CSLM Acquisition Corp. (CSLM) to Combine with Fusemachines in $200M Deal
by Nicholas Alan Clayton on 2024-01-23 at 1:37pm

CSLM (NASDAQ:CSLM) has entered into a definitive agreement to combine with AI software company Fusemachines at an equity valuation of $200 million.

New York-based Fusemachines provides enterprise software for firms looking to optimize their business processes with AI-based tools.

The combined company is expected to trade on the Nasdaq under the symbol “FUSE” once the deal is completed in the second quarter of 2024.

Transaction Overview

CSLM has an estimated $52.1 million in its current trust after seeing 74.8% of shares redeemed in a July 2023 extension vote that gave it the right to further extend its deadline up to October 18, 2024.

Affiliates of the SPAC’s sponsor have committed to invest up to $19.4 million in a PIPE of undisclosed terms.

The parties have not yet released their merger documents or an investor presentation, but CSLM’s profile page will be updated once additional details are made available.

Quick Takes: Fusemachines follows a line of AI companies that have struck SPAC deals in recent months but may bear the strongest resemblance to a firm now the end of its de-SPACing process.

Like fellow AI enterprise software firm iLearningEngines, which announced a deal with Arrowroot (NASDAQ:ARRW), Fusemachines has a foot in both developed and developing markets as it was originally grown out of Nepal.

It still has significant operations there as well as in neighboring India and both North and South America. And, it has a similar reach with about 400 employees working out of eight global offices to iLearningEngine’s six.

Fusemachine’s shares iLearnEngine’s hitherto frugality as well, having funded the business on the back of just $10 million in seed capital since 2013.

One of the advantages for both companies’ partial focus on the developing world is that the gaps in business automation and efficiencies are frequently greater.

But, iLearningEngines rolls out into each client’s operations begins with creating a knowledge base of the company’s internal information and allowing that to inform places where its software can find solutions. For Fusemachines, much of its tools work flows in specific directions.

On the generative AI side, Fusemachines’ Xtract AI Engine is able to automate the ingestion of document data and its Answer Gen tool will then be able to generate answers to queries from the bank of ingested text.

For companies wanting a straight-forward answer like “How much did we lose last month due to damages to shipped products?” One is not always at hand based on the variety of report types that a company’s internal systems might use. But, Fusemachines aims to make those sorts of internal inquests streamlined, even if it is working from scanned hand-written documents.

In the predictive AI direction, Fusemachines has a Fraud Detection AI system to monitor both internal and external business activities. Its other predictive tools are aimed at mapping out what a company’s inventory and pricing needs might be before the client turns the corner into those eventualities.

Fusemachines’ clients themselves run the gamut from retail to banking and insurance firms, healthcare, media as well as technology companies working to boost their effectiveness of their own software products.

But, while the two sides have provided some shape to the services it provides, investors will have to wait for more disclosures through the de-SPAC process to get a sense of scale of its business.

Based on its $200 million equity valuation in the deal, one would expect a smaller pot of revenue than that generated by iLearningEngines, which Arrowroot has valued at an enterprise value of $1.4 billion.

Arrowroot’s math put the price tag for it at 3.3x revenue, which if Fusemachines’ was valued similarly, would put its annual revenue at about $60 million.

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