Category: application software

DoJ raises its voice against Bazaarvoice deal

Brenon Daly

Contact: Brenon Daly

In a highly unusual move, the US Department of Justice (DoJ) filed a lawsuit Thursday afternoon against a company that has already closed an acquisition of a rival firm, alleging the deal is anticompetitive. The DoJ says Bazaarvoice did not report its $152m cash-and-stock purchase of fellow online customer review site PowerReviews to either the DoJ or Federal Trade Commission. The transaction was announced May 24 and closed quickly thereafter, on June 12.

The DoJ, which began investigating after the deal had already closed, didn’t specify exactly what part of the acquisition it would seek to unwind. The release said only that the lawsuit ‘seeks to restore competition’ in the marketplace, and DoJ representatives didn’t respond to requests for clarification.

For its part, Bazaarvoice said it spent six months explaining that there would be ‘robust and ample’ competition in the social commerce marketplace following the Bazaarvoice-PowerReviews combination. The company plans to fight the lawsuit and indicated it expects to be ‘fully vindicated.’

As we noted at the time of the acquisition – which was Bazaarvoice’s first purchase, coming just three months after its IPO – the deal represented a significant bet on being able to move down-market, expanding Bazaarvoice’s voice-of-customer platform to SMBs. At the time of the announcement, PowerReviews had more customers (1,100) than Bazaarvoice (737), but only slightly more than one-tenth the revenue.

Whatever the outcome, Wall Street’s reaction to the lawsuit was immediate. Bazaarvoice shares were unchanged at about $9 each for virtually the entire session Thursday. But when the DoJ announcement came out in the final hour of trading, the stock plummeted 15% to about $7.50. The selling pressure continued on Friday, with the stock dipping to $6.65 – the lowest level for the shares since their debut last February. All in, the DoJ’s lawsuit has trimmed $165m from Bazaarvoice’s market value.

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NetSuite shops for its retail platform

Brenon Daly

Contact: Brenon Daly

One year after Retail Anywhere released its point-of-sales SuiteApp for NetSuite, the startup has been rolled into the on-demand ERP giant. Terms of the deal, which is NetSuite’s first since mid-2009, weren’t released. However, we suspect the price is probably in the $20-30m range of NetSuite’s two previous acquisitions.

Entirely bootstrapped through its 18 years of incorporation, Retail Anywhere has about 30 employees, with CEO Branden Jenkins taking a general manager role at NetSuite. According to our understanding, Retail Anywhere was generating roughly $5m of sales. For its part, NetSuite will likely report more than $300m of revenue for 2012 when it releases its financial results in early February. The market currently values NetSuite at a stratospheric $5bn.

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Oracle pays up for an ‘Eloquent’ marketing platform

Brenon Daly

Contact: Brenon Daly

Two months ago, we noted that Oracle was rumored to be looking to acquire a marketing automation vendor. At that point, the buzz was that the acquisitive software giant, which has done social media-flavored marketing deals recently, was eyeing Marketo to be its platform. Instead, Oracle went with Eloqua, paying $956m for the company (on a fully diluted equity basis).

Eloqua, which went public in August but recently shelved a subsequent follow-on offering, had about $85m in cash, giving the proposed transaction an enterprise value of $871m. Using that figure, Oracle is valuing Eloqua at about 9.7x trailing sales – a valuation that’s about 50% higher than it paid in either of its acquisitions of fellow publicly traded SaaS application vendors over the past 14 months. (Both RightNow and Taleo went off at closer to 6.5x trailing sales.)

For Eloqua, the deal wraps a short – but rather profitable – stint on the public market. It only went public four months ago, but it is leaving the Nasdaq at twice the price it joined. Eloqua first sold shares to the public at $11.50, while Oracle is paying $23.50 for each share in the acquisition. The transaction is expected to close before mid-2013.

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Oracle buys DataRaker, adding energy analytics software

Contact: Tejas Venkatesh

Continuing to acquire software companies that target specific industry verticals, Oracle on Thursday announced the acquisition of smart energy meter analytics vendor DataRaker. The enterprise software giant has used M&A to buy its way into specific markets such as retail, financial services, healthcare and energy.

Five-year-old DataRaker provides smart energy meter analytics that enable utilities to integrate smart grid systems and analyze the resulting flood of new data. The software also helps utilities diagnose problems, forecast demand and detect tampering. Oracle’s purchase comes almost exactly a year after Siemens bought DataRaker rival eMeter for an estimated $200m. However, the two energy startups differ in one key area: DataRaker appears to have raised no outside funding, while eMeter took in a fair amount of venture capital.

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A return to dealmaking for Epicor?

Ben Kolada

Contact: Ben Kolada

After Apax Partners combined ERP giants Epicor Software and Activant Solutions last year, the new firm has been fairly quiet in the M&A market. Now that the dust has settled on the $2bn combination and declining revenue has been reversed, we wonder if the ‘new’ Epicor might return to the M&A market in fuller force.

Neither Activant nor Epicor had fully recouped the losses they suffered during the recession. But Apax’s Epicor announced fiscal 2012 results today that show revenue is steadily growing. On a trailing basis, Activant and Epicor combined posted revenue of $813m in the 12 months leading up to their pairing. Revenue for the just-closed fiscal year, which ended September 30, rose 5% to $855m.

After having some time to digest the merger, we wonder if the new Epicor may return to dealmaking. In their previous lives, Epicor and Activant were fairly frequent acquirers. The two companies combined had announced a dozen deals in the decade leading up to their merger. Since selling to Apax, the new Epicor has done just three, two of which were sub-$10m tuck-ins.

However, Epicor recently made a move that signals it may return to big-ticket M&A. In October, Epicor closed its $155m acquisition of ERP, SCM and BI software vendor Solarsoft Business Systems, which was doing about $90m in annual revenue.

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SEOmoz’s acquisition announcement gets listed

Ben Kolada1 Comment

Contact: Ben Kolada

Search engine optimization (SEO) specialist SEOmoz could also be considered a public relations expert. Rather than issuing a staid press release that follows the typical format, the company announced its acquisition of GetListed on Tuesday in rare form that included both style and substance. Having one characteristic without the other can cause a release to be a flop, but when combined together the impact can be profound.

Privately held SEOmoz announced on Tuesday the $3m cash and stock acquisition of GetListed, also privately held, using both a more formal press release and a ‘ransom note’ format.

The strategic rationale for the deal makes sense. The purchase of GetListed provides SEOmoz with software tools that SMBs use to analyze and utilize free local marketing outlets, such as Google Places. The deal adds a local component to SEOmoz’s otherwise geo-agnostic software.

But the substance of the announcement arguably carried more weight than the rationale of the fairly small transaction. Privately held companies are not required to disclose sensitive details of acquisitions, such as price, and very few choose to do so.

In providing both substance (the price of the transaction) and style (the ransom note format), SEOmoz was able to generate considerable media coverage. For example, a quick Google search for ‘seomoz’ and ‘getlisted’ generated more than three times as many results as a search for ‘urban airship’ and ‘tello’ – a pairing that was announced the same day.

Though perhaps a stretch, after seeing the success of its own public relations model, we wonder if SEOmoz may want to offer public relations capabilities to its customers. If it decides to go this route, one likely target would be young startup AirPR, which provides a platform for companies to find public relations professionals.

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NCR rings up another software purchase with Retalix

Brenon Daly

Contact: Brenon Daly

NCR will hand over $763.5m in cash for Retalix, the latest example of an old-line hardware vendor using M&A to build up its more valuable software and services business. The deal is actually the second significant software acquisition by the company formerly known as National Cash Register, and takes the equity value of the transactions to a collective $2bn. In mid-2011, NCR dropped $1.2bn on fellow publicly traded company Radiant Systems.

NCR leaned on the credit market to finance nearly all of its purchase of Radiant, the largest acquisition the company has done. It will add a bit more debt to cover the just-announced reach for Retalix. An Israeli company, Retalix has no debt and about $133m in cash, lowering the net cost of the business to roughly $650m.

In comparing NCR’s two software plays, the valuations line up rather closely. NCR’s bid for Radiant valued the company (on the basis of enterprise value) at about 3.2 times trailing sales and 21x trailing EBITDA. For Retalix, the comparable figures are 2.4x trailing sales and 25x trailing EBITDA.

Further, the premium NCR paid for Radiant, compared with the stock price 30 days prior, came in at 47%; for Retalix it was 50%. A final similarity between the two deals: the advisers. J.P. Morgan Securities banked NCR in both deals while Jefferies & Company worked for both Radiant and Retalix.

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Zillow steps up its shopping

Contact: Tejas Venkatesh

After going public in the summer of 2011, real estate website Zillow has gone on an acquisition spree, purchasing five companies for an aggregate value of more than $80m. On Monday, it announced its latest buy: rental search website HotPads for $16m in cash. The San Francisco-based company, which took in just $3m in funding from Meakem Becker Venture Capital, helps Zillow access a younger and more rental-focused audience.

The deal comes just three weeks after Zillow announced the acquisition of mortgage-pricing SaaS provider Mortech for $17.5m. Sensing increased competition, Zillow has picked up the pace of its M&A program, buying three companies in the past two months. (The vendor has been able to cover those purchases, in part, by a well-timed secondary offering in September. It raised more than $150m – twice as much as it landed in its mid-2011 IPO – in early September, selling shares at about $40 each. The stock is now roughly $25.)

Zillow isn’t alone in stepping up its M&A activity. Move Inc, the owner of REALTOR.com, has inked two pickups of real estate websites in the past two months, after being out of the market for more than a year. We wonder now if fellow real estate website Trulia will also go shopping. The company certainly has the money, following its IPO two months ago in which it raised about $100m.

Dell’s down, but still dealing

Brenon Daly

Contact: Brenon Daly

Undeterred by a sharp slump in business, Dell continues to shop. Just a day after reporting an 11% decline in fiscal Q3 revenue, the tech giant on Friday reached for infrastructure automation startup Gale Technologies. Gale should help bolster Dell’s recently launched Active System Manager (ASM) by adding an automation layer above the hypervisor, extending ASM beyond on-premises enterprise systems to support hybrid clouds.

The addition of Gale makes sense for Dell both operationally and competitively. The acquisition furthers Dell’s push toward ‘convergence,’ pretty much the only area of the company’s business that is expanding. (Through the first three quarters of this fiscal year, the servers and networking business unit has increased revenue 9%, compared with a 9% decline in total revenue at Dell.) The transaction also matches a similar purchase by Cisco of Cloupia just one day earlier.

However, beyond the Gale acquisition, there are growing questions about the broader M&A program at Dell. Although the company has been spending steadily to buy into markets beyond its historic PC business, the results have yet to show up in its top line.

Granted, the purchases are part of a multiyear transition and it may be too soon to expect full returns on them. But, with Dell shares bumping along at their lowest level since the end of the recession, Wall Street is getting impatient with the company’s turnaround. The stock has dropped 40% over the past year.

Over the past two years, Dell has spent more than $7bn on M&A, expanding into areas such as storage, security, services and software. And yet, despite that not-insignificant financial outlay, Dell is shrinking. The company is likely to put up about $57bn in sales in this fiscal year, which wraps at the end of January. That would be roughly $5bn, or 8%, less than it generated in the previous fiscal year.

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AOL’s MapQuest ‘Discovers’ Everlater

Ben Kolada

Contact: Ben Kolada

In a fairly rare M&A move, AOL has acquired online travel journal startup Everlater to expand its MapQuest offering into the travel industry. The announcement coincides with the launch of MapQuest Discover, an interactive travel planning and discovery tool. Although this appears to be AOL’s first acquisition specifically for MapQuest, it may not be the last.

Founded in 2008 and based in Boulder, Colorado, Everlater provides a free online travel journal for consumers, as well as a paid customer engagement and travel planning product called Concourse for companies in the tourism industry. The startup lists six employees on its site and had secured about $750,000 from incubator TechStars and venture firm Highway 12 Ventures. Terms of its sale were not disclosed.

The move by AOL is an attempt to reinvigorate its staid MapQuest mapping assets, with an apparent focus on consumers (MapQuest’s B2B licensing services revenue has been declining). The acquisition of Everlater also appears to be the first inorganic move AOL has made specifically to expand MapQuest beyond navigation to providing original travel content and planning features. (We’d note, though, that AOL has bought other local content companies, including Patch Media and Going Inc in 2009.)

To expedite the growth of MapQuest’s travel content and interactive features, AOL could do additional small acquisitions in the travel and tourism sector, similar to what TripAdvisor has done over the past half-decade. In the past five years, TripAdvisor has announced nearly a dozen travel-related acquisitions, including the recent pickups of Wanderfly, Where Ive Been and EveryTrail.

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