

47

would disengage if the Special Committee continued to pursue a higher price or a different treatment of equity awards, the process conducted to solicit interest in a transaction involving selling a minority stake without a change of control, the feedback from various parties who had participated or declined to participate in the process and the inbound contacts from various parties received both before and after the Reuters Article. The Special Committee considered the ability of parties to continue or commence due diligence on EngageSmart and present a superior proposal for a control transaction during the Go-Shop Period or otherwise prior to the stockholder meeting to vote on a transaction with Vista. The Special Committee then met in executive session without representatives of Evercore or Skadden and without Mr. Semel. Following the executive session of the Special Committee, it was discussed that certain older equity award grants in fact provided for single trigger vesting in connection with a change of control and that this information was already known to Vista. It was also discussed that General Atlantic was considering proposing to Vista that General Atlantic would only have a 35% equity rollover obligation, instead of 40% as proposed by Vista, which representatives of Evercore did not expect to meaningfully affect Vista’s view of the transaction given the limited difference from a governance perspective. After further discussion, the Special Committee instructed representatives of Evercore and Skadden to seek to finalize documentation for a transaction on the basis of the October 22 Proposal and to communicate this to Vista and to General Atlantic. Given that economic terms had been finalized, the Special Committee then authorized representatives of Skadden to propose to Vista, as part of finalizing documentation for a transaction, two employee bonus matters recommended by Mr. Bennett (and which Mr. Bennett had discussed with General Atlantic earlier that day), which are described in the section of this proxy statement captioned “—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

Following this meeting, in accordance with the directions of the Special Committee, representatives of Goldman Sachs, Evercore and Skadden communicated to representatives of General Atlantic and representatives of Vista the Special Committee’s support for finalizing documentation for a transaction on the basis of the October 22 Proposal. Skadden, Paul Weiss and Kirkland continued the resolution of open points in all transaction documents. This process included finalizing the Summit Support Agreement through its outside counsel.

On October 23, 2023, Goldman Sachs provided a letter, dated October 22, 2023, to Skadden, describing the relationship between Goldman Sachs and Vista.

Also on October 23, 2023 at 1:00 A.M. Eastern Time, the Special Committee held a meeting, also attended by Mr. Semel and representatives of Evercore and Skadden. Representatives of Evercore then reviewed their financial analyses with the Special Committee, including the various limitations, qualifications, assumptions and other matters in connection with these analyses, using the Projections, the Extrapolations and the October Unlevered Free Cash Flow, which the Special Committee confirmed it had instructed Evercore to use for purposes of its analyses, as further described in the section of this proxy statement captioned “—Unaudited Prospective Financial Information.” The Special Committee asked questions and received answers from representatives of Evercore concerning its analysis. A representative of Evercore then delivered to the Special Committee Evercore’s oral opinion, which was subsequently confirmed by delivery of a written opinion dated October 23, 2023, that, as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, the $23.00 in cash per share to be received by the holders of shares of EngageSmart Common Stock (other than General Atlantic and its affiliates) in the proposed merger is fair, from a financial point of view, to such holders. For a detailed discussion of Evercore’s opinion, please see the section of this proxy statement captioned “—Opinion of the Financial Advisor to the Special Committee.” A representative of Skadden then summarized the material terms of the transaction documents, including the Merger Agreement, Rollover Stockholder Support Agreement, the Summit Support Agreement, the Equity Commitment Letter, the Limited Guarantee and agreed post-closing governance terms between Vista and General Atlantic. The Special Committee asked questions and received answers from a representative of Skadden concerning the transaction documents. After further discussion, including a discussion regarding the various factors described in the section of this proxy statement captioned “—Reasons for the Merger; Recommendations of the Special Committee and the EngageSmart Board,” the Special Committee unanimously (1) determined that the Merger Agreement and the Transactions, including the Merger in

 

48

accordance with the DGCL, are advisable and fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders, (2) recommended to the EngageSmart Board that it approve and adopt the Merger Agreement and the Transactions and (3) agreed to recommend that the Unaffiliated Stockholders adopt the Merger Agreement at the Special Meeting. A representative of Skadden explained that the resolutions to be reviewed by the Special Committee related to the approval of EngageSmart’s entry into the Rollover Stockholder Support Agreement and the Summit Support Agreement, after the approval by the EngageSmart Board so that the Support Agreements are not subject to any restriction of ARTICLE NINE, Section 2 of the Charter.

Following the Special Committee meeting, on October 23, 2023, the EngageSmart Board held a meeting, also attended by management of EngageSmart and representatives of Skadden, and for a portion of the meeting, representatives of Goldman Sachs and Evercore. A representative of Skadden reminded the members of the EngageSmart Board of its delegation of authority to the Special Committee and noted that the Special Committee had approved the proposed transaction and was prepared to recommend the proposed transaction to the EngageSmart Board. Representatives of Evercore then discussed with the members of the EngageSmart Board the process conducted to solicit interest in a transaction (which process had solicited interest in acquiring a minority stake without a change of control), the feedback from various parties who had participated or declined to participate in the process and the inbound contacts from various parties received both before and after the Reuters Article. Representatives of Evercore discussed with the members of the EngageSmart Board the status of due diligence being conducted by Party C and Party E and discussed the negotiation process with Vista. Representatives of Evercore then confirmed that Evercore had earlier delivered to the Special Committee its oral opinion, to be subsequently confirmed by delivery of a written opinion, that, as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, that the $23.00 in cash per share to be received by the holders of shares of EngageSmart Common Stock (other than General Atlantic and its affiliates) in the proposed merger is fair, from a financial point of view, to such holders. A representative of Skadden then summarized the material terms of the transaction documents, including the Merger Agreement, Rollover Stockholder Support Agreement, the Summit Support Agreement, the Equity Commitment Letter, the Limited Guarantee and the agreed post-closing governance terms between Vista and General Atlantic. A representative of Skadden also described to the members of the EngageSmart Board the employee bonus matters agreed between EngageSmart and Vista. Directors asked questions and received answers from a representative of Skadden concerning the transaction documents. On behalf of the Special Committee, Mr. Hamilton confirmed that the Special Committee had approved the proposed transaction and was recommending to the EngageSmart Board that the EngageSmart Board approve the proposed transaction. Following discussion, including a discussion regarding the various factors described under the caption “—Recommendation of the Special Committee, EngageSmart Board and Reasons for the Merger,” the Board of Directors, acting on the recommendation of the Special Committee, unanimously (1) determined that the Merger Agreement and the Transactions, including the Merger in accordance with the DGCL, are advisable, fair, and in the best interests of EngageSmart and its stockholders, (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and obligations in the Merger and the consummation of the Merger Agreement upon the terms and conditions set forth in the Merger Agreement and (3) agreed to recommend that the EngageSmart stockholders adopt the Merger Agreement at the Special Meeting. The EngageSmart Board also approved that the Support Agreements would not be subject to the restrictions on business combinations contained in ARTICLE NINE, Section 2 of the Charter, which approval was required of the EngageSmart Board rather than a committee of the EngageSmart Board. Following such determinations, the members of the Special Committee and representatives of Goldman Sachs and Evercore departed the meeting. A representative of Skadden then discussed with the EngageSmart Board that the EngageSmart Board had previously approved a $1,500 per meeting fee for each member of the Special Committee with the expectation that the EngageSmart Board would revisit whether this compensation was commensurate with the efforts of the Special Committee ultimately required after it was more clear whether there would be third party interest in a transaction. The representative of Skadden discussed factors for consideration in structuring and determining compensation for the Special Committee, summarized a range of potential structures used in other similar transactions, including transactions involving Vista, and noted that Mr. Hamilton was not in a position to receive compensation for his

 

49

service on the Special Committee given the policies of Summit. Following further discussion where directors asked questions and received answers from a representative of Skadden, it was unanimously determined by the directors in attendance that each member of the Special Committee will be reimbursed for their out of pocket expenses in connection with their service on the Special Committee and will be paid, as compensation for their services (except that Mr. Hamilton would decline such compensation), a monthly fee of $20,000 for each month of service on the Special Committee beginning July 2023 until the earlier to occur of the (i) consummation of the Merger or (ii) suspension by the EngageSmart Board of the Special Committee.

Following the EngageSmart Board meeting, on October 23, 2023, the Special Committee held a meeting, also attended by a representative of Skadden. The representative of Skadden explained to the members of the Special Committee that the purpose of the meeting was to review the resolutions related to EngageSmart’s entry into the Rollover Stockholder Support Agreement and the Summit Support Agreement, after the approval by the EngageSmart Board that the Support Agreements are not subject to any restriction of ARTICLE NINE, Section 2 of the Charter. The Special Committee unanimously approved the execution and delivery by EngageSmart of (1) the Rollover Stockholder Support Agreement and (2) the Summit Support Agreement.

Following these meetings, also on October 23, 2023, the parties executed the transaction documents, including the Merger Agreement, Rollover Stockholder Support Agreement, the Summit Support Agreement, the Equity Commitment Letter, the Limited Guarantee and the letter between Vista and General Atlantic memorializing their agreed post-closing governance terms. On the same day, before the opening of trading on the NYSE, EngageSmart issued a press release announcing the execution of the Merger Agreement and related documentation.

Also on October 23, 2023, following the announcement of the Transactions, representatives of Evercore contacted representatives of Party C and Party E to determine each party’s interest in continued participation in a potential transaction involving EngageSmart during the Go-Shop Period. Both Party C and Party E declined to participate.

On October 24, 2023, in accordance with the directions of the Special Committee, representatives of Evercore began further outreach to prospective investors potentially interested in exploring a transaction involving EngageSmart during the Go-Shop Period, contacting 32 potential parties (in addition to Party C and Party E, which already declined to participate), comprised of 21 financial sponsors, including Party K and Party L, and 11 strategic parties. Representatives of Evercore contacted all of the parties that were previously involved in the process for a potential transaction except for Party H and Party I, given that they had disengaged from the process during the first bidding round. In the weeks following this outreach, Party G, Party J, Party M, Party N and Party O each declined to participate. Party P responded that it was internally evaluating the opportunity but had not yet requested a non-disclosure agreement.

On October 24, 2023 and October 25, 2023, representatives of Party K and Party L each requested that representatives of Evercore provide them with non-disclosure agreements.

On October 25, 2023, representatives of Evercore sent a form of non-disclosure agreement to Party K and Party L.

On October 30, 2023, EngageSmart and Party K entered into a non-disclosure agreement, dated as of October 28, 2023, which did not include a standstill provision. Following execution of the non-disclosure agreement, also on October 30, 2023, representatives of Evercore provided Party K with EngageSmart’s management presentation and updated management projections as previously shared with Vista in the virtual data room.

On November 11, 2023, EngageSmart and Party L entered into a non-disclosure agreement, dated as of November 11, 2023, which did not include a standstill provision. Following execution of the non-disclosure agreement, on November 11, 2023, representatives of Evercore provided Party L with EngageSmart’s management presentation and updated management projections as previously shared with Vista in the virtual data room.

 

50

To date, no party has made an Acquisition Proposal following the execution of the Merger Agreement. The Go-Shop Period expired at 11:59 p.m., Eastern time, on November 22, 2023.

Reasons for the Merger; Recommendation of the Special Committee and the EngageSmart Board

Recommendation of the Special Committee

In evaluating the Merger Agreement, the Support Agreements, the Limited Guarantee, and the transactions contemplated thereby, including the Merger, the Special Committee consulted with its independent financial advisor, Evercore, and its independent legal advisor, Skadden, and, where appropriate, with members of EngageSmart management. At the conclusion of its review, the Special Committee unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders; (2) recommended that the EngageSmart Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger; and (3) resolved to recommend that the Unaffiliated Stockholders adopt the Merger Agreement. In addition, the Special Committee believes that the Merger is fair to EngageSmart’s “unaffiliated security holders,” as such term is defined in Rule 13e-3 of the Exchange Act (the “unaffiliated security holders”).

In the course of reaching its determination and making its recommendations, the Special Committee considered the following non-exhaustive list of material factors, which are not presented in any relative order of importance and each of which the Special Committee viewed as being generally supportive of its determination and recommendations to the EngageSmart Board:

 

•

Solicitation Process Prior to Merger Agreement. The Special Committee’s process, together with its and EngageSmart’s advisors, for soliciting and responding to offers from potential counterparties in an effort to obtain the best value reasonably available to the unaffiliated security holders, including the fact that ten parties were contacted in such process to solicit interest in a potential minority investment transaction in EngageSmart with General Atlantic continuing as the controlling stockholder of EngageSmart, all of which entered into non-disclosure agreements with EngageSmart and were provided with an opportunity to conduct due diligence, including reviewing the estimated projections of EngageSmart’s financial prospects and conducting management diligence sessions based on non-public diligence information with members of EngageSmart’s management (as described in the section of this proxy statement captioned “—Background of the Merger”). The Special Committee also considered that, because EngageSmart’s two different operating segments were unlikely to be attractive to a single strategic acquirer, outreach to strategic acquirers was unlikely to result in a transaction. The Special Committee also considered the fact that, on October 5, 2023, Reuters published an article reporting that General Atlantic was exploring a sale of EngageSmart, and the limited level of interest expressed to EngageSmart by additional parties after this report (as described in the section of this proxy statement captioned “—Background of the Merger”). In addition, during the Go-Shop Period, 34 parties were contacted, including both strategic counterparties and financial sponsors, and no Acquisition Proposal has been received to date (as described in the section of this proxy statement captioned “—Background of the Merger”).

 

•

Potential Strategic Alternatives. The assessment of the Special Committee that none of the possible alternatives to the Merger (including continuing to operate EngageSmart as an independent company or pursuing a different transaction, and the desirability and perceived risks of those alternatives, as well as the potential benefits and risks to the unaffiliated security holders of those alternatives and the timing and likelihood of effecting such alternatives) was reasonably likely to present superior opportunities for EngageSmart to create greater value for the unaffiliated security holders, taking into account execution risks as well as business, financial, industry, competitive and regulatory risks. The Special Committee also considered the fact that, on October 20, 2023, Vista indicated it was not willing to pursue a potential minority investment transaction in EngageSmart with General Atlantic continuing as the controlling stockholder of EngageSmart, and proposed instead a transaction

 

51

involving a change of control. In consultation with Evercore and Skadden, the Special Committee assessed the potential benefits of soliciting the parties previously involved in the process or additional parties, to determine interest in a transaction for control of EngageSmart and determined that the benefits of doing so were outweighed by the risks, including the risks that Vista would no longer engage in the process and that, based in part on feedback received from parties previously involved in the process, the other parties either could not offer as much value as Vista, did not have committed financing for their bids or believed that EngageSmart was already fully valued. The Special Committee also considered the fact that since October 4, 2023, the date of media reports that EngageSmart was exploring a potential transaction, any prospective investor that was interested in exploring a transaction with EngageSmart, including a take private transaction to acquire control of EngageSmart, had the opportunity to submit a proposal for such a transaction, and the Merger Agreement contains a go-shop provision, which allowed the Special Committee to solicit the parties previously involved in the process and additional parties to determine interest in a transaction for control of EngageSmart during the Go-Shop Period (as described in the section of this proxy statement captioned “The Merger Agreement—Solicitation of Other Offers”).

 

•

Certainty of Value. The consideration to be received by the unaffiliated security holders in the Merger consists entirely of cash, which provides the unaffiliated security holders certainty of value and immediate liquidity at an attractive price measured against the ongoing business and financial execution risks of EngageSmart’s business plan and its continued operations as an independent company and allows the unaffiliated security holders to realize that value immediately upon the consummation of the Merger. In that regard, the Special Committee noted that the amount of cash to be received for each outstanding share of EngageSmart Common Stock is fixed and will not be reduced if the share price of EngageSmart Common Stock declines prior to the effective time of the Merger.

 

•

Best Value Reasonably Obtainable. The belief of the Special Committee that the Per Share Price represented Vista’s best and final offer and the best value that EngageSmart could reasonably obtain from Vista for the shares of EngageSmart Common Stock, taking into account (1) Vista’s statements and reputation as a bidder; (2) the Special Committee’s assessment, which included advice from its financial advisor, Evercore, that other parties did not have the interest in, or capability to, acquire EngageSmart at a higher price, including based on the regulatory, financing and other execution risks applicable to each party; and (3) the Special Committee’s familiarity with the business, operations, prospects, business strategy, assets, liabilities and general financial condition of EngageSmart on a historical and prospective basis and its assessment of associated risks, including execution risks with respect to EngageSmart’s business plan. The Special Committee believed that, after negotiations at the direction of the Special Committee and with the assistance of experienced independent legal and financial advisors, the Special Committee obtained the best terms and highest price that Vista was willing to pay for EngageSmart, pursuant to a thorough process and that further negotiations would have created a risk of causing Vista to abandon the Merger altogether or materially delay the entry into definitive transaction agreements with respect to the Merger. In addition, the Special Committee believed that, measured against the longer-term execution risks described above, the Per Share Price reflects a fair and favorable price for the shares of EngageSmart Common Stock. The Special Committee also considered that the Per Share Price constitutes (1) a premium of approximately 23 percent to the closing price of EngageSmart Common Stock on October 4, 2023 of $18.71 per share, the last full trading day before media reports that EngageSmart was exploring a potential transaction; and (2) a premium of approximately 30 percent to the volume weighted average price of EngageSmart’s Common Stock for the 30 days ending October 4, 2023.

 

•

Loss of Opportunity. The possibility that, if the Special Committee declined to recommend that the EngageSmart Board approve the Merger Agreement, there may not be another opportunity for EngageSmart’s stockholders (including the unaffiliated security holders) to receive a comparably priced offer with a comparable level of closing certainty. The Special Committee also considered Vista’s position that Vista would no longer be interested in pursuing a transaction with the Company if the parties did not finalize a definitive agreement on the timeline proposed in the October 9 Vista

 

52

Proposal (as described in the section of this proxy statement captioned “—Background of the Merger”), and that Vista had been the most engaged potential counterparty to a transaction to date.

 

•

Financial Condition, Results of Operations and Prospects of EngageSmart; Risks of Execution. The current, historical and projected financial condition, results of operations and business of EngageSmart, as well as EngageSmart’s prospects and risks if it were to remain an independent company. In particular, the Special Committee considered EngageSmart’s then-current business plan, including management’s then-current estimated projections of EngageSmart’s financial prospects, as reflected in the Unaudited Prospective Financial Information. As part of this, the Special Committee considered EngageSmart’s current business plan and the potential opportunities and risks that it presented against, among other things, various execution, operational and other risks to achieving the business plan and related uncertainties, including: (1) the impact of market, customer and competitive trends on EngageSmart; (2) the likelihood that the business plan could be achieved in the face of operational and execution risks, including loss of share, customer dissatisfaction or employee attrition; and (3) general risks related to market conditions that could negatively impact our valuation or reduce the price of EngageSmart Common Stock. In particular, the Special Committee considered the likelihood and timing of, and risks to, achieving the operational improvements, objectives and share improvement assumptions underlying the business plan, as well as the estimated projections of EngageSmart’s financial prospects, all as reflected in the Unaudited Prospective Financial Information.

 

•

Among the potential risks identified by the Special Committee were consideration of (1) EngageSmart’s ability to sustain its rapid growth and to manage infrastructure to support such growth; (2) EngageSmart’s ability to attract new customers or convert trial customers into paying customers; (3) EngageSmart’s ability to introduce new features or services successfully and to make enhancements to its solutions; (4) risks related to any decline in customer renewals or failure to convince EngageSmart’s customers to broaden their use of the solutions and related services; and (5) EngageSmart’s ability to navigate the competitive industry landscape and to maintain or improve share within its industry.

 

•

The Special Committee was also aware that the price of EngageSmart Common Stock could be negatively impacted if EngageSmart failed to meet investor expectations, including if EngageSmart failed to meet its growth and profitability objectives.

 

•

Opinion of Evercore. The oral opinion of Evercore rendered to the Special Committee on October 23, 2023, which was subsequently confirmed in Evercore’s written opinion dated October 23, 2023, that as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, the Per Share Price to be received by holders of EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates, in the Merger was fair, from a financial point of view, to such holders, as more fully described in the section of this proxy statement captioned “—Opinion of the Financial Advisor to the Special Committee” and the full text of the written opinion of Evercore attached as Annex B to this proxy statement.

 

•

Negotiations with Parent and Terms of the Merger Agreement. The terms and conditions of the Merger Agreement, which was the product of arm’s-length negotiations, including:

 

•

The requirement that approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders.

 

•

EngageSmart’s ability during the Go-Shop Period to solicit alternative acquisition proposals from, and participate in discussions and negotiations with, third parties.

 

•

EngageSmart’s ability, under certain circumstances, to furnish information to, and conduct negotiations with, third parties submitting unsolicited alternative acquisition proposals.

 

53

•

The Special Committee’s belief that the terms of the Merger Agreement would be unlikely to deter third parties from making a superior proposal.

 

•

The ability of the EngageSmart Board, acting upon the recommendation of the Special Committee, and the Special Committee’s ability, in each case under certain circumstances, to change, withdraw or modify the recommendation that our stockholders (including the unaffiliated security holders) vote in favor of the adoption of the Merger Agreement.

 

•

The EngageSmart Board’s ability, acting upon the recommendation of the Special Committee, under certain circumstances, to terminate the Merger Agreement to enter into a definitive agreement with respect to a superior proposal. In that regard, the Special Committee believed that the termination fee payable by EngageSmart in such instance in accordance with the terms of the Merger Agreement was reasonable, consistent with or below similar fees payable in comparable transactions, and not preclusive of other offers.

 

•

The remedies available to EngageSmart under the Merger Agreement in the event the Merger is not consummated, including monetary damages and the fact that the Merger Agreement provides that Vista could be liable for breaches under the Merger Agreement, Limited Guarantee or the Equity Commitment Letter up to, in the aggregate for all such breaches, the Parent Liability Limitation.

 

•

The terms of the Merger Agreement provide EngageSmart with sufficient operating flexibility to conduct its business in the ordinary course until the earlier of the consummation of the Merger or the termination of the Merger Agreement.

 

•

Reasonable Likelihood of Consummation. The belief of the Special Committee that an acquisition by Parent has a reasonable likelihood of closing, based on, among other matters:

 

•

the limited conditions to Parent’s obligation to consummate the Merger as provided by the Merger Agreement, including the absence of a financing condition;

 

•

no anticipated substantive issues expected in connection with the required regulatory approvals and the meaningful obligation of Parent to obtain such regulatory approval;

 

•

the fact that the Summit Stockholders, who hold approximately 15% of the voting power of EngageSmart’s outstanding share capital, have duly executed and entered into the Summit Support Agreement and have agreed to vote their respective shares in favor of the Merger Agreement, subject to, and in accordance with, the terms and conditions of the Summit Support Agreement;

 

•

EngageSmart’s ability to specifically enforce Parent’s obligations under the Merger Agreement in accordance with its terms and the terms of the Equity Commitment Letter (including EngageSmart’s third-party beneficiary rights to enforce the Guarantor’s equity commitment under the Equity Commitment Letter in accordance with its terms and the terms of the Merger Agreement) which commits the Guarantor to cause the equity financing to be funded if the conditions to closing in the Merger Agreement are satisfied;

 

•

Vista’s business reputation and financial resources, which provided the Special Committee comfort that the equity financing would be available.

 

•

Appraisal Rights. EngageSmart’s stockholders have the right to exercise their statutory appraisal rights under Section 262 of the DGCL and receive payment of the fair value of their shares of the EngageSmart common stock in lieu of the Per Share Price, subject to and in accordance with the terms and conditions of the Merger Agreement and the DGCL, unless and until any such EngageSmart stockholder fails to perfect or effectively withdraws or loses such holder’s rights to appraisal and payment under the DGCL.

 

•

Current and Historical Market Prices. The current and historical market prices of EngageSmart’s Common Stock, including as set forth in the table under “Important Information Regarding EngageSmart—Market Price of EngageSmart’s Common Stock” and “Special Factors—Opinion of the Financial Advisor to the

 

54

Special Committee” taking into account the market performance of EngageSmart’s Common Stock relative to the capital stock of other participants in the industries in which EngageSmart operates and general market indices.

The Special Committee also considered a number of factors relating to the procedural safeguards that it believes were and are present to ensure the fairness of the Merger and to permit the Special Committee to represent effectively the interests of the Unaffiliated Stockholders and the unaffiliated security holders of EngageSmart. In light of such procedural safeguards, the Special Committee did not consider it necessary to retain an unaffiliated representative to act solely on behalf of the Unaffiliated Stockholders and the unaffiliated security holders of EngageSmart for purposes of negotiating the terms of the Merger Agreement or preparing a report concerning the fairness of the Merger Agreement and the Merger. The Special Committee believes these factors support its determinations and recommendations and provide assurance of the procedural fairness of the Merger to the Unaffiliated Stockholders and the unaffiliated security holders of EngageSmart:

 

•

Independence. The Special Committee, since the revocation of its suspension on July 23, 2023, has consisted solely of independent (for purposes of serving on the Special Committee) and disinterested directors that are not affiliated with, and are independent of, any of the potential counterparties to a potential acquisition of EngageSmart (including the Rollover Stockholders) and were otherwise disinterested and independent with respect to a potential acquisition of EngageSmart (including a potential acquisition of EngageSmart that has a transaction or series of transactions in which one or more significant stockholders of EngageSmart have an interest that is in addition to, and/or different from, the interests of EngageSmart’s stockholders as a whole), other than as discussed in the section of this proxy statement captioned “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger”;

 

•

Negotiating Authority and Procedural Safeguards. The fact that General Atlantic conditioned its engagement in a potential transaction on (1) the Special Committee being empowered to freely select its own independent legal and financial advisors and to consider (including the ability to reject) any proposal by General Atlantic regarding a potential transaction; and (2) the transaction being subject to a non-waivable condition requiring approval of a majority of the shares of common stock of EngageSmart not owned by General Atlantic and such approval actually being obtained before consummation of the Merger.

 

•

Prior Special Committee Action. The EngageSmart Board was not permitted to approve any potential acquisition of EngageSmart (including a potential acquisition of EngageSmart that also included a transaction or series of transactions in which one or more significant stockholders of EngageSmart had an interest that was in addition to, and/or different from, the interests of EngageSmart’s stockholders as a whole) or recommend for approval any such transactions by EngageSmart’s stockholders without a prior favorable recommendation of the transaction by the Special Committee.

 

•

Active Involvement and Oversight. The numerous meetings held by the Special Committee over a three-month period (with its legal and financial advisors present) to discuss and evaluate, among other things, the process for exploring a potential strategic transaction and the proposals from Vista and other bidders, and the Special Committee’s active oversight of the negotiation process. The Special Committee was actively engaged in this process on a regular basis and was provided with full access to EngageSmart management and its advisors in connection with the evaluation process.

 

•

Independent Advice. The Special Committee selected and engaged its own independent legal and financial advisors and received the advice of such advisors throughout its review, evaluation and negotiation of a potential acquisition of EngageSmart, which independent financial advisor delivered a fairness opinion to the Special Committee.

 

•

Full Knowledge. The Special Committee made its evaluation of a potential acquisition of EngageSmart by Vista based upon the factors discussed in this proxy statement and with the full knowledge of the interests of the Rollover Stockholders.

 

55

•

No Obligation to Recommend. The recognition by the Special Committee that it had no obligation to recommend to the EngageSmart Board the approval of the Merger or any other transaction and had the authority to reject any proposals made.

 

•

Majority of the Minority Approval. The consummation of the Merger requires the affirmative vote of the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders to adopt the Merger Agreement.

In the course of reaching its determinations and making its recommendations, the Special Committee also considered the following non-exhaustive list of countervailing factors concerning the Merger Agreement and the Merger, which are not presented in any relative order of importance:

 

•

No Stockholder Participation in Future Growth or Earnings. The nature of the Merger as a cash transaction means that our stockholders (including the unaffiliated security holders) (other than the Rollover Stockholders) will not participate in EngageSmart’s future earnings or growth and will not benefit from any appreciation in value of the Surviving Corporation. The Special Committee considered the other potential alternative strategies available to EngageSmart as an independent company, which, despite significant uncertainty, had the potential to result in a more successful and valuable company.

 

•

No-Shop Restrictions after the Go-Shop Period. The restrictions in the Merger Agreement on EngageSmart’s ability to solicit competing transactions following the Go-Shop Period (subject to certain exceptions to allow the EngageSmart Board, acting upon the recommendation of the Special Committee, or the Special Committee, to exercise their respective fiduciary duties and, in the case of EngageSmart Board, acting upon the recommendation of the Special Committee, to accept a superior proposal, and then only upon the payment of a termination fee by EngageSmart to Parent). The Special Committee was also aware that the interests of the Rollover Stockholders in the Merger would likely be considered by third parties evaluating whether to make superior proposals.

 

•

Risk Associated with Failure to Consummate the Merger. The possibility that the Merger might not be consummated, and if it is not consummated, that: (1) EngageSmart’s directors, management team and other employees will have expended extensive time and effort and will have experienced significant distractions from their work on behalf of EngageSmart during the pendency of the Merger; (2) EngageSmart will have incurred significant transaction and other costs; (3) EngageSmart’s continuing business relationships with customers, business partners and employees may be adversely affected, which could include the loss of key personnel; (4) the trading price of EngageSmart Common Stock could be adversely affected; (5) the contractual and legal remedies available to EngageSmart in the event of the breach or termination of the Merger Agreement may be insufficient, costly to pursue, or both; and (6) the failure of the Merger to be consummated could result in an adverse perception among our customers, potential customers, employees and investors about EngageSmart’s prospects.

 

•

Regulatory Risks. The possibility that regulatory agencies may delay, object to, challenge or seek to enjoin the Merger, or may seek to impose terms and conditions on their approvals that are not acceptable to Parent, notwithstanding its obligations under the Merger Agreement.

 

•

Impact of Interim Restrictions on EngageSmart’s Business Pending the Completion of the Merger. The restrictions on the conduct of EngageSmart’s business prior to the consummation of the Merger, which may delay or prevent us from undertaking strategic initiatives before the completion of the Merger that, absent the Merger Agreement, we might have pursued, or from taking certain actions aimed at incentivizing and retaining our employees.

 

•

Effects of the Merger Announcement. The effects of the public announcement of the Merger, including the: (1) effects on our employees, customers, operating results and stock price; (2) impact on our ability to attract and retain key management, sales and marketing, and technical personnel; and (3) potential for litigation in connection with the Merger.

 

56

•

Termination Fee Payable by EngageSmart. The requirement that EngageSmart pay Parent a termination fee of $144,370,000 under certain circumstances following termination of the Merger Agreement, including if EngageSmart terminates the Merger Agreement to accept a superior proposal or if Parent terminates the Merger Agreement because the Special Committee and/or the EngageSmart Board changes its respective recommendation (as further described under “The Merger Agreement—Termination Fees and Expenses”). The Special Committee considered the potentially discouraging impact that this termination fee could have on a third party’s interest in making a competing proposal to acquire EngageSmart; noting, however, that the Merger Agreement was negotiated to ameliorate such potential deterrence by reducing the amount of the termination fee to $72,185,000 if an Alternative Acquisition Agreement was entered into during the Go-Shop Period.

 

•

Cap on Vista Liability. That the Merger Agreement provides that the maximum aggregate liability of Vista for breaches under the Merger Agreement, Limited Guarantee or the Equity Commitment Letter will not exceed, in the aggregate for all such breaches, the Parent Liability Limitation.

 

•

Taxable Consideration. The receipt of cash in exchange for shares of EngageSmart common stock in the Merger will be a taxable transaction for U.S. federal income tax purposes for many of the unaffiliated security holders.

 

•

Interests of EngageSmart’s Directors and Executive Officers. The interests that EngageSmart’s directors and executive officers may have in the Merger, which may be different from, or in addition to, those of the other unaffiliated security holders.

 

•

Interests of Certain Significant Stockholders in the Merger. The Rollover Stockholders will participate in the transaction through an equity rollover of a portion of their EngageSmart Common Stock in Vista’s potential acquisition of EngageSmart. As noted in this section, the Rollover Stockholders will be able to participate in the future growth or earnings of the post-closing company with respect to that portion of their equity that they are rolling over in the post-closing entity.

 

•

Voting Obligations of Certain Significant Stockholders. Certain significant stockholders of EngageSmart are parties to the Rollover Stockholder Support Agreement and the Summit Support Agreement with EngageSmart and Parent, which, under certain circumstances, obligate such holders to vote in favor of the adoption of the Merger Agreement and that those obligations do not automatically terminate in the event that the Special Committee, or the EngageSmart Board, acting upon the recommendation of the Special Committee, modifies, changes or withdraws EngageSmart’s recommendation with respect to the transaction.

 

•

Transaction Costs. EngageSmart has incurred and will incur substantial costs in connection with the transactions contemplated by the Merger Agreement, even if the transactions are not consummated.

The Special Committee concluded that the uncertainties, risks and potentially negative factors relevant to the Merger Agreement and the Merger were outweighed by the potential benefits of the Merger Agreement and the Merger.

Recommendation of the EngageSmart Board

Based on the unanimous recommendation of the Special Committee and on the basis of the other factors described above, the EngageSmart Board unanimously (1) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and its stockholders; (2) approved the execution and delivery of the Merger Agreement by EngageSmart, the performance by EngageSmart of its covenants and other obligations in the Merger, and the consummation of the Merger Agreement upon the terms and conditions set forth therein; and (3) resolved to recommend that EngageSmart’s stockholders adopt the Merger Agreement.

 

57

In addition, the EngageSmart Board, on behalf of EngageSmart, believes, based on the factors described below, that the Merger is fair to the “unaffiliated security holders,” as such term is defined in Rule 13e-3 under the Exchange Act.

The EngageSmart Board did not assess whether the “rollover” provisions of the Rollover Stockholder Support Agreements with the Rollover Stockholders are advisable, fair to and in the best interests of the Rollover Stockholders. In the course of reaching its determination and making its recommendations, the EngageSmart Board considered the following non-exhaustive list of material factors and countervailing factors, which are not presented in any relative order of importance:

 

•

Determinations of the Special Committee. The Special Committee’s analysis (as to both substantive and procedural aspects of the Merger), conclusions and unanimous determination, which the EngageSmart Board adopted, that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of EngageSmart and the Unaffiliated Stockholders. The EngageSmart Board also considered the Special Committee’s unanimous recommendation that the EngageSmart Board approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger.

 

•

Procedural Protections. The procedural fairness of the Merger, including that (1) it was negotiated by the Special Committee consisting solely of independent (for purposes of serving on the Special Committee) and disinterested directors that are not affiliated with, and are independent of, any of the potential counterparties to a potential acquisition of EngageSmart (including the Rollover Stockholders) and were otherwise disinterested and independent with respect to a potential acquisition of EngageSmart (including a potential acquisition of EngageSmart that has a transaction or series of transactions in which one or more significant stockholders of EngageSmart have an interest that is in addition to, and/or different from, the interests of EngageSmart’s stockholders as a whole), other than as discussed in the section titled “Special Factors—Interests of EngageSmart’s Directors and Executive Officers in the Merger”; and (2) the Special Committee had the authority to select and engage, and was advised by, its own independent legal and financial advisors;

 

•

Unaffiliated Stockholder Vote. Although consummation of the Merger does not specifically require that the Merger Agreement be adopted by EngageSmart’s unaffiliated security holders, the Merger Agreement provides that consummation of the Merger is conditioned upon EngageSmart obtaining the Unaffiliated Stockholder Vote. Mr. Bennett is not deemed to be an Unaffiliated Stockholder because he is an “officer” of EngageSmart within the meaning of Rule 16a-1(f) of the Exchange Act; accordingly, the shares he beneficially owns will be excluded from the Unaffiliated Stockholder Vote. The directors that hold shares of EngageSmart Common Stock, other than Mr. Bennett (the “Stockholder Directors”), are deemed to be Unaffiliated Stockholders; accordingly, the shares they beneficially own will be counted toward the Unaffiliated Stockholder Vote. While the Stockholder Directors are deemed to be “affiliates” of EngageSmart under Rule 13e-3 and thus are not deemed to be “unaffiliated security holders,” for purposes of Rule 13e-3 under the Exchange Act, the EngageSmart Board and the Special Committee viewed the Unaffiliated Stockholder Vote as a procedural safeguard of the interests of the unaffiliated security holders because they considered the interests of the Stockholder Directors to be entirely aligned with those of the unaffiliated security holders. Specifically, following the Merger, the Stockholder Directors, will not retain any equity interest in EngageSmart, they will receive the same Per Share Price as the unaffiliated security holders upon consummation of the Merger, and the Stockholder Directors have not received any consideration beyond the Per Share Price from any Purchaser Filing Party in connection with the Merger. Accordingly, the EngageSmart Board and the Special Committee considered the Unaffiliated Stockholder Vote as a factor in support of their belief that the Merger is fair to EngageSmart’s unaffiliated security holders.

 

•

Other Factors Considered by the Special Committee. The other material factors and countervailing factors considered by the Special Committee and listed above.

 

58

The EngageSmart Board concluded that the uncertainties, risks and potentially negative factors relevant to the Merger Agreement and the Merger were outweighed by the potential benefits of the Merger Agreement and the Merger.

The foregoing discussion of the information and factors considered by the Special Committee and by the EngageSmart Board is not intended to be exhaustive and includes only the material factors considered. In light of the variety of factors considered by the Special Committee and by the EngageSmart Board and the complexity of these factors, neither the Special Committee nor the EngageSmart Board found it practicable to, and did not, quantify or otherwise assign relative weights, ranks or values to the foregoing factors in reaching their respective determinations and recommendations. Moreover, each member of the Special Committee and of the EngageSmart Board applied his or her own personal business judgment to the process and may have assigned different relative weights, ranks or values to the different factors, and the recommendations, determinations and approvals, where applicable, by the Special Committee and the EngageSmart Board were based upon the totality of the information presented to, and considered by, the Special Committee and the EngageSmart Board, respectively.

In the course of evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, and making the decisions, determinations and recommendations described above (as applicable), the EngageSmart Board and the Special Committee did not consider the liquidation value of EngageSmart because (1) they considered EngageSmart to be a viable, going concern; (2) they believed that liquidation sales generally result in proceeds substantially less than sales of a going concern; and (3) they considered determining a liquidation value to be impracticable given the significant execution risk involved in any breakup of EngageSmart. For the foregoing reasons, the EngageSmart Board and the Special Committee did not consider liquidation value to be a relevant factor. Further, the EngageSmart Board and the Special Committee did not consider EngageSmart’s net book value, which is an accounting concept, as a factor because they believed (1) that net book value is not a material indicator of the value of EngageSmart as a going concern but rather is indicative of historical costs and (2) net book value does not take into account the prospects of EngageSmart, market conditions, trends in the industry in which EngageSmart operates or the business risks inherent in the industry. In addition, the EngageSmart Board and the Special Committee did not view the purchase prices paid in the transactions described in the section of this proxy statement captioned “Important Information Regarding EngageSmart—Transactions in EngageSmart Common Stock” (all of which were below the Per Share Price) to be relevant except to the extent that those prices indicated the trading price of the EngageSmart Common Stock during the applicable periods. The EngageSmart Board and the Special Committee believe that the trading price of the shares of EngageSmart common stock at any given time represents the best available indicator of EngageSmart’s going concern value at that time so long as the trading price at that time is not impacted by speculation regarding the likelihood of a potential transaction. In addition, the EngageSmart Board and the Special Committee implicitly considered the value of EngageSmart as a going concern by taking into account the value of EngageSmart’s current and anticipated business, financial condition, results of operations, prospects, and other forward-looking matters.

Other than as described in this proxy statement, the EngageSmart Board is not aware of any firm offer by any other person during the prior two years for (1) a merger or consolidation of EngageSmart with another company; (2) the sale or transfer of all or substantially all of EngageSmart’s assets; or (3) a purchase of EngageSmart’s securities that would enable such person to exercise control of EngageSmart.

Opinion of the Financial Advisor to the Special Committee

The Special Committee retained Evercore to act as its financial advisor in connection with the Special Committee’s evaluation of strategic and financial alternatives, including the Merger. As part of this engagement, the Special Committee requested that Evercore evaluate the fairness, from a financial point of view, to holders of EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates, of the Per Share Price to be paid to such holders in the Merger. At a meeting of the Special Committee held on October 23, 2023,

 

59

Evercore rendered to the Special Committee its oral opinion, subsequently confirmed by delivery of a written opinion dated October 23, 2023, that as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, the Per Share Price to be received by holders of EngageSmart Common Stock, other than Rollover Stockholders and their affiliates, in the Merger was fair, from a financial point of view, to such holders.

The full text of the written opinion of Evercore, dated October 23, 2023, which sets forth, among other things, the procedures followed, assumptions made, matters considered and qualifications and limitations on the scope of review undertaken in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference in its entirety. The summary of the opinion of Evercore in this proxy statement is qualified in its entirety by reference to the full text of the written opinion. You are urged to read Evercore’s opinion carefully and in its entirety. Evercore’s opinion was addressed to, and provided for the information and benefit of, the Special Committee (solely in its capacity as such) in connection with its evaluation of the proposed Merger. The opinion does not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of EngageSmart Common Stock should vote or act in respect of the Merger. Evercore’s opinion does not address the relative merits of the Merger as compared to other business or financial strategies that might be available to EngageSmart, nor does it address the underlying business decision of EngageSmart to engage in the Merger.

In connection with rendering its opinion, Evercore, among other things:

 

•

reviewed certain publicly available business and financial information relating to EngageSmart that Evercore deemed to be relevant, including publicly available research analysts’ estimates;

 

•

reviewed certain internal projected financial data relating to EngageSmart prepared and furnished to Evercore by the management of EngageSmart, as approved for Evercore’s use by the Special Committee (which are referred to as the “Forecasts,” as more fully described in the section of this proxy statement captioned “—Unaudited Prospective Financial Information”);

 

•

discussed with management of EngageSmart their assessment of the past and current operations of EngageSmart, the current financial condition and prospects of EngageSmart, and the Forecasts;

 

•

reviewed the reported prices and the historical trading activity of EngageSmart Common Stock;

 

•

compared the financial performance of EngageSmart and its stock market trading multiples with those of certain other publicly traded companies that Evercore deemed relevant;

 

•

compared the financial performance of EngageSmart and the valuation multiples relating to the Merger with the financial terms, to the extent publicly available, of certain other transactions that Evercore deemed relevant;

 

•

reviewed the financial terms and conditions of a draft, dated October 22, 2023, of the Merger Agreement; and

 

•

performed such other analyses and examinations and considered such other factors that Evercore deemed appropriate.

For purposes of Evercore’s analysis and opinion, Evercore assumed and relied upon the accuracy and completeness of the financial and other information publicly available, and all of the information supplied or otherwise made available to, discussed with, or reviewed by Evercore, without any independent verification of such information (and Evercore did not assume responsibility or liability for any independent verification of such information), and further relied upon the assurances of the management of EngageSmart that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the Forecasts, Evercore assumed with the consent of the Special Committee that they were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of EngageSmart as to the future financial performance of EngageSmart. Evercore expressed no view as to the Forecasts, or the assumptions on which they were based.

 

60

For purposes of Evercore’s analysis and opinion, Evercore assumed, in all respects material to its analysis, that the final executed Merger Agreement would not differ from the draft Merger Agreement reviewed by Evercore, that the representations and warranties of each party contained in the Merger Agreement were true and correct, that each party would perform all of the covenants and agreements required to be performed by it under the Merger Agreement and that all conditions to the consummation of the Merger will be satisfied without waiver or modification thereof. Evercore further assumed, in all respects material to its analysis, that all governmental, regulatory or other consents, approvals or releases necessary for the consummation of the Merger would be obtained without any delay, limitation, restriction or condition that would have an adverse effect on EngageSmart or the consummation of the Merger or reduce the contemplated benefits to the holders of EngageSmart Common Stock of the Merger.

Evercore did not conduct a physical inspection of the properties or facilities of EngageSmart and did not make or assume any responsibility for making any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off-balance sheet assets and liabilities) of EngageSmart, nor was Evercore furnished with any such valuations or appraisals, nor did Evercore evaluate the solvency or fair value of EngageSmart under any state or federal laws relating to bankruptcy, insolvency or similar matters. Evercore’s opinion was necessarily based upon information made available to Evercore as of October 23, 2023 and financial, economic, market and other conditions as they existed and as could be evaluated as of that date. Subsequent developments might affect Evercore’s opinion and Evercore does not have any obligation to update, revise or reaffirm its opinion.

Evercore was not asked to pass upon, and expressed no opinion with respect to, any matter other than the fairness to the holders of EngageSmart Common Stock (other than the Rollover Stockholders and their affiliates), from a financial point of view, of the Per Share Price. Evercore did not express any view on, and its opinion did not address, the fairness of the proposed Merger to, or any consideration received in connection therewith by, the holders of any other class of securities, creditors or other constituencies of EngageSmart, nor as to the fairness of the amount or nature of any compensation to be paid or payable to any of the officers, directors or employees of EngageSmart, or any class of such persons, whether relative to the Per Share Price or otherwise. Evercore was not asked to, nor did it express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Merger, including, without limitation, the structure or form of the Merger, the Support Agreements and any consideration to be received or exchanged in connection thereto, or any term or aspect of any other agreement or instrument contemplated by the Merger Agreement or entered into or amended in connection with the Merger Agreement or the Merger. Evercore’s opinion did not address the relative merits of the Merger as compared to other business or financial strategies that might be available to EngageSmart, nor did it address the underlying business decision of EngageSmart to engage in the Merger. Evercore’s opinion did not constitute a recommendation to the Special Committee or to any other persons in respect of the Merger, including as to how any holder of shares of EngageSmart Common Stock should vote or act in respect of the Merger. Evercore did not express any opinion to the prices at which shares of EngageSmart Common Stock will trade at any time, as to the potential effects of volatility in the credit, financial and stock markets on EngageSmart or the Merger or as to the impact of the Merger on the solvency or viability of EngageSmart or the ability of EngageSmart to pay its obligations when they come due. Evercore is not a legal, regulatory, accounting or tax expert and assumed the accuracy and completeness of assessments by EngageSmart and its advisors with respect to legal, regulatory, accounting and tax matters.

Set forth below is a summary of the material financial analyses reviewed by Evercore with the Special Committee on October 23, 2023 in connection with rendering its opinion. The following summary, however, does not purport to be a complete description of the analyses performed by Evercore. The order of the analyses described and the results of these analyses do not represent relative importance or weight given to these analyses by Evercore. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data that existed on or before October 19, 2023, and is not necessarily indicative of current market conditions.

 

61

For purposes of its analyses and reviews, Evercore considered general business, economic, market and financial conditions, industry sector performance, and other matters, as they existed and could be evaluated as of the date of its opinion, many of which are beyond the control of EngageSmart. The estimates contained in Evercore’s analyses and reviews, and the ranges of valuations resulting from any particular analysis or review, are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by Evercore’s analyses and reviews. In addition, analyses and reviews relating to the value of companies, businesses or securities do not purport to be appraisals or to reflect the prices at which companies, businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from, Evercore’s analyses and reviews are inherently subject to substantial uncertainty.

The following summary of Evercore’s financial analyses includes information presented in tabular format. In order to fully understand the analyses, the tables should be read together with the full text of each summary. The tables are not intended to stand alone and alone do not constitute a complete description of Evercore’s financial analyses. Considering the tables below without considering the full narrative description of Evercore’s financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view of such analyses.

Summary of Evercore’s Financial Analyses

Discounted Cash Flow Analyses

Evercore performed a discounted cash flow analysis of EngageSmart to calculate ranges of implied present values of the per share equity value of EngageSmart utilizing, with the Special Committee’s approval, estimates of the standalone unlevered, after-tax free cash flows that EngageSmart was forecasted to generate over the period from September 30, 2023 through December 31, 2033 based on the Forecasts. Evercore calculated terminal values for EngageSmart using two methods: (i) a perpetuity growth method—under which Evercore calculated terminal values for EngageSmart by applying a range of perpetuity growth rates of 5.0% to 7.0%, which range was selected based on Evercore’s professional judgment and experience, to an estimate of the unlevered, after-tax free cash flows that EngageSmart was forecasted to generate in the terminal year based on the Forecasts and (ii) a terminal multiple method—under which Evercore calculated terminal values for EngageSmart by applying a range of enterprise values to next twelve months (which is referred to as “NTM”) earnings before interest, taxes, depreciation and amortization (which is referred to as “EBITDA”) multiples of 9.0x to 13.0x, which range was selected based on Evercore’s professional judgment and experience, to an estimate of EngageSmart’s terminal year adjusted EBITDA based on the Forecasts.

The cash flows and terminal values in each case were then discounted to present value as of September 30, 2023 using discount rates ranging from 12.5% to 13.5%, representing an estimate of EngageSmart’s weighted average cost of capital, as estimated by Evercore based on its professional judgment and experience, to derive implied enterprise value reference ranges for EngageSmart. Based on these ranges of implied enterprise values, EngageSmart’s estimated net cash as of September 30, 2023, and the number of fully diluted outstanding shares of EngageSmart Common Stock as of October 20, 2023, in each case as provided by EngageSmart’s management, this analysis indicated ranges of implied equity values per share of EngageSmart Common Stock as set forth in the table below, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023 (the last trading day before media reports that EngageSmart was exploring a potential transaction, which is referred to as the “Unaffected Date”) and the Per Share Price of $23.00:

 

Methodology		Implied Equity Values Per Share
Perpetuity Growth Rate Method		$13.71 – $18.72
Terminal Multiple Method		$15.87 – $21.24

 

62

Selected Publicly Traded Companies Analysis

Evercore reviewed and compared certain financial information of EngageSmart to corresponding financial multiples and ratios for the following selected publicly traded companies in the software and financial technology industries, serving enterprise and small and midsize business clients (“Enterprise” and “SMB”, respectively):

Enterprise:

 

•

ACI Worldwide, Inc.

 

•

Flywire Corporation

 

•

Payoneer Global Inc.

 

•

Paymentus Holdings, Inc.

 

•

AvidXchange Holdings, Inc.

SMB:

 

•

Bill Holdings, Inc.

 

•

Paylocity Holding Corporation

 

•

Paycor HCM, Inc.

 

•

Doximity, Inc.

 

•

EverCommerce Inc.

 

•

Definitive Healthcare Corp.

 

•

Phreesia, Inc.

 

•

Weave Communications, Inc.

For each of the selected companies, Evercore calculated total enterprise value (defined as equity market capitalization plus total debt plus non-controlling interests, less cash and cash equivalents) as a multiple of estimated calendar year 2024 adjusted EBITDA (which is referred to as “TEV / 2024E EBITDA”).

This analysis indicated the following:

Enterprise:

 

Benchmark		Mean				Median
TEV / 2024E EBITDA			22.5x				20.5x

SMB:

 

Benchmark		Mean		Median
TEV / 2024E EBITDA		17.8x		17.4x

Based on the multiples it derived for the selected companies and its professional judgment and experience, Evercore applied a TEV / 2024E EBITDA multiple reference range of 25.0x to 33.0x to an estimate of EngageSmart’s calendar year 2024 adjusted EBITDA, as reflected in the Forecasts, to derive an implied enterprise value reference range for EngageSmart. Based on this range of implied enterprise values, EngageSmart’s estimated net cash as of September 30, 2023 and the number of fully diluted outstanding shares of EngageSmart common stock as of October 20, 2023, in each case as provided by EngageSmart’s management,

 

63

this analysis indicated a range of implied equity values per share of EngageSmart Common Stock of $17.27 to $22.12, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Although none of these companies is directly comparable to EngageSmart, Evercore selected these companies because they are publicly traded companies in the software and financial technology industries with business characteristics that Evercore, in its professional judgment and experience, considered generally relevant to EngageSmart for purposes of its financial analyses. In evaluating the selected companies, Evercore made judgments and assumptions with regard to general business, economic and market conditions affecting the selected companies and other matters, as well as differences in the selected companies’ financial, business and operating characteristics. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the selected companies and the multiples derived from the selected companies. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the selected companies.

Selected Precedent Transactions Analysis

Evercore reviewed, to the extent publicly available, financial information related to the following selected transactions involving target companies in the software and financial technology industries, serving Enterprise clients and SMB clients announced since 2007.

The selected transactions reviewed by Evercore, and the date each was announced were as follows:

Enterprise:

 

Date Announced		Acquirer		Target
01/09/23		Nuvei Corporation		Paya Holdings Inc.
12/12/22		Thoma Bravo, L.P.		Coupa Software Incorporated
09/28/22		EQT Holdings AB		BTRS Holdings Inc.
08/01/22		Global Payments, Inc.		EVO Payments Inc.
12/17/21		Thoma Bravo, L.P.		Bottomline Technologies, Inc.
05/28/19		Global Payments Inc.		Total System Services, Inc.
03/18/19		Fidelity National Information Services, Inc.		Worldpay, Inc.
01/16/19		Fiserv, Inc.		First Data Corporation
07/04/17		Vantiv, Inc.		Worldpay Group PLC
02/14/17		PayPal Holdings, Inc.		TIO Networks Corp.
08/02/07		Fiserv, Inc.		CheckFree Corporation

 

64

SMB:

 

Date Announced		Acquirer		Target
07/31/23		Francisco Partners Management LLC, TPG		New Relic, Inc.
03/14/23		Blackstone Inc.		Cvent Holding Corp.
03/06/23		Canada Pension Plan Investment Board, Silver Lake Partners		Qualtrics International Inc.
01/09/23		Vista Equity Partners		Duck Creek Technologies, Inc.
08/08/22		Vista Equity Partners		Avalara, Inc.
05/04/22		Intercontinental Exchange, Inc.		Black Knight, Inc.
04/07/22		Brookfield Business Partners L.P.		CDK Global, Inc.
08/19/21		Nordic Capital Limited		Inovalon Holdings, Inc.
02/10/21		Tyler Technologies, Inc.		NIC Inc.
12/21/20		Thoma Bravo, L.P.		RealPage, Inc.
02/12/19		Thoma Bravo, LLC		Ellie Mae, Inc.
02/04/19		Canada Pension Plan Investment Board, GIC Pte Ltd., Hellman & Friedman LLC, JMI Equity, The Blackstone Group L.P.		The Ultimate Software Group, Inc.
12/24/18		Vista Equity Partners		MINDBODY, Inc.

For each selected transaction, Evercore calculated total enterprise value (defined as equity market capitalization plus total debt plus non-controlling interests, less cash and cash equivalents) as a multiple of NTM EBITDA for the target company at the time of the announcement of the applicable transaction (which is referred to as “TEV / NTM EBITDA”). Estimated financial data of the selected transactions were based on publicly available information at the time of announcement of the relevant transaction.

This analysis indicated the following:

Enterprise:

 

Benchmark		Mean				Median
TEV / NTM EBITDA			19.0x				18.0x

SMB:

 

Benchmark		Mean				Median
TEV / NTM EBITDA			26.2x				24.6x

Based on the multiples it derived from the selected transactions and its professional judgment and experience, Evercore applied a TEV / NTM EBITDA multiple reference range of 25.0x to 40.0x to an estimate of EngageSmart’s NTM EBITDA, as reflected in the Forecasts, to derive an implied enterprise value reference range for EngageSmart. Based on this range of implied enterprise values, EngageSmart’s estimated net cash as of September 30, 2023 and the number of fully diluted outstanding shares of EngageSmart Common Stock as of October 20, 2023, in each case as provided by EngageSmart’s management, this analysis indicated a range of implied equity values per share of EngageSmart common stock of $15.58 to $23.67, compared to the unaffected 30-day volume-weighted average price of EngageSmart common stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Although none of the target companies or businesses reviewed in the selected transactions analysis is directly comparable to EngageSmart and none of the selected transactions is directly comparable to the Merger, Evercore selected these transactions because they involve companies or businesses that Evercore, in its professional judgment and experience, considered generally relevant for purposes of its financial analyses with respect to

 

65

EngageSmart and the Merger. In evaluating the selected transactions, Evercore made judgments and assumptions with regard to general business, economic and market conditions and other factors existing at the time of the selected transactions, and other matters, as well as differences in financial, business and operating characteristics and other factors relevant to the target companies or businesses in the selected transactions. Accordingly, an evaluation of the results of this analysis is not entirely mathematical. Rather, this analysis involves complex considerations and judgments regarding many factors that could affect the relative values of the target companies or businesses in the selected transactions and the multiples derived from the selected transactions. Mathematical analysis, such as determining the mean or median, is not in itself a meaningful method of using the data of the selected transactions.

Other Factors

Evercore also noted certain other factors, which were not considered material to its financial analyses with respect to its opinion, but were referenced for informational purposes only, including, among other things, the following:

Present Value of Future Share Price Analyses

Evercore performed an illustrative analysis of the implied average present value of the future price per share of EngageSmart Common Stock, which is designed to provide an indication of the present value of a theoretical future value of EngageSmart, as a function of EngageSmart’s estimated NTM adjusted EBITDA and its assumed multiple of total enterprise value to NTM adjusted EBITDA.

In calculating the implied present value of the future price per share of EngageSmart Common Stock, Evercore first calculated ranges of implied total enterprise values of EngageSmart by multiplying EngageSmart’s estimated NTM adjusted EBITDA as of the end of each of calendar years 2023 through 2026 based on the Forecasts by illustrative enterprise value to NTM adjusted EBITDA multiple ranges of 30.0x to 26.0x, 30.0x to 24.0x and 30x to 22.0x, which ranges were selected based on Evercore’s professional judgment and experience, to derive implied future enterprise value reference ranges for EngageSmart. Based on these ranges of implied future enterprise values, EngageSmart’s estimated net cash as of the end of each of calendar years 2023 through 2026, and the number of fully diluted outstanding shares of EngageSmart Common Stock as of the end of each of calendar years 2023 through 2026, in each case as provided by EngageSmart’s management, Evercore calculated reference ranges of implied future equity values per share of EngageSmart Common Stock. Evercore then discounted the implied future equity values per share to present value as of September 30, 2023 using a discount rate of 14.0%, representing an estimate of EngageSmart’s cost of equity, as estimated by Evercore based on its professional judgment and experience. This analysis indicated an average range of implied equity values per share of EngageSmart Common Stock of $23.23 to $25.09, compared to the unaffected 30-day volume-weighted average price of EngageSmart common stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Sum-of-the-Parts Selected Publicly Traded Companies Analysis

Evercore performed a sum-of-the-parts selected publicly traded companies analysis, to derive a range of implied equity values per share of EngageSmart Common Stock based on a sum-of-the-parts approach aggregating the implied enterprise values of EngageSmart’s Enterprise segment and SMB segment. Based on its review of the financial information and ratios related to the selected companies as described above under the caption “Selected Publicly Traded Companies Analysis” and its professional judgement and experience, Evercore applied a multiple reference range of 30.0x to 35.0x to an estimate of EngageSmart’s calendar year 2024 adjusted EBITDA attributable, as directed by EngageSmart management, to its enterprise segment and a multiple reference range of 28.0x to 36.0x to an estimate of EngageSmart’s calendar year 2024 adjusted EBITDA attributable, as directed by EngageSmart management, to its SMB segment, each as reflected in the Forecasts, to derive implied enterprise value reference ranges for each segment and, by aggregating such ranges, for EngageSmart. In its analysis, and

 

66

upon advice of EngageSmart’s management, Evercore assumed no tax leakage costs or synergies and dis-synergies costs, other than approximately $5.0 million of cost savings in calendar year 2024, in the separation of EngageSmart into its two segments. Based on the sum of the implied enterprise value reference ranges for each segment, after adjusting for the estimated net cash as of September 30, 2023 allocated, as directed by EngageSmart’s management, to each segment and to EngageSmart’s corporate cash, and the number of fully diluted outstanding shares of EngageSmart Common Stock as of October 20, 2023, in each case as provided by EngageSmart’s management, this analysis indicated a range of implied equity values per share of EngageSmart Common Stock of $20.05 to $24.90, compared to the unaffected 30-day volume-weighted average price of EngageSmart common stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Sum-of-the-Parts Selected Precedent Transactions Analysis

Evercore performed a sum-of-the-parts selected transactions analysis, to derive a range of implied equity values per share of EngageSmart Common Stock based on a sum-of-the-parts approach aggregating the implied enterprise values of EngageSmart’s Enterprise segment and SMB segment. Based on its review of the financial information and ratios related to the selected transactions as described above under the caption “Selected Precedent Transactions Analysis” and its professional judgement and experience, Evercore applied a multiple reference range of 4.0x to 5.0x to an estimate of EngageSmart’s NTM revenue, as of September 30, 2023, attributable, as directed by EngageSmart management, to its enterprise segment and a multiple reference range of 30.0x to 40.0x to an estimate of EngageSmart’s NTM adjusted EBITDA, as of September 30, 2023, attributable, as directed by EngageSmart management, to its SMB segment, each as reflected in the Forecasts, to derive implied enterprise value reference ranges for each segment and, by aggregating such ranges, for EngageSmart. In its analysis, and upon advice of EngageSmart’s management, Evercore assumed no tax leakage costs or synergies and dis-synergies costs, other than approximately $5.0 million of cost savings in calendar year 2024, in the separation of EngageSmart into its two segments. Based on the sum of the implied enterprise value reference ranges for each segment, after adjusting for the estimated net cash as of September 30, 2023 allocated, as directed by EngageSmart’s management, to each segment and to EngageSmart’s corporate cash, in each case, as reflected in the Forecasts, and the number of fully diluted outstanding shares of EngageSmart Common Stock as of October 20, 2023, as provided by EngageSmart’s management, this analysis indicated a range of implied equity values per share of EngageSmart Common Stock of $21.84 to $28.07, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price $23.00.

Leveraged Buyout Analysis

Evercore performed a leveraged buyout analysis of EngageSmart to estimate the price per share that a potential financial buyer might be willing to pay for EngageSmart. For purposes of this analysis, Evercore assumed, based on its experience and professional judgment, (1) that the financial buyer would complete the transaction on September 30, 2023 and exit the investment on December 31, 2028, (2) a required internal rate of return (IRR) ranging from 17.5% to 22.5%, (3) a range of exit multiples of 22.0x to 26.0x based on its review of the financial information and ratios related to the selected companies as described above under the caption “Selected Publicly Traded Companies Analysis,” (4) gross leverage equal to 6.5x, (5) $70 million minimum cash balance, as provided by EngageSmart management, (6) $50 million of transaction fees, (7) management fees at a rate of four percent, and (8) annual public company cost savings of $9 million to $12 million as provided by EngageSmart management. This analysis indicated a range of implied equity values per share of EngageSmart Common Stock of $19.24 to $26.18, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Equity Research Analysts’ Price Targets

Evercore reviewed selected publicly available share price targets of research analysts’ estimates known to Evercore as of October 4, 2023, the Unaffected Date, noting that the 25th percentile and 75th Percentile of share

 

67

price targets for EngageSmart Common Stock ranged from $21.00 to $24.50, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00. Public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for the shares of EngageSmart Common Stock and these target prices and the analysts’ earnings estimates on which they were based are subject to risk and uncertainties, including factors affecting the financial performance of EngageSmart and future general industry and market conditions.

52-Week Trading Range Analysis

Evercore reviewed historical trading prices of shares of EngageSmart Common Stock during the 52-week period ended October 4, 2023, the Unaffected Date, noting that low and high prices (based on closing values) during such period ranged from $15.44 to $22.27 per share of EngageSmart Common Stock, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Premiums Paid Analysis

Using publicly available information, Evercore reviewed certain selected take private transactions involving publicly traded companies in North America with total enterprise values greater than $1 billion announced over the three-year period prior to the date of Evercore’s opinion. Using publicly available information, Evercore calculated the premium paid in each transaction as the percentage by which the per share consideration paid or proposed to be paid in each such transaction exceeded the unaffected 30-day volume-weighted average prices per share of the target companies prior to announcement of each transaction. Based on the results of this analysis and its professional judgment and experience, Evercore applied a premium range of 25.0% to 40.0% to the unaffected 30-day volume-weighted average price of the shares of EngageSmart Common Stock of $17.74 as of October 4, 2023. This analysis indicated a range of implied equity values per share of EngageSmart common stock of $22.18 to $24.84, compared to the unaffected 30-day volume-weighted average price of EngageSmart Common Stock of $17.74 on October 4, 2023, the Unaffected Date, and the Per Share Price of $23.00.

Other Presentations by Evercore

In addition to the presentation made to the Special Committee on October 23, 2023, the date on which Evercore rendered its opinion, as described above, Evercore made other written and oral presentations to the Special Committee on August 29, 2023, August 31, 2023, September 5, 2023, September 26, 2023, October 4, 2023, October 20, 2023 and October 22, 2023, which are referred to in this section as the preliminary Evercore presentations. Copies of the preliminary Evercore presentations provided to the Special Committee by Evercore have been attached as exhibits to the Transaction Statement on Schedule 13E-3 with respect to the Merger. These written presentations and the written opinion will be available for any interested holder of EngageSmart Common Stock to inspect and copy at EngageSmart’s principal executive offices during regular business hours.

None of the preliminary Evercore presentations, alone or together, constitutes an opinion of Evercore with respect to the Per Share Price. The August 29, 2023, and the August 31, 2023 discussion materials included a process update and review of and observations regarding preliminary versions of the Forecasts (as described in the section of this proxy statement captioned “—Unaudited Prospective Financial Information) and operational benchmarking. The September 5, 2023 discussion materials included operational benchmarking analyses. The September 26, 2023 discussion materials (delivered on September 24, 2023) included an evaluation of strategic alternatives and preliminary financial analysis of EngageSmart based on preliminary versions of the Forecasts. The October 4, 2023 discussion materials included a preliminary financial analysis of EngageSmart based on the Forecasts. The October 20, 2023 discussion materials included a summary of the bids received, a preliminary analysis of EngageSmart Common Stock at various share prices, and a preliminary financial analysis based on the Forecasts and compared to Parent’s non-binding second bid offer of $22.75. The October 22, 2023 discussion

 

68

materials included a preliminary analysis of EngageSmart Common Stock at various share prices and a preliminary financial analysis based on the Forecasts and compared to the Per Share Price.

Each of the analyses performed in these preliminary Evercore presentations was subject to further updating and subject to the final analyses presented to the Special Committee on October 23, 2023 by Evercore, which is summarized above under “—Summary of Evercore’s Financial Analyses” and which superseded all analyses performed in the preliminary Evercore presentations. Each of these analyses was necessarily based on financial, economic, monetary, market, regulatory and other conditions and circumstances as they existed and as could be evaluated by Evercore as of the dates on which Evercore performed such analyses. Accordingly, the results of the financial analyses may have differed due to changes in those conditions and other information, and not all of the written and oral presentations contained all of the financial analyses included in the October 23, 2023 presentation.

Miscellaneous

The foregoing summary of Evercore’s financial analyses does not purport to be a complete description of the analyses or data presented by Evercore to the Special Committee. In connection with the review of the Merger by the Special Committee, Evercore performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary described above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Evercore’s opinion. In arriving at its fairness determination, Evercore considered the results of all the analyses and did not draw, in isolation, conclusions from or with regard to any one analysis or factor considered by it for purposes of its opinion. Rather, Evercore made its determination as to fairness on the basis of its professional judgment and experience after considering the results of all the analyses. In addition, Evercore may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of Evercore with respect to the actual value of the shares of EngageSmart Common Stock. Further, Evercore’s analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies used, including judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of EngageSmart or its advisors. Rounding may result in total sums set forth in this section not equaling the total of the figures shown.

Evercore prepared these analyses for the purpose of providing an opinion to the Special Committee as to the fairness, from a financial point of view, of the Per Share Price to be received by holders of EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates. These analyses do not purport to be appraisals or to necessarily reflect the prices at which the business or securities actually may be sold. Any estimates contained in these analyses are not necessarily indicative of actual future results, which may be significantly more or less favorable than those suggested by such estimates. Accordingly, estimates used in, and the results derived from, Evercore’s analyses are inherently subject to substantial uncertainty, and Evercore assumes no responsibility if future results are materially different from those forecasted in such estimates.

Evercore’s financial advisory services and its opinion were provided for the information and benefit of the Special Committee (in its capacity as such) in connection with its evaluation of the proposed Merger. The issuance of Evercore’s opinion was approved by an Opinion Committee of Evercore.

Except as described above, the Special Committee imposed no other instruction or limitation on Evercore with respect to the investigations made or the procedures followed by Evercore in rendering its opinion. Evercore did not recommend any specific amount of consideration to the Special Committee or EngageSmart’s management or that any specific amount of consideration constituted the only appropriate consideration in the Merger for the holders of EngageSmart Common Stock.

 

69

Pursuant to the terms of Evercore’s engagement letter with the Special Committee, EngageSmart has agreed to pay Evercore a fee for its services in the aggregate amount of approximately $24.1 million, of which (1) $2 million was paid upon delivery of Evercore’s opinion and is fully creditable against any fee payable upon the execution of the Merger Agreement, (2) $6.7 million was paid promptly following the execution of the Merger Agreement and is fully creditable against any fee payable upon the consummation of the Merger and (3) approximately $15.4 million will be payable contingent upon the consummation of the Merger. EngageSmart has also agreed to reimburse Evercore for its expenses and to indemnify Evercore against certain liabilities arising out of its engagement.

During the two-year period prior to the date of its opinion, Evercore and its affiliates have not been engaged to provide financial advisory or other services to EngageSmart and Evercore has not received any compensation from EngageSmart during such period. In addition, during the two-year period prior to the date of its opinion, Evercore and its affiliates have provided financial advisory or other services to Vista and certain of its affiliates and portfolio companies and to General Atlantic and certain of its affiliates and portfolio companies, and received fees for the rendering of these services. During the period between January 1, 2020 and October 19, 2023, the aggregate fees for financial advisory or other services recognized by Evercore from Vista and certain of its affiliates and portfolio companies were approximately $22 million. During the period between January 1, 2020 and October 19, 2023, the aggregate fees for financial advisory or other services recognized by Evercore from General Atlantic and certain of its affiliates and portfolio companies were approximately $42 million. Evercore may provide financial advisory or other services to EngageSmart, Vista and General Atlantic in the future, and in connection with any such services Evercore may receive compensation.

Evercore and its affiliates engage in a wide range of activities for its and their own accounts and the accounts of customers, including corporate finance, mergers and acquisitions, equity sales, trading and research, private equity, placement agent, asset management and related activities. In connection with these businesses or otherwise, Evercore and its affiliates and/or its or their respective employees, as well as investment funds in which any of them may have a financial interest, may at any time, directly or indirectly, hold long or short positions and may trade or otherwise effect transactions for their own accounts or the accounts of customers, in debt or equity securities, senior loans and/or derivative products or other financial instruments of or relating to EngageSmart, Parent, potential parties to the Merger and/or any of their respective affiliates or persons that are competitors, customers or suppliers of EngageSmart or Parent.

The Special Committee engaged Evercore to act as a financial advisor based on Evercore’s qualifications, experience and reputation. Evercore is an internationally recognized investment banking firm and regularly provides fairness opinions in connection with mergers and acquisitions, leveraged buyouts and valuations for corporate and other purposes.

Position of the Purchaser Filing Parties as to the Fairness of the Merger

Under the SEC rules governing “going-private” transactions, each General Atlantic Filing Party may be deemed to be an affiliate of EngageSmart, and under a possible interpretation of such SEC rules, each Vista Filing Party and Parent Entity may be deemed to be an affiliate of EngageSmart, and, therefore, required to express its belief as to the fairness of the proposed Merger to EngageSmart’s “unaffiliated security holders,” as defined under Rule 13e-3 of the Exchange Act. The Merger is a Rule 13e-3 transaction for which a Schedule 13e-3 Transaction Statement has been filed with the SEC. The Purchaser Filing Parties are making the statements included in this section solely for purposes of complying with the requirements of Rule 13e-3 and related rules and regulations under the Exchange Act. However, the view of the Purchaser Filing Parties as to the fairness of the Merger is not intended to be and should not be construed as a recommendation to any EngageSmart stockholder as to how that stockholder should vote on the Merger Proposal. The Purchaser Filing Parties have interests in the Merger that are different from, and/or in addition to, the unaffiliated security holders of EngageSmart.

The Purchaser Filing Parties believe that the interests of the unaffiliated security holders were represented by the Special Committee, which negotiated the terms and conditions of the Merger Agreement with the assistance of

 

70

its independent legal and financial advisors. The Purchaser Filing Parties did not participate in the deliberation of the Special Committee regarding, nor received advice from the respective legal or other advisors of the Special Committee as to, the fairness of the Merger. In addition, the Vista Filing Parties and the Parent Entities did not participate in the deliberations of the EngageSmart Board regarding, nor received advice from the advisors of the EngageSmart Board as to, the fairness of the Merger. The Purchaser Filing Parties have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purposes of assessing the fairness of the Merger to the unaffiliated security holders of EngageSmart. Based on, among other things, their knowledge and analysis of available information regarding EngageSmart, as well as discussions with EngageSmart’s senior management regarding EngageSmart and its business and the factors considered by, and the analysis and resulting conclusions of, the EngageSmart Board and the Special Committee discussed in the section of this proxy statement entitled “Special Factors—Reasons for the Merger; Recommendation of the Special Committee and the EngageSmart Board” (which analysis and resulting conclusions the Purchaser Filing Parties adopt), the Purchaser Filings Parties believe that the Merger is substantively fair to the unaffiliated security holders of EngageSmart. In particular, the Purchaser Filing Parties considered the following:

 

•

the current and historical market prices of EngageSmart Common Stock, including the market performance of EngageSmart Common Stock relative to those of other participants in EngageSmart’s industry and general market indices, and the fact that the Per Share Price represents a premium of approximately 30% to the volume-weighted average stock price of EngageSmart Common Stock for the 30 days ended October 4, 2023, the last full trading day before media reports that EngageSmart was exploring a potential transaction; EngageSmart Common Stock traded as low as $15.01 per share during the 52-week period prior to the announcement of the Merger;

 

•

the fact that the Special Committee unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, EngageSmart and the Unaffiliated Stockholders and, accordingly, EngageSmart’s unaffiliated security holders, as defined in Rule 13e-3 under the Exchange Act;

 

•

the fact that the EngageSmart Board, acting upon the recommendation of the Special Committee, unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, are advisable, fair to, and in the best interests of, EngageSmart and its stockholders;

 

•

the members of the Special Committee are not officers or employees of EngageSmart, are not affiliated with any Purchaser Filing Party and do not have any interests in the Merger different from, or in addition to, those of the unaffiliated security holders, other than the members’ receipt of EngageSmart Board compensation and Special Committee compensation (which are not contingent upon the completion of the Merger or the Special Committee’s or the EngageSmart Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective indemnification agreement entered into with EngageSmart and in connection with the Merger Agreement;

 

•

the fact that the Per Share Price will be paid to the unaffiliated security holders in all cash, thus allowing the unaffiliated security holders of EngageSmart to immediately realize a certain and fair value for their shares, which value represents a significant premium to the closing price of EngageSmart Common Stock on October 4, 2023, the last full trading day before media reports that EngageSmart was exploring a potential transaction;

 

•

the fact that the Merger will provide liquidity for the unaffiliated security holders of EngageSmart without the delays that would otherwise be necessary in order to liquidate the positions of larger holders, and without incurring brokerage and other costs typically associated with market sales;

 

•

the fact that the Merger is not conditioned on any financing being obtained by Parent, increasing the likelihood that the Merger will be consummated and that the consideration to be paid to the unaffiliated security holders of EngageSmart in the Merger will be received;

 

71

•

the potential risks to EngageSmart of continuing to have publicly traded common stock, including the risks of market volatility and global uncertainty;

 

•

the fact that EngageSmart has the ability to seek specific performance under the Merger Agreement to prevent breaches of the Merger Agreement and to specifically enforce the terms of the Merger Agreement; and

 

•

the fact that, notwithstanding that the Purchaser Filing Parties are not entitled to, and did not rely on the opinion provided by Evercore to the Special Committee on October 23, 2023, the Special Committee received an opinion from Evercore stating that, as of the date of such opinion and based upon and subject to the assumptions, limitations, qualifications and conditions described in Evercore’s written opinion, the Per Share Price to be received by holders of EngageSmart Common Stock, other than the Rollover Stockholders and their affiliates, in the Merger was fair, from a financial point of view, to such holders.

The Purchaser Filing Parties did not consider the liquidation value of EngageSmart in determining their view as to fairness of the Merger to the unaffiliated security holders because the Purchaser Filing Parties consider EngageSmart to be a viable going concern and view the trading history of EngageSmart Common Stock as an indication of EngageSmart’s going concern value, and, accordingly, did not believe liquidation value to be relevant to a determination as to the fairness of the Merger.

The Purchaser Filing Parties did not consider net book value, which is an accounting concept, in determining their view as to fairness of the Merger to the unaffiliated security holders because they believed that net book value is not a material indicator of the value of EngageSmart as a going concern but rather is indicative of historical costs and therefore not a relevant measure in the determination as to the fairness of the Merger. The Purchaser Filing Parties note, however, that the Per Share Price of $23.00 is substantially higher than the net book value per share of EngageSmart Common Stock as of September 30, 2023 of $5.02 (based on 167,864,066 issued and outstanding shares as of that date). See the section of this proxy statement captioned “Where You Can Find Additional Information” for a description of how to obtain copies of EngageSmart’s periodic reports.

The Purchaser Filing Parties did not establish, and did not consider, a going concern value for EngageSmart as a public company to determine the fairness of the Merger consideration to unaffiliated security holders because, following the Merger, EngageSmart will have a significantly different capital structure.

Other than to the extent known to the Purchaser Filing Parties as disclosed in the section of this proxy statement captioned “—Background of the Merger”, the Purchaser Filing Parties were not aware of, and thus did not consider, any other firm offers made by any unaffiliated person during the past two years for (i) a merger or consolidation of EngageSmart with another company, (ii) the sale or transfer of all or substantially all of EngageSmart’s assets or (iii) the purchase of all or a substantial portion of the shares that would enable such person to exercise control of or significant influence over EngageSmart.

The Purchaser Filing Parties did not receive any reports, opinions or appraisals from any outside party materially related to the fairness of the Merger or the Merger consideration, and thus did not consider any such reports, opinions or appraisals in determining the substantive and procedural fairness of the Merger to unaffiliated security holders.

The Purchaser Filing Parties further believe that the Merger is procedurally and substantively fair to the unaffiliated security holders of EngageSmart based upon, among other things, the following factors, which are not listed in any relative order of importance:

 

•

the fact that the Special Committee and the EngageSmart Board were fully informed about the extent to which the interests of the Purchaser Filing Parties in the Merger differed from those of the unaffiliated security holders of EngageSmart;

 

72

•

the fact that consideration and negotiation of the Merger Agreement were conducted under the control and supervision of the Special Committee, which consists solely of independent directors, each of whom is an outside, non-employee director not affiliated with any of the Purchaser Filing Parties, and the prior suspension of the Special Committee was revoked at the outset of the strategic process that resulted in execution of the Merger Agreement;

 

•

the fact that, since the outset of the strategic process that resulted in execution of the Merger Agreement, General Atlantic has conditioned the potential transaction upon, and Vista’s proposals for the potential transaction were conditioned upon, (i) the approval of the Special Committee and (ii) a non-waivable condition requiring the Merger to be approved by a majority of the shares of EngageSmart Common Stock not owned by General Atlantic, and such approval in fact being obtained prior to consummation of the Merger;

 

•

the fact that, in considering the transaction with the Purchaser Filing Parties, the Special Committee acted solely to represent the interests of the unaffiliated security holders, and the Special Committee had independent control of the extensive negotiations with the members of the Purchaser Filing Parties and their respective advisors on behalf of the unaffiliated security holders;

 

•

the fact that all of the members of the Special Committee, were and are independent directors and not affiliated with any Purchaser Filing Party; in addition, none of such Special Committee members is or ever was an employee of EngageSmart or any of its subsidiaries or affiliates and none of such directors has any financial interest in the Merger that is different from that of the unaffiliated security holders other than the members’ receipt of EngageSmart Board compensation and Special Committee compensation

(which are not contingent upon the completion of the Merger or the Special Committee’s or the EngageSmart Board’s recommendation and/or authorization and approval of the Merger) and their indemnification and liability insurance rights under their respective indemnification agreements entered into with EngageSmart and under the Merger Agreement;

 

•

the fact that the Special Committee retained, and had the benefit of advice from, nationally recognized legal and financial advisors;

 

•

the fact that the Merger consideration, and the terms and conditions of the Merger were the result of the Special Committee’s extensive arm’s length negotiations with Parent;

 

•

the fact that the Special Committee had the full power and authority to negotiate the terms and conditions of any strategic transaction involving EngageSmart (including the Merger), including to reject any proposals made by Parent or any other person;

 

•

the fact that the closing of the Merger is conditioned on EngageSmart’s receipt of the requisite EngageSmart stockholder approvals, including the affirmative vote of the holders of a majority of the outstanding shares of EngageSmart Common Stock held by the Unaffiliated Stockholders to adopt the Merger Agreement;

 

•

EngageSmart’s ability, under certain circumstances as set out in the Merger Agreement, to provide information to, or participate in discussions or negotiations with, third parties regarding any alternative acquisition proposal that constitutes, or is reasonably likely to lead to, a Superior Proposal;

 

•

EngageSmart’s ability, under certain circumstances as set out in the Merger Agreement, to terminate the Merger Agreement to enter into a definitive agreement related to a Superior Proposal, subject to paying Parent a termination fee of $144,370,000 in cash (which may be reduced to $72,185,000 in certain circumstances if such termination occurs prior to the No-Shop Period Start Date and if EngageSmart enters into an Alternative Acquisition Agreement at the time of such termination), subject to and in accordance with the terms and conditions of the Merger Agreement;

 

•

EngageSmart’s ability to, for a period of 30 days after entering into the Merger Agreement, solicit, initiate, propose or induce the making, submission or announcement of, or knowingly encourage,

 

73

facilitate or assist, any proposal or inquiry that constitutes, or is reasonably expected to lead to an Acquisition Proposal;

 

•

the recognition by the Special Committee that it had no obligation to recommend to the EngageSmart Board that it approve the Merger Agreement, and the recognition by the EngageSmart Board that it had no obligation to approve the Merger Agreement;

 

•

the availability of appraisal rights to EngageSmart’s stockholders who comply with all of the required procedures under Delaware law for exercising appraisal rights, which allow such holders to seek appraisal of the fair value of their shares; and

 

•

the fact that, in certain circumstances under the terms of the Merger Agreement, the Special Committee and the EngageSmart Board are able to change, withhold, withdraw, qualify or modify their recommendation that EngageSmart stockholders vote in favor of the proposal to adopt the Merger Agreement.

The Purchaser Filing Parties also considered a variety of risks and other countervailing factors related to the substantive and procedural fairness of the proposed Merger, including:

 

•

(1) the fact that the unaffiliated security holders of EngageSmart will not participate in any future earnings, appreciation in value or growth of EngageSmart’s business and will not benefit from any potential sale of EngageSmart or its assets to a third party in the future, (2) the risk that the Merger might not be completed in a timely manner or at all, and (3) the fact that Parent and Merger Sub are newly formed corporations with essentially no assets other than the funding commitments of the Guarantor and the rollover commitments of the Rollover Stockholders;

 

•

the restrictions on the conduct of EngageSmart’s business prior to the completion of the Merger set forth in the Merger Agreement, which may delay or prevent EngageSmart from undertaking business opportunities that may arise and certain other actions it might otherwise take with respect to the operations of EngageSmart pending completion of the Merger;

 

•

the negative effect that the pendency of the Merger, or a failure to complete the Merger, could potentially have on EngageSmart’s business and relationships with its employees, vendors and customers;

 

•

subject to the terms and conditions of the Merger Agreement, beginning on the No-Shop Period Start Date, EngageSmart and its subsidiaries are restricted from soliciting, proposing, initiating or knowingly encouraging the submission of acquisition proposals from third parties or the making of any inquiry, proposal or offer that would reasonably be expected to lead to an Acquisition Proposal;

 

•

the possibility that the amounts that may be payable by EngageSmart upon the termination of the Merger Agreement, including payment to Parent of a termination fee of $144,370,000 in cash, and the processes required to terminate the Merger Agreement, including the opportunity for Parent to negotiate to make adjustments to the Merger Agreement, could discourage other potential acquirors from making a competing bid to acquire EngageSmart; and

 

•

the fact that the receipt of cash by a U.S. Holder in exchange for shares of EngageSmart Common Stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes.

The foregoing discussion of the information and factors considered and given weight by the Purchaser Filing Parties in connection with the fairness of the Merger is not intended to be exhaustive but is believed to include all material factors considered by them. The Purchaser Filing Parties did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their conclusion as to the fairness of the Merger. Rather, the Purchaser Filing Parties reached their position as to the fairness of the Merger after considering all of the foregoing as a whole.

The Purchaser Filing Parties believe these factors provide a reasonable basis upon which to form their position regarding the fairness of the Merger to the unaffiliated security holders of EngageSmart. This position however,

 

74

is not intended to be and should not be construed as a recommendation to any EngageSmart stockholder to approve the Merger Agreement. The Purchaser Filing Parties make no recommendation as to how stockholders of EngageSmart should vote their shares relating to the Merger. The Vista Filing Parties attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the unaffiliated security holders of EngageSmart, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to the unaffiliated security holders of EngageSmart.

Plans for EngageSmart After the Merger

Following completion of the Merger, Merger Sub will have been merged with and into EngageSmart, with EngageSmart surviving the Merger as a wholly owned subsidiary of Parent. The shares of EngageSmart Common Stock are currently listed on the NYSE and registered under the Exchange Act. Following completion of the Merger, there will be no further market for the shares of EngageSmart Common Stock and, as promptly as practicable following the Effective Time and in compliance with applicable law, EngageSmart Common Stock will be delisted from the NYSE and deregistered under the Exchange Act.

At the Effective Time, the directors of Merger Sub immediately prior to the Effective Time will become the initial directors of the Surviving Corporation, and the officers of EngageSmart immediately prior to the Effective Time will become the officers of the Surviving Corporation, in each case until their successor is duly elected and qualified or until the earlier of his or her death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation. At the Effective Time, the certificate of incorporation of EngageSmart as the Surviving Corporation will be amended and restated in its entirety to read as set forth in Exhibit A to the Merger Agreement, and the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, will become the bylaws of the Surviving Corporation, until thereafter amended in accordance with the applicable provisions of the DGCL and such certificate of incorporation and such bylaws.

The Purchaser Filing Parties currently anticipate that EngageSmart’s operations initially will be conducted following completion of the Merger substantially as they are currently being conducted (except that EngageSmart will cease to be a public company and will instead be a wholly owned subsidiary of Parent). The Purchaser Filing Parties are currently conducting a review of EngageSmart and its business and operations with a view towards determining how to redirect EngageSmart’s operations to improve EngageSmart’s long-term earnings potential as a private company (including by reducing EngageSmart’s costs and expenses following the Merger) and expect to complete such review following completion of the Merger. Further, following completion of the Merger, the Purchaser Filing Parties will continue to assess EngageSmart’s assets, corporate and capital structure, capitalization, operations, business, properties and personnel to determine what additional changes, if any, would be desirable following the Merger to enhance the business and operations of EngageSmart. In addition, Parent may seek to buy or combine EngageSmart with target companies that provide earnings and growth synergies; however, no definitive contracts, arrangements, plans, proposals, commitments or understandings with respect thereto currently exist. Although presently there are no definitive contracts, arrangements, plans, proposals, commitments or understandings regarding any such transactions, the Purchaser Filing Parties and certain of their affiliates may seek, from and after the Effective Time, to acquire target companies or assets that operate in EngageSmart’s industry.

Certain Effects of the Merger

If the Requisite Stockholder Approval is obtained and all other conditions to closing of the Merger are satisfied or waived, upon the terms and subject to the conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, (1) Merger Sub will merge with and into EngageSmart, (2) the separate existence of Merger Sub will cease, and (3) EngageSmart will continue as the Surviving Corporation in the Merger and a wholly owned subsidiary of Parent. As a result of the Merger, EngageSmart will cease to be a publicly traded company, EngageSmart Common Stock will be delisted from the NYSE and deregistered under the Exchange Act and EngageSmart will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of capital stock of the Surviving Corporation.

 

75

The Effective Time will occur upon the filing of a Certificate of Merger with, and acceptance of that certificate by, the Secretary of State of the State of Delaware (or at a later time as EngageSmart, Parent and Merger Sub may agree and specify in such Certificate of Merger).

Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time:

 

•

each certificate formerly representing any shares of EngageSmart Common Stock or any book-entry shares that represented shares of EngageSmart Common Stock immediately prior to the Effective Time (except for Owned Shares) will automatically be canceled and extinguished and will automatically convert into the right to receive cash in an amount equal to the Per Share Price, without interest and subject to any applicable withholding taxes;

 

•

the Owned Shares (which include the Rollover Shares, which will have been contributed to Parent (or a direct or indirect parent company thereof) immediately prior to the Effective Time pursuant to the Rollover Stockholder Support Agreement) will be cancelled for no consideration;

 

•

each outstanding Vested EngageSmart Option (whether vested at the Effective Time or that vests in connection with the Merger) will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart Option multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of such Vested EngageSmart Option;

 

•

each outstanding Unvested EngageSmart Option will automatically be canceled and converted into a Converted Cash Award with respect to an aggregate amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart Option immediately prior to the Effective Time multiplied by (2) the excess, if any, of the Per Share Price over the exercise price per share of such Unvested EngageSmart Option. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart Option immediately prior to the Effective Time; however, due to the existing change in control vesting provisions of the EngageSmart Option Awards, it is expected that there will be no Unvested EngageSmart Options at the Effective Time;

 

•

each outstanding Vested EngageSmart RSU will automatically be canceled and converted into the right to receive an amount (without interest) in cash equal in value to (1) the total number of shares of EngageSmart Common Stock subject to such Vested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price; and

 

•

each outstanding Unvested EngageSmart RSU will automatically be canceled and converted into a Converted Cash Award with respect to an aggregate amount (without interest) in cash equal to (1) the total number of shares of EngageSmart Common Stock subject to such Unvested EngageSmart RSU immediately prior to the Effective Time multiplied by (2) the Per Share Price. Each such Converted Cash Award will continue to have, and will be subject to, the same vesting terms and conditions as applied to the corresponding Unvested EngageSmart RSU immediately prior to the Effective Time.

At or prior to the closing of the Merger, a sufficient amount of cash will be deposited with a designated Payment Agent to pay the aggregate Per Share Price. Once a stockholder has provided the Payment Agent with his, her or its stock certificates (or an affidavit of loss in lieu of a stock certificate) or customary agent’s message (or such other evidence of transfer as the Payment Agent may reasonably request) with respect to book-entry shares, appropriate letter of transmittal and other items specified by the Payment Agent, then the Payment Agent will pay the stockholder the appropriate portion of the aggregate Per Share Price. For more information, see the section of this proxy statement captioned “The Merger Agreement—Exchange and Payment Procedures.”

Following the Merger, all of the equity interests in the Surviving Corporation will be owned by Parent. If the Merger is completed, Parent (and the Rollover Stockholders indirectly through their indirect equity interests in

 

76

Parent) will be the sole beneficiaries of EngageSmart’s future earnings and growth, if any, and will be entitled to vote on corporate matters affecting EngageSmart following the Merger. Similarly, Parent (and the Rollover Stockholders indirectly) will also bear the risks of ongoing operations, including the risks of any decrease in EngageSmart’s value after the merger.

In connection with the Merger, certain members of EngageSmart’s management will receive benefits and be subject to obligations that are different from, or in addition to, the benefits and obligations of EngageSmart’s stockholders generally, as described in more detail under “—Interests of EngageSmart’s Directors and Executive Officers in the Merger.”

Benefits of the Merger for the Unaffiliated Security Holders

The primary benefit of the Merger to the “unaffiliated security holders,” as defined in Rule 13e-3 of the Exchange Act, will be their right to receive the Per Share Price for each share of EngageSmart Common Stock held by such stockholders as described above. This amount constitutes a premium of approximately 23% to the unaffected closing price of EngageSmart Common Stock of $18.71 per share on October 4, 2023, the last full trading day before media reports that EngageSmart was exploring a potential transaction. Additionally, such stockholders will avoid the risk after the Merger of any possible decrease in EngageSmart’s future earnings, growth or value.

Detriments of the Merger to the Unaffiliated Security Holders

The primary detriment of the Merger to the “unaffiliated security holders,” as defined in Rule 13e-3 of the Exchange Act, is the lack of an interest of such stockholders in the potential future earnings, growth, or value realized by EngageSmart after the Merger, including as a result of any sale of EngageSmart or its assets to a third party in the future. Additionally, the receipt of cash in exchange for EngageSmart Common Stock pursuant to the Merger will generally be a taxable sale transaction for U.S. federal income tax purposes to U.S. Holders (as defined in the section entitled “—Certain U.S. Federal Income Tax Consequences of the Merger”) who surrender their EngageSmart Common Stock in the Merger to the extent that such stockholders have any gain on their shares of EngageSmart Common Stock.

Certain Effects of the Merger for the Purchaser Filing Parties

If the Merger is completed, all of the equity interests in EngageSmart will be beneficially owned, indirectly through Parent, by the Purchaser Filing Parties and their affiliates.

The benefits of the Merger to the Purchaser Filing Parties include the fact that, following the completion of the Merger, Parent will directly own 100% of the outstanding equity interests of the surviving company and will therefore have a corresponding 100% interest in the surviving company’s net book value and net earnings. The table below sets forth the beneficial ownership of EngageSmart Common Stock and resulting interests in EngageSmart’s net book value and net earnings of the Purchaser Filing Parties prior to and immediately after the Merger, based on EngageSmart’s net book value at September 30, 2023 and net earnings for the nine months ended September 30, 2023, as if the Merger were completed on such date.

 

		Beneficial Ownership of EngageSmart Prior to the Merger(1)												Beneficial Ownership of EngageSmart After the Merger(2)
($ in thousands)		% Ownership				Net Book Value at September 30, 2023(3)				Net Income for the Nine Months Ended September 30, 2023(4)				% Ownership				Net Book Value at September 30, 2023(3)				Net Income for the Nine Months Ended September 30, 2023(4)
Parent			—			$	—			$	—				100	%		$	842,233			$	19,992
Vista			—				—				—				65.0	%			547,451				12,995
General Atlantic			53.8	%			453,121				10,756				35.0	%			294,782				6,997

 

77

 

(1)	Based on 167,864,066 shares of EngageSmart Common Stock outstanding as of September 30, 2023.

(2)

The actual interests of the Purchaser Filing Parties following completion of the Merger will be based on the Rollover Stockholders’ ownership of EngageSmart Common Stock as of the date of completion. In addition, the post-closing interest of Vista will be reduced to the extent Vista assigns a portion of the equity financing commitment to other parties in accordance with the Equity Commitment Letter.

(3)	Based on total stockholders’ equity of $842.2 million as of September 30, 2023.

(4)	Based on net income of $20.0 million for the nine months ended September 30, 2023.

In addition, the Purchaser Filing Parties will benefit from the savings associated with EngageSmart no longer being required to file reports under or otherwise having to comply with provisions of the Exchange Act. Detriments of the Merger to the Purchaser Filing Parties include the lack of liquidity for EngageSmart Common Stock following the Merger and the risk that EngageSmart will decrease in value following the Merger.

Certain Effects on EngageSmart if the Merger is Not Completed

If the Merger Agreement is not adopted as a result of the failure to obtain the Requisite Stockholder Approval, or if the Merger is not completed for any other reason, EngageSmart’s stockholders will not receive any payment for their shares of EngageSmart Common Stock in connection with the Merger. Instead, (1) EngageSmart will remain an independent public company, (2) EngageSmart Common Stock will continue to be listed and traded on the NYSE and registered under the Exchange Act, and (3) EngageSmart will continue to file periodic reports with the SEC. In addition, if the Merger is not completed, EngageSmart expects that: (x) our management will continue to operate the business as it is currently being operated, and (y) EngageSmart’s stockholders will continue to be subject to the same risks and opportunities to which they are currently subject, including risks related to the highly competitive industry in which EngageSmart operates and adverse economic conditions.

Furthermore, if the Merger is not completed, and depending on the circumstances that cause the Merger not to be completed, the price of EngageSmart Common Stock may decline significantly. If that were to occur, it is uncertain when, if ever, the price of EngageSmart Common Stock would return to the price at which EngageSmart Common Stock trades as of the date of this proxy statement. Accordingly, there can be no assurance as to the effect of the Merger not being completed on the future value of your shares of EngageSmart Common Stock. If the Merger is not completed, the EngageSmart Board will continue to evaluate and review, among other things, EngageSmart’s business, operations, strategic direction and capitalization, and will make whatever changes it deems appropriate. If the Merger Agreement is not adopted as a result of the failure to obtain the Requisite Stockholder Approval, or if the Merger is not completed for any other reason, EngageSmart’s business, prospects or results of operation may be adversely impacted.

In addition, in specified circumstances in which the Merger Agreement is terminated, EngageSmart has agreed to pay Parent a termination fee of $144,370,000, as more fully described in “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Company Termination Fee.”

Unaudited Prospective Financial Information

Other than in connection with our regular earnings press releases and related investor materials, we do not, as a matter of course, make public projections as to our long-term future financial performance, due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, EngageSmart management regularly prepares projections as to our future financial performance for internal use.

Projections

In August and September 2023, in connection with the Special Committee’s review of strategic alternatives, EngageSmart management prepared unaudited non-public prospective financial information of EngageSmart, on

 

78

a standalone basis without giving effect to the Merger, for fiscal year 2023 through fiscal year 2027 (the “Projections”), which was reviewed by the Special Committee. The Projections were provided to the Special Committee in connection with its evaluation of strategic alternatives and to Evercore, the Special Committee’s financial advisor, in connection with its preliminary financial analyses. Information containing the Projections as summarized below was made available to potential counterparties to a strategic transaction, including Vista, in connection with their due diligence review of a potential transaction.

Although the information in the Projections is presented with numerical specificity, it reflects numerous estimates and assumptions made by EngageSmart management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to EngageSmart’s business, in each case as of the date it was prepared, all of which are difficult or impossible to predict accurately and many of which are beyond EngageSmart’s control. The Projections include the following assumptions and estimates:

 

•

consolidated revenue growth rates ranging from 28% in 2023 to 22% in 2027 reflecting EngageSmart management’s assumptions and estimates for future growth;

 

•

in the SMB segment, revenue growth rates ranging from 31% in 2023 to 22% in 2027 with the key growth drivers including continued growth in new customer acquisition, average revenue per user expansion, and increasing traction with revenue cycle management;

 

•

in the Enterprise segment, revenue growth rates ranging from 23% in 2023 to 22% in 2027 with the key growth drivers including new customers going live with our solutions and continued improvements in digital payment adoption with existing customers, consistent with historical trends;

 

•

operating income margins ranging from 18% in 2023 to 29% in 2027;

 

•

adjusted EBITDA margins ranging from 19% in 2023 to 31% in 2027 reflecting EngageSmart management’s expectations for margin expansion based on (1) sales and marketing efficiencies in the Enterprise segment as a result of economies of scale and enhanced sales productivity, (2) corporate general and administrative support functions driving efficiencies at scale and, to a lesser extent, (3) gross margin expansion due to efficiencies assumed in customer support; and

 

•

no anticipated material acquisitions or divestures by EngageSmart.

These values and amounts were determined by EngageSmart management based on their experience and judgment and their expectations of EngageSmart’s operation as a standalone company.

The following table summarizes the Projections:

(Amounts in millions)

 

		2023E				2024E				2025E				2026E				2027E
SMB Revenue		$	217			$	277			$	350			$	432			$	527
Enterprise Revenue		$	157	(1)		$	192			$	239			$	294			$	359
Total Revenue		$	374			$	469			$	588			$	726			$	886
Total Operating Income(2)		$	68			$	99			$	140			$	193			$	260
Adjusted EBITDA(3)		$	72			$	106			$	149			$	205			$	276

 

(1)	2023E figures are presented on a pro forma basis to account for EngageSmart’s sale of IMAGEVISION.NET, LLC, the entity that operates the HealthPay24 platform, in August 2023.

(2)	Total Operating Income represents Total Revenue minus cost of goods sold, sales and marketing expenses, research and development expenses and general and administrative expenses.

(3)	Adjusted EBITDA represents EngageSmart earnings before interest, taxes, depreciation and amortization.

 

79

Extrapolations

In September 2023, at the direction of the Special Committee, EngageSmart management developed extrapolations to the Projections for fiscal years 2028 through 2033 for purposes of a discounted cash flow analysis to be utilized in Evercore’s financial analysis (the “Extrapolations”). The Extrapolations were reviewed with the Special Committee on September 26, 2023.

Although the information in the Extrapolations is presented with numerical specificity, it reflects numerous estimates and assumptions made by EngageSmart management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to EngageSmart’s business, in each case as of the date it was prepared, all of which are difficult or impossible to predict accurately and many of which are beyond EngageSmart’s control. The Extrapolations include the following assumptions and estimates:

 

•

consolidated revenue growth rates ranging from 17% in 2028 to 7% in 2033 reflecting EngageSmart management’s expectations for growth as the business scales and market share increases;

 

•

in the SMB segment, revenue growth rates ranging from 17% in 2028 to 6% in 2033;

 

•

in the Enterprise segment, revenue growth rates ranging from 17% in 2028 to 7% in 2033;

 

•

operating income margins ranging from 31% in 2028 to 34% in 2033; and

 

•

adjusted EBITDA margins ranging from 32% in 2028 to 35% in 2033 reflecting efficiency in sales and marketing as the business matures.

The following table summarizes the Extrapolations:

(Amounts in millions)

 

		2028E				2029E				2030E				2031E				2032E				2033E
SMB Revenue		$	618			$	698			$	771			$	840			$	903			$	958
Enterprise Revenue		$	422			$	477			$	534			$	585			$	635			$	682
Total Revenue		$	1,040			$	1,175			$	1,305			$	1,425			$	1,538			$	1,640
Total Operating Income(1)		$	317			$	369			$	419			$	467			$	511			$	552
Adjusted EBITDA(2)		$	336			$	390			$	443			$	492			$	539			$	581

 

(1)	Total Operating Income represents Total Revenue minus cost of goods sold, sales and marketing expenses, research and development expenses and general and administrative expenses.

(2)	Adjusted EBITDA represents EngageSmart earnings before interest, taxes, depreciation and amortization.

Unlevered Free Cash Flow

In September 2023, at the direction of the Special Committee, EngageSmart management used the Projections and the Extrapolations to calculate unlevered free cash flow for the fiscal years 2023 through 2033 (the “September Unlevered Free Cash Flow”). The September Unlevered Free Cash Flow was calculated as adjusted EBITDA minus stock based compensation, taxes, capital expenditures and changes in net working capital and also accounting for the tax shield from depreciation and amortization expense. In October 2023, EngageSmart management updated its assumptions and estimates related to taxes and net working capital. The unlevered free cash flow calculated using the updated assumptions (which was otherwise calculated in the same manner as the September Unlevered Free Cash Flow) is referred to as the “October Unlevered Free Cash Flow.” As described in the section of this proxy statement captioned “—Background of the Merger,” the information containing the Projections provided to bidders, including Vista, was updated in a manner consistent with the changes between the September Unlevered Free Cash Flow and the October Unlevered Free Cash Flow as summarized below.

 

80

Although the information in the September Unlevered Free Cash Flow and the October Unlevered Free Cash Flow is presented with numerical specificity, it reflects numerous estimates and assumptions made by EngageSmart management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to EngageSmart’s business, in each case as of the date it was prepared, all of which are difficult or impossible to predict accurately and many of which are beyond EngageSmart’s control. The October Unlevered Free Cash Flow includes the following assumptions and estimates:

 

•

adjusted EBITDA margins ranging from 19% in 2023 to 35% in 2033, consistent with EngageSmart management’s assumptions and estimates underlying the Projections and the Extrapolations;

 

•

stock based compensation expenses ranging from 6% of total revenue in 2023 to 7% of total revenue in 2033;

 

•

tax rates ranging from 38.3% in 2023 to 26.0% in 2028 through 2033;

 

•

capital expenditures ranging from $10 million in 2023 to $33 million in 2033 which primarily consists of capitalized software development costs and is consistent with historical trends of the business; and

 

•

change in net working capital increasing from a $2 million source of cash in 2023 to a $12 million source of cash in 2033 consistent with EngageSmart management’s growth expectations for the business.

The following table summarizes the September Unlevered Free Cash Flow:

 

		2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E				2033E
Adjusted EBITDA(1)		$	72			$	106			$	149			$	205			$	276			$	336			$	390			$	443			$	492			$	539			$	581
Less: Stock Based Compensation		($	23	)		($	34	)		($	47	)		($	63	)			(80	)		($	83	)		($	94	)		($	91	)		($	100	)		($	108	)		($	115	)
Less: Taxes		($	10	)		($	17	)		($	24	)		($	34	)		($	46	)		($	59	)		($	71	)		($	85	)		($	95	)		($	105	)		($	114	)
Less: Capital Expenditures		($	10	)		($	12	)		($	13	)		($	15	)		($	18	)		($	21	)		($	24	)		($	26	)		($	29	)		($	31	)		($	33	)
Less: (Increases) in Net Working Capital		($	16	)		($	9	)		($	14	)		($	14	)		($	16	)		($	16	)		($	18	)		($	20	)		($	21	)		($	23	)		($	25	)
Unlevered Free Cash Flow		$	14			$	33			$	51			$	78			$	117			$	158			$	184			$	220			$	247			$	272			$	295

 

(1)	Adjusted EBITDA represents EngageSmart earnings before interest, taxes, depreciation and amortization.

The following table summarizes the October Unlevered Free Cash Flow:

 

		2023E				2024E				2025E				2026E				2027E				2028E				2029E				2030E				2031E				2032E				2033E
Adjusted EBITDA(1)		$	72			$	106			$	149			$	205			$	276			$	336			$	390			$	443			$	492			$	539			$	581
Less: Stock Based Compensation		($	23	)		($	34	)		($	47	)		($	63	)			(80	)		($	83	)		($	94	)		($	91	)		($	100	)		($	108	)		($	115	)
Less: Taxes		($	12	)		($	17	)		($	24	)		($	34	)		($	46	)		($	59	)		($	71	)		($	85	)		($	95	)		($	105	)		($	114	)
Less: Capital Expenditures		($	10	)		($	12	)		($	13	)		($	15	)		($	18	)		($	21	)		($	24	)		($	26	)		($	29	)		($	31	)		($	33	)
Less: (Increases) in Net Working Capital		$	2			$	4			$	5			$	6			$	6			$	7			$	8			$	9			$	10			$	11			$	12
Unlevered Free Cash Flow		$	31			$	47			$	69			$	98			$	139			$	181			$	210			$	249			$	279			$	306			$	332

 

81

 

(1)	Adjusted EBITDA represents EngageSmart earnings before interest, taxes, depreciation and amortization.

The Projections, the Extrapolations, the October Unlevered Free Cash Flow (collectively, the “Forecasts”) and the September Unlevered Free Cash Flow were prepared for internal use only and not for public disclosure and were provided to the Special Committee in connection with its evaluation of the proposed Merger. The Forecasts were provided to Evercore, as approved by the Special Committee, for its use and reliance in connection with its financial analyses and fairness opinion provided to the Special Committee on October 23, 2023, as described in the section of this proxy statement captioned “—Opinion of the Financial Advisor to the Special Committee” (and were the only financial projections that were approved by the Special Committee for such purpose). Additionally, information containing the Projections as summarized above was made available to potential counterparties to a strategic transaction, including Vista, in connection with their due diligence review of a potential transaction.

Additional Projected Financial Information

During periods prior to the strategic process commenced by EngageSmart at the end of July 2023, EngageSmart management created additional unaudited prospective financial information of EngageSmart or its business segments for purposes of internal strategic planning by EngageSmart management, for use by the EngageSmart Board in strategic discussions and to respond to information requests from General Atlantic (collectively, the “Additional Projected Financial Information”).

May 2022 Projected Financial Information

Below is a summary of the Additional Projected Financial Information provided by EngageSmart management for purposes of the meeting of the EngageSmart Board held on May 3, 2022.

(Amounts in millions)

 

		2023E				2024E				2025E
Total Revenue		$	391.6			$	514.7			$	672.9
Total Operating Income(1)		$	50.6			$	80.9			$	125.8
Adjusted EBITDA(2)		$	55.3			$	88			$	136.5

 

(1)	Total Operating Income represents Total Revenue minus cost of goods sold, sales and marketing expenses, research and development expenses and general and administrative expenses.

(2)	Adjusted EBITDA represents EngageSmart earnings before interest, taxes, depreciation and amortization.

October 2022 Projected Financial Information

Below is a summary of the Additional Projected Financial Information related to SMB provided by EngageSmart management for purposes of the meeting of the EngageSmart Board held on October 27, 2022.

(Amounts in millions)

 

		2023E				2024E				2025E
Total Revenue (SMB Only)		$	216.8			$	288.9			$	379.4

May 2023 Projected Financial Information

Below is a summary of the Additional Projected Financial Information provided by EngageSmart management to two members of the EngageSmart Board, both associated with General Atlantic, Preston McKenzie and David Mangum, on May 1, 2023.

 

82