Marketing deals rise, once again, on Marketo

Marketo has now twice driven marketing tech M&A to new heights. Adobe’s $4.8bn acquisition of the marketing automation vendor pushes the total value of marketing deals past its previous record, set in 2016, a year when Vista Equity Partners’ $1.8bn take-private of the same company was the largest transaction in the category. Although only a year separates those record runs, the motivations of the largest buyers in each year are far apart.

According to 451 Research’s M&A KnowledgeBase, $13.2bn worth of marketing software and services companies have been acquired this year, already well above 2016’s $8.6bn. A surge of private equity buyers paying healthy multiples propelled the latter year’s total – the second-largest marketing tech deal that year was EQT’s $1.1bn purchase of Sitecore. This year, it’s strategic buyers looking to play defense that’s driving up the total.

Take ad agency Interpublic, which spent $2.3bn for Acxiom’s marketing database services business to fend off the consulting shops and SIs that are pouring into advertising as the market goes digital. Similarly, AT&T’s $1.6bn acquisition of AppNexus makes up part of the telecom giant’s plan (along with its pickup of Time Warner) to keep from being just a pipe for Amazon, Facebook, Google and Netflix.

In Adobe’s case, reaching for Marketo seems motivated by its increasing competition with Salesforce. Adobe could have outbid Vista Equity back in 2016 for less than the roughly 12x trailing sales it’s paying today. (Vista paid 7.9x in that earlier transaction). Owning Marketo provides Adobe with a defense against Salesforce’s historical strength among B2B firms. In a similar vein, Adobe’s $1.7bn purchase of Magento in May seemed a strike at Salesforce’s earlier acquisition of Magento rival Demandware and also came at an uncharacteristic valuation (11.2x). Prior to those two most recent deals, Adobe had only once paid more than 8x for a vendor with at least $10m in revenue.