Category: application software

salesforce.com ‘acq-hires’ Microsoft talent by acquiring Thinkfuse

Ben Kolada

Contact: Ben Kolada

Taking a page from the playbooks of Google and Facebook, salesforce.com is ‘acq-hiring’ Microsoft-nurtured talent. The CRM giant announced on Tuesday the tiny acquisition of team collaboration SaaS startup Thinkfuse. The target immediately ceased operations and terminated its service, suggesting this was more of an acq-hire than anything else. Through the deal, salesforce.com gets its hands on about five employees, three of whom have had software engineering experience at Microsoft, according to their LinkedIn profiles.

Although three of the four acquisitions salesforce.com has announced this year (including Thinkfuse) have been tiny transactions, this small trend likely doesn’t represent a shift in M&A strategy. The company has a history of buying young firms, primarily for technology tuck-ins. According to The 451 M&A KnowledgeBase, the average time from when a company was founded to when it sold to salesforce.com is just under four years. What’s also notable, though, is that salesforce.com’s last team collaboration acquisition – Stypi, announced in May – was also a small acq-hire. However, the Stypi service is being maintained, at least for now.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Box eyes a new round at $1bn valuation

Brenon Daly1 Comment

Contact: Brenon Daly

Box is back in the market. Several sources have indicated that the enterprise content management and collaboration startup is currently looking to raise $100m in new funding, on top of the roughly $160m it has already pulled in. Box’s valuation is said to be north of $1bn.

That’s a heady valuation for a company that’s likely to finish this year at about $60m, according to sources. The round (assuming it does get raised) comes at a time when competition is heating up for Box. For instance, Citrix has made a series of acquisitions to piece together an enterprise collaboration and file-sharing platform. (Those small deals came after Citrix was rumored to have missed out on acquiring Box at a price thought to be roughly $600m.)

Likewise, VMware has used small purchases to bolster its Project Octopus while its parent, EMC, recently reached for synchronization startup Syncplicity to expand its collaboration offering. Other tech giants have rolled out their own collaboration platforms through organic development, such as Google’s Drive, Microsoft’s SkyDrive and even Apple’s iCloud. (Additionally, Microsoft is adding much more cloud functionality to its SharePoint product in its next release, due out late this year or early next year.)

Box – along with dozens of other cloud- and drive-themed rival offerings – effectively provides centralized storage as well as a shared file system for all of the documents at an enterprise. As we see it, the seven-year-old company is currently facing two main challenges, and is likely to put at least some of its new funding toward these.

First, since Box is competing as an enterprise software vendor, it needs to hire more sales agents to land enterprise accounts. We understand that the company has added dozens of experienced enterprise sales agents and is looking to bring on dozens more. Second, Box needs to establish itself as a platform on which other software shops can develop additional applications and enhancements. Earlier this year, the company introduced a new API – its first in four years – to draw in more developers.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Google takes another swing at Office

Brenon Daly

Contact: Brenon Daly

Google has reached for the popular maker of mobile software suite Quickoffice, the fourth notable acquisition the company has made in its effort to take on Microsoft Office. Each of the purchases has given Google specific pieces of technology that have helped draw users away from Office, which stands as the dominant desktop productivity suite and has generated tens of billions of dollars of sales for Microsoft over the past two decades.

Looking to siphon off some of those incredibly high-margin sales, Google has scooped up startups offering online word processing (Upstartle with its Writely program), spreadsheet programs (iRows), as well as collaboration and sharing of Office documents (DocVerse). As it built on those deals over the past six years, Google has always pitched its offering – first in Google Docs, then in Google Apps and now in Google Drive – as a Web-based alternative to the largely desktop-based Office franchise. (Of course, Microsoft also offers a hosted, or cloud, version of its popular suite in the form of Office 365.)

With Quickoffice, Google is shoring up the technology around a productivity suite for the post-PC era, as Quickoffice is installed on more than 400 million devices. In addition to the broad user base, Google also gets some much-needed technology that should help iron out some of the wrinkles that can pop up when converting Microsoft Office documents to Google formats. Additionally, Quickoffice can run Office apps on the iPad, while Microsoft has yet to release an official version of Office for the rival tablet. (It is rumored to be working on one, however.)

While terms of the acquisition weren’t released, we would note that Quickoffice has a rather compelling business model, with an extremely low cost of customer acquisition. It gets paid by licensing its software suite to device makers and then generates business on top of that by upselling customers to subscription offerings. (We understand that ‘aftermarket’ business was running at about $5m a quarter recently.) Not bad for a business that was founded in 1996 inside the recently disappeared Palm Inc. For the record, Google has now acquired pieces of two wireless pioneers: Palm and Motorola Mobility.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

The Facebook effect

Ben Kolada

Contact: Ben Kolada

Facebook’s stratospheric growth has had a profound impact on technology entrepreneurship and exits. In addition to creating some $60bn of market value in its own recent IPO, the company has spawned an ecosystem of vendors hoping to further monetize its one billion customers. A myriad of startups have popped up over the years to help advertisers, marketers and brands manage and deliver their message across Facebook’s platform, which some bulls on the company consider something like a new operating system.

Several of these startups are finally starting to show material sales. As a result, the market overall is being targeted by tech titans looking to become advertising and marketing vendors of choice for agencies and brands. That has led to a dramatic rise in the volume of acquisitions of tech firms serving this segment. Last year set the record in both the volume and value of acquisitions.

Dealmaking this year, however, has already shattered that total spending record: The $3.6bn spent so far this year on social-related companies is already twice the 2011 total. The M&A is being driven by phenomenal growth rates in the social media market. As a proxy for that, consider Facebook’s monthly active user (MAU) count, which has grown at a compound annual growth rate of 132% from its founding in 2004 to 2011.

The social media sector’s growth is leading to top-dollar prices for hot startups. Buddy Media, probably the largest social media marketing platform vendor, increased revenue 250% last year. On Monday, salesforce.com officially announced that it is paying $689m for Buddy Media. Meanwhile, Google and Meebo made their pairing official: Google is reportedly paying $100m for the social networking and user engagement vendor. Oracle just paid an estimated $325m for social marketing provider Vitrue to gain capabilities competitive to what Buddy Media offers. (And the enterprise software giant tucked in Collective Intellect for social media monitoring on Tuesday.) And finally, even old-line vendor IBM has inked a high-priced deal in the market, likely paying north of $200m for social sentiment provider Tealeaf Technology last month.

Source: The 451 M&A KnowledgeBase *Includes transactions in social software, social networking and related categories.

Salesforce.com puts $1bn to work to buy parts of its Marketing Cloud

Brenon Daly

Contact: Brenon Daly

Salesforce.com has now shelled out a cool billion dollars to acquire the makings of its Marketing Cloud. The marketing offering, which is built on the back of the company’s two largest acquisitions, represents the most significant push to grow beyond the on-demand sales force automation product that it’s primarily known for. At stake: billions of dollars of market value for the richly valued SaaS kingpin.

On Monday, the company announced that it will pay $689m in cash and stock for Buddy Media, a social media marketing platform that counts 8 of the 10 largest advertisers as clients. The business, which should officially become part of salesforce.com by the end of October, will be combined with Radian6, a social media monitoring startup that salesforce.com picked up a little over a year ago for $326m.

Both transactions valued the target companies at a double-digit price-to-trailing-sales multiple. Buddy Media is being valued at an eye-popping 27 times 2011 revenue, roughly twice the valuation that Radian6 garnered. For its part, salesforce.com trades a little above 7x trailing sales.

Salesforce.com has shown through its M&A program – where it has acquired core parts of not only its Marketing Cloud, but also its Service Cloud offering – that the company is acutely aware that it can’t sustain an above-market valuation on a single product. With its platform being built on ever-pricier acquisitions, salesforce.com is gambling that it can use M&A to pull off a portfolio expansion that precious few software vendors have done successfully. To date, it’s been hard to bet against the company: Since its shares came public almost eight years ago, salesforce.com is up more than 700%, compared to a flatline S&P 500 over that same period.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Bazaarvoice buys a down-market voice with PowerReviews

Brenon Daly

Contact: Brenon Daly

Having just minted its public market shares three months ago, Bazaarvoice put them to use in a big way on Thursday. The company, which provides an online customer review platform, announced plans to acquire smaller rival PowerReviews in a deal valued at $152m – $121m of the consideration coming in stock, with the remaining $31m in cash. Terms give PowerReviews control of roughly 10% of Bazaarvoice’s total equity.

The transaction represents a significant bet on being able to move down-market, expanding Bazaarvoice’s voice-of-customer platform to SMBs. To get a sense of the discrepancy in size, consider this: PowerReviews has more customers (1,100) than Bazaarvoice (737), but only slightly more than one-tenth the revenue.

As with any platform, the value increases as the number of users increases. So the play for scale is a relatively sound motivation for Bazaarvoice’s first-ever acquisition. But we would have to add that the scale isn’t necessarily coming cheap. Bazaarvoice is valuing each dollar that PowerReviews generated last year at about $13, while the public market values each dollar that Bazaarvoice generated at roughly $9. Obviously there are differences in the size of the businesses – not to mention the takeout premium – but it’s worth noting the valuation gap nonetheless.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Does the next social media marketing deal involve Involver?

Brenon Daly

Contact: Brenon Daly

In acquiring Vitrue, Oracle joined a crowded field of big-name vendors that are looking to stay relevant as social networking sites increasingly become marketing channels. Spurred by this trend, Adobe shelled out $400m late last year for Efficient Frontier, while IBM picked up Tealeaf Technology earlier this month. The total spending for just these three deals is likely in the neighborhood of $1bn.

And the total may be growing. A market source has indicated that Involver may be the next social marketing platform that gets acquired. Word is that Microsoft was close to buying Involver but it was unclear if those talks were still live. To date, Microsoft has made mostly small steps into social networking, such as taking a tiny 1.6% stake in Facebook in 2007 and very quietly launching its own social network – ‘so.cl,’ pronounced ‘social’ – just over the weekend. Could the software giant be looking at a bigger move into the hot sector, with a marketing management platform as its play?

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

SAP’s platinum payouts

Brenon Daly

-Contact: Brenon Daly

Even though SAP has historically been a reluctant buyer, it hasn’t hesitated to throw around big numbers as it has picked up its M&A pace over the past half-decade. The German giant announced its latest top-dollar acquisition on Tuesday, paying roughly $4.5bn for Ariba (on an equity value basis). The supplier relationship management vendor hasn’t traded that high in more than a decade, as the first Internet bubble was deflating.

The purchase of Ariba continues SAP’s practice of paying high prices to clear deals. For instance, its offer for SuccessFactors last December matched the highest level that company’s shares had ever hit, and likewise, when it erased Sybase in 2010, it did so at a high-water mark for that stock. (Incidentally, the collective bill for those three transactions, which have been done in just two years, is more than $14bn.)

In terms of valuation, Ariba basically splits the difference between SAP’s two recent big software deals. Based on SAP’s valuation of Ariba at $4.3bn, the German giant is paying 8.6 times the roughly $500m that Ariba generated over the trailing 12 months (TTM). In comparison, it valued SuccessFactors at 11.3x TTM revenue and Sybase at 4.8x TTM revenue. (The relative valuation of each of those vendors primarily reflects their growth rates: Sybase was growing at a single-digit percentage, while Ariba is clipping along at nearly 40% and SuccessFactors was topping 50%.)

Select SAP transactions

Date announced Target Deal value Enterprise value/TTM sales multiple Bid
May 22, 2012 Ariba $4.5bn 8.6x $45 per share, highest price in 11 years
December 3, 2011 SuccessFactors $3.6bn 11.7x $40 per share, matching highest-ever price
May 12, 2010 Sybase $6.1bn 4.8x $65 per share, highest-ever price

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase

EMC buys Syncplicity for mobile file sharing in the enterprise

Ben Kolada1 Comment

Contact: Ben Kolada, Simon Robinson

EMC on Tuesday announced that it is taking another swing at backup and file synchronization. However, this time the company is aiming primarily at mobile users in the enterprise. EMC is acquiring four-year-old startup Syncplicity, which provides file-sharing and storage software as a service that enables synchronization to and from computers, mobile devices and online services.

In announcing the acquisition, EMC noted that it chose Syncplicity over the competition because Syncplicity is focused on the enterprise segment, while most other competitors are still targeting consumers. (EMC had previously tried its hand at the consumer backup market. In 2007, it paid $76m for online storage startup Mozy, but has since handed over much of the responsibility for those assets to VMware.) Like so many of its rivals, Syncplicity started in the consumer space but turned its attention toward enterprises in the past year or so. The company now claims about 200,000 users, including roughly 50,000 businesses.

We’d also note that the deal was driven by EMC’s Information Intelligence Group (i.e., Documentum), which makes sense from a collaboration/workflow/app space, but it does have the potential to cause some internal conflicts. For example, the EMC Atmos team is working closely with Oxygen Cloud, and VMware has Horizon/Octopus.

EMC isn’t disclosing terms of the acquisition, but we were recently told that Syncplicity is still in its early days and is nowhere near the size of competitor ShareFile, which sold to Citrix last year. ShareFile had nearly double Syncplicity’s headcount, and generated an estimated $12m in revenue during the year leading up to its sale. Citrix paid $54m for ShareFile, and is now using the target’s technology in its recently updated CloudGateway 2 product for mobile app management and file sharing. We’ll have a longer report on EMC’s Syncplicity buy later this week.

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

Buying into the social side of HR

Brenon Daly

Contact: Brenon Daly

After three consolidation plays in the fragmented human capital management (HCM) market, private equity-backed rollup Peoplefluent has expanded into enterprise collaboration with the acquisition of Socialtext. Although 10-year-old Socialtext was one of the pioneers of collaboration software (or ‘wikis,’ as they were known in the early days) and did attract some 6,500 users, it struggled to actually put up revenue.

According to our understanding, Socialtext was only generating about $5m in revenue. Peoplefluent – backed by Bedford Funding, whose principals served as executives at ERP rollup Geac – isn’t renowned for paying high multiples. It paid less than 2 times sales for both of its main consolidation acquisitions, 2008’s platform purchase of Authoria and 2010’s reach for Peopleclick. (Earlier this year, it also added a learning management vendor, Strategia Communications.)

Peoplefluent’s move to add collaboration to its HR platform comes almost exactly two years after HCM giant SuccessFactors paid $50m for social enterprise software provider CubeTree. Additionally, we’ve seen salesforce.com combine elements of its acquisition of collaboration software startup Manymoon with its step into the HCM market through its high-multiple purchase of Rypple. And salesforce.com just added another small part to its collaboration offering, tucking in tiny startup Stypi