Category: marketing software

Bankrate boosts insurance biz with recent deals

Scott Denne

Contact: Scott Denne

Though Bankrate’s dealmaking has slowed since its 2011 IPO, its recent acquisitions, including its latest purchase of LeadKarma, have been focused on a single strategic initiative – shifting from a quantity- to a quality-based approach to selling sales leads to insurance companies.

LeadKarma furthers this strategy by bringing search engine marketing savvy to Bankrate (as well as about $3m in quarterly revenue, according to the acquirer). Bankrate runs a variety of websites with financial content (Bankrate.com, CreditCards.com, CarInsuranceQuotes.com, etc.) and generates cash mainly by selling leads to credit card and insurance firms. Its lead-generation business accounted for nearly three-quarters ($89m) of its $121m in revenue last quarter. Until recently, Bankrate had a volume-based approach to selling insurance leads, but it has been in the process of moving to lower-volume and higher-quality leads.

The company made a similar move toward quality in 2010, picking up CreditCards.com for $143m to grow the size of its credit card lead-generation business and focusing on performance-based pricing for credit card leads. Bankrate’s last two purchases before LeadKarma (InsWeb in 2011 and InsuranceAgents.com last year) also focused on improving the quality of its insurance leads. The insurance portion of the business grew 30% sequentially in the most recent quarter, following a few down quarters as a result of the strategy shift.

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LivingSocial moves $260m worth of product in its biggest sale

Scott Denne

Contact: Scott Denne

In an unusual divestiture among close competitors, LivingSocial sells its Korean Ticket Monster business to Groupon for $260m. Looking past the surprising development that LivingSocial will shortly own about $160m in stock (the rest is cash) of a rival, the transaction shows the companies’ paths diverging as the daily deals market cools down.

Sales at both businesses soared in the early days of flash sales and have since stalled as the novelty of the concept faded. To bounce back, LivingSocial, whose revenue was down this quarter for the first time (its financial performance is made public in Amazon’s filings, as the company has a 31% stake in LivingSocial), is expanding its role as a marketing partner for merchants, while Groupon is taking a different tack by moving into physical goods.

Ticket Monster fits well with the new Groupon – more than half of the Korean company’s business is physical goods. Last quarter, physical goods sales at Groupon set a record, accounting for more than one-third of the company’s $595m in revenue. While the new strategy has enabled Groupon to grow revenue as its daily deals business shrinks, its profits have taken a hit – margins on its physical goods are 10% compared with 86% from its merchant business. That’s OK for Groupon, which has $1.1bn in cash on hand, but it’s a less appealing strategy for LivingSocial, which is still private, unprofitable and raised another $110m from investors earlier this year. Following this transaction, physical goods will be less than 10% of LivingSocial’s business.

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PROS announces first acquisition in its 28-year history

Scott Denne

Contact: Scott Denne

PROS Holdings is paying $36m for configure, price and quote (CPQ) sales automation vendor Cameleon Software, adding fuel to an already steady growth rate. The deal, PROS’s first in its 28-year history, should boost the company’s top line by providing new cross-selling opportunities and expanding its presence in Europe.

Using an enterprise value of $33m, Cameleon is being valued at 2.2x trailing sales, a bargain compared with the 7.3x valuation PROS is currently sporting. Cameleon’s shares are being valued 45% higher than their 90-day average trading price.

PROS, which makes software that helps determine the optimal price to charge each customer for a given product, grew revenue 22% last year, to $118m. That follows a record-setting 36% growth rate in 2011. Cameleon is much smaller, but still saw sales rise 29% last year to $14m.

The purchase of Cameleon brings PROS technology that helps customers/vendors automate the process of getting the right products and right information to prospective clients. (It is similar to what Oracle obtains with its recent purchase of BigMachines .) Cameleon, based in France, also brings PROS a larger European operation. Though PROS is growing overall, its European revenue shrank slightly in its most recent quarter.

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Friends are friends, but business is business

Scott Denne

Contact: Ben Kolada Scott Denne

Oracle is either adding depth or distance to its partnership with salesforce.com by acquiring BigMachines, yet another salesforce.com-integrated startup. The two software giants have had a difficult relationship, most visibly with salesforce.com CEO Marc Benioff being ‘uninvited’ from Oracle OpenWorld two years ago. But the companies seemed to have worked out their differences this year, announcing a nine-year product integration partnership in June. Oracle’s recent dealmaking, however, could undermine some of that reconciliation.

Terms haven’t been disclosed in Oracle’s acquisition of configure, price and quote sales automation SaaS vendor BigMachines. We estimate that the company generated $60m in trailing sales, or about twice the revenue it recorded in the year before its recapitalization by Vista Equity Partners and JMI Equity.

BigMachines is the second salesforce.com partner Oracle has purchased in the past week. On October 17, Oracle bought content marketing SaaS provider Compendium, but the stakes and price are certainly much larger for this deal (subscribers to The 451 M&A KnowledgeBase can see our estimated price and revenue for the Compendium buy here).

BigMachines integrated its price and quoting optimization software into salesforce.com’s core CRM offering in 2010 (it was also an Oracle partner) and salesforce.com became an investor in the company in 2012. (As an investor, salesforce.com almost certainly had right of first refusal on Big Machines.) Compendium – which was founded by one of the founders of ExactTarget, the marketing software company that salesforce.com picked up for $2.5bn earlier this year – integrated its content marketing software into ExactTarget’s offering as well as a rival marketing automation offering from Eloqua, which Oracle acquired a year ago.

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Oracle deal shows hoosiers own marketing software

Scott Denne

Contact: Scott Denne

Oracle’s purchase of Compendium cements Indianapolis’ transformation into the go-to spot for marketing software deals. This makes six acquisitions of marketing tech companies in that city, which have collectively been valued at more than $3bn.

Earlier this year, salesforce.com spent $2.5bn to acquire ExactTarget, and two years ago Teradata paid $525m for Aprimo. Both those companies were founded more than 10 years ago and helped bring – and train – marketing software talent to the area. Given the shift in marketing software from a niche to a strategic pillar at many major software companies – such as Oracle, which has bought five such companies in the last 18 months – there’s room for more local marketing companies to benefit.

ExactTarget birthed many of these businesses. Chris Baggott, one of the founders of ExactTarget, was a founder of Compendium. Other marketing tech startups in the region, such as Right On Interactive, Marketpath and Smarter Remarketer, also have founders that spent time at ExactTarget.

Recent marketing tech deals with Indy targets

Date Target Acquirer Deal Value
October 17, 2013 Compendium Oracle not disclosed
June 04, 2013 ExactTarget salesforce.com $2.5bn
October 11, 2012 iGoDigital ExactTarget $21m
June 07, 2011 Vontoo One Call Now not disclosed
December 22, 2010 Aprimo Teradata $525m

Source: The 451 M&A KnowledgeBase

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