IncrediMail reaches deep for deal

Contact: Brenon Daly

Almost exactly a year after taking the top spot at IncrediMail, CEO Josef Mandelbaum has announced his first acquisition at the digital media company. And it’s a big one: IncrediMail, which had just $33m in cash in March, will spend $25m upfront and another possible $15m earnout to add startup Smilebox. IncrediMail will cover at least the first tranche of the payment from its own treasury when the deal closes later this year, but it may look to tap the credit market for the earnout.

The transaction represents a significant bet by the Israeli firm, which has a market cap of just $70m. According to IncrediMail’s forecast, Smilebox should add more than $15m to revenue next year to the vendor, which, organically, has only generated about $30m in sales in each of the past two years. (We should note, however, that those sales are highly profitable for IncrediMail. Its operating margin runs at roughly 40%.)

The fact that Mandelbaum is doing deals for IncrediMail shouldn’t come as much of a surprise. Before taking the top spot at the small public company, he ran the interactive division of American Greetings, where it built out the digital business of the card provider through a series of acquisitions. Among the deals Mandelbaum put together included the pickups of, PhotoWorks, and Webshots. In fact, during his tenure at American Greetings, we understand that Mandelbaum may have even been interested in buying his current firm, IncrediMail.