Category: application software

Rebellion Media set on consolidating digital media

Ben Kolada2 Comments

Contact: Ben Kolada

Rebellion Media was founded just earlier this year, but has already announced enough acquisitions to make itself appear like a veteran player in the digital media sector. From its first acquisition announcement, Sortable.com, announced July 11, the company has been printing a deal a week. In fact, Rebellion is buying companies at such a breakneck pace that official announcements are playing catch-up to Rebellion’s corporate website, which already lists all of the brands it has acquired so far.

Waterloo, Canada-based Rebellion Media isn’t hiding its intentions, saying on its website that it will continue to be ‘aggressive’ in M&A. The startup has so far announced acquisitions of content, mobile and Web development and e-commerce-related vendors. Targets so far have been located in its home country, Canada, but future deals are likely throughout North America and beyond.

The company primarily targets content and reference Internet properties in the health and wellness, technology, entertainment and sports verticals. But it isn’t restricting itself to this group. Rebellion recently announced the purchase of Jingu Apps, an LBS-based mobile instant messaging and friend-finding service. The company has reinforced its acquired assets with its traffic and monetization platform called TRACE, which stands for ‘Traffic, Revenue and Content Engine.’

Rebellion isn’t yet working with bankers, instead preferring to use M&A knowhow that its executives garnered from their prior experiences. CEO Ted Hastings was previously president of digital media rollup shop Cyberplex. As for funding, the company has taken an undisclosed amount of financing from American Capital. Although we weren’t given specific guidance on who or where Rebellion might acquire next, future transactions could be in the SEM/SEO and e-commerce sectors.

Rebellion Media’s announced M&A

Date announced Target Target summary
July 31, 2012 Universal Properties Owns domain names for purposes of Web development and search engine optimization.
July 24, 2012 Jingu Apps LBS mobile instant messaging application that enables BlackBerry and iOS users to connect with nearby users of WhatsApp, Hookt, LiveProfile, Touch and Kik mobile social networks and communities.
July 17, 2012 Scott Hastings (10 sports websites) Group of combat sports news and reference content websites, including www.fighters.com, www.fightline.com, www.mmatraining.com and www.mmaconvvert.com.
July 11, 2012 Sortable.com Provides online electronics buying advice and reference content that allows consumers to compare and rate products.

Source: The 451 M&A KnowledgeBase

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Eloqua hits right message at right time

Brenon Daly

Contact: Brenon Daly

The key to marketing is the right message at the right time. And in that regard, marketing automation vendor Eloqua hit both points squarely as it came public on Thursday. The company priced its shares at the high end of its expected range ($11.50 each) and then registered a mid-teen percentage gain in the aftermarket. The IPO created some $420m in market value.

Eloqua’s pitch is fairly simple: Its subscription-based platform makes the sales process for its roughly 1,100 customers more efficient. As corporate budgets continue to flow to marketing, Eloqua has actually been able to accelerate its growth rate as its revenue has increased.

The company was putting up revenue growth in the 30% range in late 2010, but has bumped that up to the 40% range over the past year. (It finished 2011 with sales of $71m, putting it on track for about $100m in sales this year. Assuming it does hit that level, it would represent a doubling of revenue since 2010.)

Wall Street, of course, pays for growth, so Eloqua is delivering the right message on the top line. Further, the revenue is coming in a relatively predictable manner: Eloqua sells only through subscriptions, which is a lot smoother than the traditional big-or-bust license model. Subscriptions account for roughly 90% of total revenue at Eloqua, with another coming 10% from professional services.

The timing of the offering, which has been on file for almost a year, also fits fairly well in the broader market right now. While consumer Internet offerings continue to get roughed up, investors have been supportive of enterprise-focused companies. Eloqua sells primarily to the B2B market, with enterprise customers accounting for about 60% of total revenue, and the remaining 40% coming from SMB customers. Add all that together, and it’s a solid start for Eloqua in its debut.

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Google’s admission of failure?

Ben Kolada

Contact: Ben Kolada

Google has finally found a way to monetize Facebook’s platform. After failing to acquire Facebook when it had the chance several years ago, and now with its own attempts at social networking a bit spotty, official word came on Tuesday that Google is acquiring social marketing startup Wildfire Interactive. Google is reportedly paying $250m for Wildfire, a respectable price tag that likely values the target at 7-10x revenue.

Google’s own ‘Insights for Search’ search analysis engine shows interest in Orkut, its attempt at a social network that found most of its popularity outside the US, and its Google+ social network trending downward over the past 12 months. Meanwhile, interest in Facebook has remained remarkably high.

In acquiring Wildfire, Google is recognizing its social shortcomings, and not a moment too soon. There has been rapid consolidation of social marketing startups in just the past three months.

Sector stalwarts Vitrue and Buddy Media have already been acquired by Oracle and salesforce.com, respectively, leaving only a few hot startups left. Beyond Wildfire, we’d point to GraphEffect, Hearsay Social, Syncapse and Lithium Technologies as the next to go. And there will likely be bidding competition for these firms. Large CRM vendors SAP and Microsoft could make a play here, as well as Teradata, which could buy into social to build on top of its recent purchases of marketing specialists Aprimo and eCircle.

Recent select M&A in social marketing

Date announced Acquirer Target Deal value
July 31, 2012 Google Wildfire Interactive Not disclosed
July 10, 2012 Oracle Involver Not disclosed
June 4, 2012 salesforce.com Buddy Media $689m
May 23, 2012 Oracle Vitrue $325m*
April 18, 2012 Marketo Crowd Factory Not disclosed

Source: The 451 M&A KnowledgeBase *451 Research estimate

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With new CEO at Symantec, is Big Yellow planning a big unwind?

Brenon Daly

Contact: Brenon Daly

Is Big Yellow planning to slim down? That’s the question that was echoing around Wall Street on June 25 after Symantec showed Enrique Salem the door following another lackluster quarterly performance.

Symantec reported fiscal Q1 revenue was essentially flat with the year-earlier period, as its storage and server management unit (the company’s largest single business) actually shrank in Q1. Even when the unit grows, it lags Symantec’s other main business of security. For the full previous fiscal year, the storage business increased just 4%, compared to a 20% rise in security sales.

That discrepancy – along with the fact that Symantec shares have lost about one-third of their value since the security company got into the storage business with its mid-2005 acquisition of Veritas – has prompted calls from investors to unwind Veritas. We understand Symantec has been exploring that option since Salem took the top spot three years ago. One of the more intriguing ideas we heard was Symantec swapping its storage business for the RSA unit at EMC. However, we gather the separation of the units, along with tax implications, made that too complicated.

Incoming CEO Steve Bennett, who has been chairman of Symantec for a year, has indicated that he will review Symantec’s portfolio. Wall Street, of course, read a fair amount into that, as well as the CEO changeover. One source noted that Bennett had overseen a handful of divestitures during his tenure as chief executive of Intuit, including shedding the construction management software unit and unwinding the company’s Blue Ocean acquisition. However, we would characterize those moves as a typical bit of corporate housecleaning – a far cry from the teardown that some investors are calling for at Symantec.

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RealPage getting social, acquiring RentMineOnline

Ben Kolada

Contact: Ben Kolada

With seemingly all consumer-facing tech now trending toward social, why shouldn’t property management software vendor RealPage get in on the game as well?

The company took a step in that direction on Monday, when it announced the $6m acquisition of SaaS startup RentMineOnline, a rental-marketing startup that enables property managers to set up campaigns that residents use to recommend their rental property to friends through email and social networks.

RealPage is handing over $6m, with an earnout of up to $3.5m based on an unspecified revenue milestones. Excluding the earnout, the deal values RentMineOnline at 4x trailing sales (it generated approximately $1.5m in revenue for the 12 months ended June 30). The San Francisco-based company was founded in 2007 and had taken funding from fbFund, Partners in Equity, Seed Camp, and Alex Hoye, the former CEO of GoIndustry, which closed its $31m sale to Liquidity Services earlier this month.

The deal is a complementary addition to RealPage’s LeaseStar service. In announcing the acquisition, RealPage stated the intent was to build up its LeaseStar multichannel managed marketing service, which enables property owners and managers to market and secure rental leads more effectively.

And for a bit of irony, although RentMineOnline was headquartered in San Francisco, we expect its platform will have a greater effect in almost any market but the City by the Bay. Rental costs in San Francisco have skyrocketed recently, leading to a ‘beggars can’t be choosers’ environment where apartment seekers are likely to take whatever option is available, whether the apartment was recommended or rejected.

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Dell’s hard drive into software

Brenon Daly

by Brenon Daly

Dell plans to more than triple the size of its software business in the coming years, underscoring the tech giant’s transition away from its origins as a box maker. The software division is currently running at around $1.5bn, and John Swainson, the recently appointed president of Dell Software, laid out a target of $5bn in sales for the unit. M&A will continue to help move the company toward that target, he added.

In many ways, the transition that Dell is going through is one that IBM has already been through. Indeed, Swainson and a number of other executives (Tom Kendra and Dave Johnson, among others) that are charged with building out Dell’s software portfolio helped do the same thing at Big Blue. Each of the three executives spent a quarter-century at IBM.

Dell has been a steady buyer of software, with all six of its acquisitions so far this year adding to the company’s software portfolio. The largest, of course, is the recently announced $2.5bn purchase of Quest Software, expected to close later this quarter. While that acquisition brought some much-needed heft to Dell’s software portfolio, Quest was viewed by many as a mixed bag of businesses, including some (such as data protection) that directly overlapped with existing Dell products.

For the software business, Swainson also set out the rather ambitious goal of growing it in the ‘mid-teen’ percentage range. Clearly, that was a long-range goal, one that implies a significant acceleration of existing business as well as a regular contribution from acquisitions. Still, the projection seems like a bit of a stretch. Consider that IBM – a model for Dell – has increased revenue in its software business just 2.5% so far this year.

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VHS-era Autodesk stretches in acquisition of mobile video startup Socialcam

Brenon Daly

Contact: Brenon Daly

Autodesk is no Facebook, but the latest deal by the 30-year-old, battle-worn enterprise software vendor looked like it came from the M&A playbook of one of the new generation of tech buyers. In one of the oddest pairings of new and old, Autodesk, which belongs squarely in the VHS era, said it would hand over $60m for one-year-old Socialcam, a mobile video-sharing service that’s sort of an Instagram for videos. Even though the financial impact is muted (Autodesk has $1.5bn – enough to cover an Instagram and a half – in its treasury), the purchase of Socialcam is a huge stretch for the company.

For starters, there’s no clear way for Autodesk, which sells products primarily to engineers, to make money from consumer-focused Socialcam. While Autodesk touts the fact that Socialcam has been downloaded 16 million times, that doesn’t get Autodesk any closer to the $600m in revenue it has to put up every quarter. (Meanwhile, the deal will lower Autodesk’s earnings for the rest of the year, at least on a GAAP basis.) It’s EPS – rather than eyeballs – that’s the relevant financial metric for Autodesk.

Of course, it’s understandable that the explosive growth of Socialcam and other consumer-oriented companies looks tantalizing to Autodesk and other tech giants posting single-digit-percentage revenue increases. However, that M&A enthusiasm needs to be tempered by the fact that getting a return on an acquisition that doesn’t really fit into the existing business model can prove challenging. That’s particularly true with a company like Autodesk that can’t monetize the acquisition by just throwing a bunch of advertisements against the audience that an app like Socialcam has collected. Like we said, Autodesk is no Facebook.

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Healthy M&A activity in medical speech recognition and transcription

Ben Kolada

Contact: Ben Kolada

There’s seemingly been a burst in deal volume in the niche medical-focused speech recognition and transcription market lately. On Thursday, iMedX announced the acquisition of Electronic Medical Transcription Services (eMTS), capping off a growing line of acquisitions in this sector. Driving deal flow, among other things, is healthcare professionals’ increasing use of transcription and voice recognition systems and various legislation being passed that provides incentives for digital clinical documentation.

One such bill is the Health Information Technology for Economic and Clinical Health Act, also known as the HITECH Act, which became law in 2009. HITECH provides incentives for healthcare providers to use electronic health records, which store clinical data in a digital format.

Although the eMTS buy is likely quite small in the grand scheme of things, there is big M&A money being poured into medical speech recognition and transcription deals.

Earlier this month, One Equity Partners bet its money on this market when it announced that it was taking M*Modal private for $840m, or $1.1bn when including $260m of net debt. That transaction was announced almost exactly a year after M*Modal was acquired by rival MedQuist, which assumed the target’s name.

We’ve previously written that Nuance Communications, with its Nuance Healthcare unit, has been a major consolidator in this sector. In March, Nuance announced that it was paying $313m for medical-focused rival Transcend Services – its largest purchase since its last significant medical acquisition in April 2008, when it paid $363m for eScription. Nuance’s Healthcare division generated $583m in trailing sales as of March 31.

Recent select M&A in medical transcription and speech recognition

Date announced Acquirer Target Deal value
July 2, 2012 One Equity Partners M*Modal $840m
March 7, 2012 Nuance Communications Transcend Services $313.5m
August 15, 2011 Nuance Communications Loquendo $75m
July 14, 2011 Nuance Communications Webmedx Not disclosed
July 11, 2011 MedQuist M*Modal $130m

Source: The 451 M&A KnowledgeBase

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KANA Software sharpening M&A blade, acquires Ciboodle

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Contact: Thejeswi Venkatesh, Ben Kolada

Since being taken private by Accel-KKR in early 2010, KANA Software has revved its M&A engine. On Tuesday, KANA announced its fourth acquisition since its take-private, picking up call-center software veteran Ciboodle from Sword Group to bolster its agent desktop, business process management and social CRM capabilities. The Ciboodle buy is KANA’s latest deal as it inorganically moves to become a more robust platform for customer-centric support processes across channels and devices.

KANA’s acquisitions have focused on adding social capabilities to its platform and better serving the SMB market. In April 2011, the company bought social media monitoring company Overtone. KANA then integrated the target’s social analytics and infused key areas of its core platform with its own social CRM capabilities, resulting in a simple-to-use tool for support agents to identify issues or receive service requests via popular social networks. Last April, in an attempt to better serve the midmarket, KANA added more cloud clout by reaching for Trinicom. Arma Partners, which advised KANA on its acquisition of Lagan Technologies in October 2010, advised the company again on the Ciboodle purchase. We’ll have a longer report on KANA’s Ciboodle buy in tonight’s Daily 451.

KANA M&A since its take-private by Accel-KKR

Date announced Target Target abstract
July 10, 2012 Ciboodle Call-center software provider
April 24, 2012 Trinicom Customer service automation SaaS
April 5, 2011 Overtone Social media monitoring SaaS
October 6, 2010 Lagan Technologies Call-center software provider

Source: The 451 M&A KnowledgeBase

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Independent now, but will independenceIT someday be acquired?

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

Application hoster and desktops-as-a-service provider independenceIT (iIT) announced on Wednesday the tech-and-talent acquisition of cloud management platform Veddio Cloud Solutions. The cloud aggregator’s dashboard platform will be used to control iIT’s cloud workspace products. According to The 451 M&A KnowledgeBase, this is iIT’s first acquisition on record, but it won’t be its last. As it continues to fill out its product platform, will the company someday turn from acquirer to acquired?

Veddio offers a dashboard application that integrates services from a variety of Internet infrastructure providers, such as telco competitive carriers and MSPs. Through its dashboard, Veddio offers white-label application and cloud hosting, hosted PBX, email hosting, managed firewall, domain name registration, software virtualization and data backup and recovery services. As of the acquisition announcement, the five-employee firm had approximately 150 channel partners.

Though this is iIT’s first acquisition, according to our records, the company is planning additional inorganic moves both in the short and long term. We’re told it is eyeing another tech-and-talent acquisition. Specific details weren’t provided, but the next play will likely focus on the delivery of cloud services.

We’d also note that, although currently becoming more of an acquirer, independenceIT could someday become acquired. The small firm (it has 31 employees) could already be considered a prized target. The pickup of Veddio should provide for triple-digit-percent growth and when we last covered iIT, in 2010, we noted that it had already been profitable for two years.

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