Category: VC

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.

Facebook’s $16bn IPO: raised above the Valley

Brenon Daly

Contact: Brenon Daly

As IPOs go, Facebook is far more Silicon Valley than Wall Street. That was clear from the social networking giant’s roadshow this month, where 20-something CEO Mark Zuckerberg could hardly be bothered to meet with the institutional investors who do most of the buying of new offerings. (When Zuck did attend the meet and greets with the pinstripes, he wore a hoodie.) And if there was any lingering doubt about it, consider the fact that Zuck stayed at home at the company’s headquarters in Menlo Park, California rather than travel to New York City to ring the opening bell on Nasdaq.

And yet, Facebook is hardly representative of a Valley company – much less a Valley IPO. First, there’s the not-so-small matter of its $100bn market capitalization. But even beyond the valuation, the $16bn that Facebook just raised in its offering is probably more than all the tech companies that go public in the next three years or so will raise, collectively.

Our rough math: Facebook took in $16bn in today’s debut (of that amount, nearly $7bn will go to the company, with the remaining $9bn or so going to company executives and investors). In comparison, the typical tech IPO brings in, say, $100m or maybe $150m. In our surveys, investment bankers and corporate development executives have been consistently forecasting about 25 tech IPOs in each of the recent years. So assuming that rate holds – or even increases slightly – we’re still looking at roughly four years of IPOs to get to the more than 100 offerings to raise the same amount as Facebook.

Even a blockbuster IPO like Splunk had just a month ago raised just dimes compared with Facebook. Underwriters ended up selling 13.5 million shares in the enterprise data search firm at $17 each, which was roughly twice the price of the original range. That meant Splunk raised $321m in its IPO – or only about one-fiftieth the amount Facebook just raised.

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

TriNet expands with ExpenseCloud

Brenon Daly

Contact: Brenon Daly

Throughout its history, TriNet Group has been a slow but steady consolidator. Perhaps the best-known play by the outsourced HR provider came three years ago, when it gobbled up publicly traded rival Gevity HR for $99m. In its most recent deal, however, the private equity-backed buyer has shifted gears a bit.

Rather than simply add more accounts through an acquisition, TriNet has added a nifty offering to its portfolio. The company recently picked up three-year-old startup ExpenseCloud, which helps automate the process around creating and reimbursing employee expenses. TriNet says the expense management offering will be available on its platform later this year.

Although, candidly, employee expense management sounds like a ho-hum market, the big player in this space – publicly traded Concur Technologies – has shown it can be a wildly valued one. The company’s shares currently change hands at their highest-ever level, putting its market valuation at a whopping $3.4bn. Concur recently projected that sales for its current fiscal year, which ends in September, would be in the neighborhood of $440m, meaning investors are valuing the company at 7.6 times this year’s projected sales.

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

Audience tries to make IPO noise before Facebook debut

Contact: Thejeswi Venkatesh, Ben Kolada

Although Facebook’s road show may have delayed some companies’ IPO itineraries, audio processing vendor Audience is continuing with plans to begin trading on the Nasdaq on May 10. Facebook has dominated recent IPO chatter (a quick Google search for ‘Facebook IPO’ generates more than 312 million results, versus just five million for ‘Audience IPO’), but Audience’s market opportunity should help the company create some noise of its own.

Audience designs digital signal processors and associated algorithms that help separate human voice from background noise, thereby helping to improve voice quality on mobile phones. The technology also helps improve the responsiveness of speech-recognition software. Apple, for example, uses Audience’s chip in the iPhone 4S.

So far, the market has been receptive. The patient firm, which was founded in 2000 but didn’t start pushing product until 2008, has grown revenue fifteenfold over the past few years, from $6m in 2009 to $97m in 2011. That growth story should pay off in spades for its selling shareholders, notably NEA, Tallwood Venture Capital and Vulcan Capital, which collectively own 87% of the company (combined, they poured $75m into the firm).

Audience plans to raise $80m by offering 5.3 million shares in the range of $14-16 per share. Assuming it prices at the midpoint, Audience will garner a market cap of just under $300m, or three times trailing sales. That valuation is in the ballpark of where rival Maxim Integrated Products currently trades in the public markets. J.P. Morgan, Credit Suisse and Deutsche Bank are leading Audience’s IPO. This is likely to be the last tech IPO before Facebook’s debut.

LinkedIn looks to keep users more linked with SlideShare acquisition

Brenon Daly

Contact: Brenon Daly

In its largest-ever acquisition, LinkedIn said Thursday afternoon that it will pay $119m for SlideShare in an effort to draw more people to the professional network and keep them there longer. SlideShare has some 29 million unique monthly visitors, and the combination should allow LinkedIn members to expand their professional development and identity. It also significantly increases the amount of content on LinkedIn’s network, which is crucial for the company to grow beyond a site that the 160 million registered users only access when they are looking for a job.

The purchase, which continues the company’s practice to cover its M&A bill with a mix of cash and stock, represents a significant inorganic move to bump up engagement on top of LinkedIn’s earlier in-house efforts such as forming professional groups and a dedicated news page. To date, LinkedIn has had success with its strategy.

As it announced the SlideShare acquisition, LinkedIn also reported financial results for its first quarter. Sales for the January-March period doubled to $189m, with the business running at a solid 20% ‘adjusted EBITDA’ margin. Perhaps more importantly, revenue from all three segments of its business (hiring, marketing, subscriptions) posted strong growth. It’s fairly rare that a fast-growth business (LinkedIn has at least doubled revenue for seven straight quarters now) can put up consistent results across completely different business units without a misstep.

Wall Street has certainly noticed that performance. Shares hit their highest level since last May’s IPO, changing hands at about $120 each in Friday afternoon trading. That values the company at $12.3bn, or more than 13 times the forecasted revenue of roughly $900m for 2012. In comparison, old-line job board Monster Worldwide is valued at only $950m, despite being on track to generate slightly higher revenue this year.

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

Intuit pays up for SMB-focused Demandforce

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

Intuit on Friday announced its largest M&A move in six years, acquiring SMB-focused marketing automation startup Demandforce for $423.5m. The deal, and Demandforce’s valuation, was primarily driven by the target’s market traction. The company, founded just in 2003, has amassed a customer roster of more than 35,000 SMBs. The transaction also demonstrates the accounting and tax giant’s desire to further penetrate this market with additional products and services – this is its first major play in marketing automation.

The Demandforce acquisition complements Intuit’s QuickBooks software and expands its offerings for SMBs. (We’d note that Intuit already offers a marketing management and productivity application called QuickBase, though that product is for enterprises.) Demandforce provides marketing automation SaaS and helps businesses maintain an online profile and better communicate with their customers. The company has grown considerably over its short lifetime. According to Inc.com’s annual survey of the fastest-growing companies, Demandforce generated $15.3m in revenue in 2010, up from $6.4m in 2009. Continuing that growth rate would put its 2011 revenue at roughly $25-30m.

Intuit is handing over $423.5m in cash for Demandforce, making this deal Intuit’s largest since it forked over $1.35bn for transaction processor Digital Insight in 2006. Demandforce’s growth certainly factored into its valuation. Assuming that Demandforce maintained historical growth rates, Intuit’s offer would value the target at a whopping 15-20 times trailing sales. If our initial estimates are correct, that valuation is double and even triple some precedent valuations. For example, in 2010, IBM bought Unica for 4.4x sales. Unica had flatlined during its final years as a public company, with revenue remaining in the $100m ballpark for the four years before its sale. The valuation is also double Teradata’s Aprimo acquisition, also announced in 2010. Teradata paid $525m for Aprimo, or 6.3x sales.

Survey: lots of M&A talk, but few prints

Brenon Daly

Contact: Brenon Daly

Although key members of the broad dealmaking community indicate they have stepped up their activity in the M&A market recently, actually closing deals has proven challenging so far this year because of pricing and renewed concerns about the stability and growth outlook across the globe. That’s one of the main findings from the inaugural survey by 451 Research and Morrison & Foerster of more than 300 executives, corporate development officials, lawyers/bankers and other dealmakers.

In the survey, slightly more than half of the respondents (52%) said they are seeing more activity over the past half-year than they have during the same period in either of the two previous years. That’s more than twice the number who said activity has tailed off recently. Further, respondents projected that the heightened activity will translate into actual prints at some point this year: Nearly six out of 10 (59%) respondents said they expected to be busier in 2012 than they were last year, compared to just one out of 10 (8%) who said the opposite. We’ll have a full report on the survey in tonight’s Daily 451, including what’s driving current dealmaking and what’s keeping respondents from doing deals.

M&A spending outlook

Period Increase Stay the same Decrease
2012 forecast 59% 33% 8%

Source: M&A Leaders’ Survey from 451 Research / Morrison & Foerster, April 2012

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

Spirent secures its testing platform with Mu

Brenon Daly

Contact: Brenon Daly, Eric Hanselman

A relatively infrequent shopper, Spirent Communications has picked up Mu Dynamics, adding security testing for applications to the company’s performance-testing portfolio. The deal, which is only the British company’s second acquisition in the past half-decade, was announced last week and closed Monday. Spirent paid $40m in cash for Mu, which is projected to contribute about $18m in sales next year. (We understand that talks got going only in December, with Duff & Phelps’ Pagemill Partners unit advising Mu.)

The purchase of Mu Dynamics should also help Spirent expand its market, both in terms of customers and products. Traditionally, Spirent has sold its performance analysis offering as a hardware-based platform to network equipment manufacturers that use it to test the performance of products before they launch them. (It primarily competes in this market with Ixia, although Spirent is much larger and more profitable than its rival.) With Mu, Spirent will get a software product that can be more quickly and easily deployed, even within corporate IT departments.

As more and more applications are run on virtualized infrastructure, the process of testing is adapting. Where hardware-based systems have traditionally been used in test environments, it’s much more difficult to connect them to the virtual and ‘cloudy’ application deployments that are predominating. Spirent’s move will give it tools to address these environments. Ixia has also developed product capabilities in this area. Software versions of testing products can also scale well to match the increased scaling demands placed on applications.

Additionally, Spirent obtains Mu Dynamic’s small – but potentially disruptive – cloud-based testing division called Blitz.io, which bumps up against startups such as SOASTA, Apica, AppDynamics, LoadStorm and other SaaS testing providers. Blitz.io already has some 15,000 users.

While both the performance and security of applications is important to increased cloud application adoption, security is turning out to be a far more significant factor. In a survey earlier this year, ChangeWave Research, a service of 451 Research, found that companies gave higher marks to the reliability of cloud apps than they did to the security of them. Further, of the companies that are not currently running cloud applications, one-third of them cited ‘security concerns’ as the reason they have passed so far. That was twice as high as any other concern voiced by the more than 1,500 respondents to our survey.

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

Marketo buys into social marketing with Crowd Factory

Brenon Daly1 Comment

Contact: Brenon Daly

Announcing its first-ever acquisition, Marketo said Wednesday that it is picking up Crowd Factory. The deal adds Crowd Factory’s social campaign management technology to Marketo’s marketing automation platform, expanding the distribution of marketing pitches to social channels such as Facebook pages and Twitter.

Although terms weren’t disclosed, we imagine that this was a small technology tuck-in. As we understand it, Crowd Factory was planning on raising a new round of financing of about $10m, but instead took the offer from Marketo. (Crowd Factory had already raised money from Storm Ventures, Hummer Winblad Venture Partners and Peninsula Ventures.) Our understanding is that Crowd Factory generated a little more than $1m in 2011 (with just two sales people) and was planning on tripling revenue this year.

For Marketo, this purchase rounds out its platform, adding cross-channel capabilities as well as bringing analytics to measure returns on the sharing of social campaigns, such as sweepstakes pages. The technology additions should help the company compete in the red-hot marketing automation space, which has seen significant moves by rivals recently. ExactTarget went public last month, creating some $1.6bn in market capitalization, while Eloqua has been on file since last summer. We could certainly envision Marketo following with an IPO of its own, but probably not until it tops $50m in revenue next year.

Tech IPO market looks to next week’s triple-header

Brenon Daly

Contact: Brenon Daly

Although the US equity market has been a bit choppy over the past week or so, shares are still generally inching higher. Sure, it hasn’t necessarily been the uninterrupted ascent of the Nasdaq that we saw in the first quarter, which recorded the strongest start to a year in two decades. But the sentiment – despite renewed concerns about the economies of Europe as well as the quality of some Q1 results, which will begin trickling in over the coming weeks – has been bullish. That goes double for the newest entrants into the equity markets, IPOs.

We have already highlighted the warm reception that Wall Street has given the companies that have come to market so far this year. We expect that to continue next week, which is shaping up to the busiest week in tech underwriting in a long time. Splunk, Infoblox and Proofpoint are all scheduled to price their offerings next week. (The trio set preliminary ranges earlier this week. A fourth tech company, Envivio, also set its range this week but will likely be heading out later in the month.) Of the IPOs on the calendar, Splunk is all but certain to capture a disproportionate amount of attention as it steps onto Wall Street.

Splunk, which plans to trade under the ticker SPLK on the Nasdaq, will almost certainly be valued at more than $1bn on its debut. (This week, it set the range for its 13.5 million shares at $8-10 each, although we suspect that the actual price will be north of that range.) Splunk finished its most recent fiscal year (ending January 31) with $121m in sales, an 83% increase over the previous year. The growth rate for the second half of the year actually accelerated at the company, so it will hit the market with a lot of momentum. (And with four bulge-bracket bookrunners, Splunk’s performance will be trumpeted loudly across Wall Street.)

We’ll have an in-depth look at Splunk and next week’s other two IPO candidates in tonight’s Daily 451. Additionally, the report will look ahead to what’s coming in the pipeline after this trio hits the market. If anything, the second round of IPOs this year will be even hotter than this current round. Look for the special IPO report tonight.

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