Tag: Google

Increasing interest in Internet M&A, as Getty Images sells for $3.3bn

Ben Kolada

Contact: Ben Kolada

In another sign of growing interest in the digital media sector, and in Internet companies in particular, Getty Images has announced that its management and The Carlyle Group are acquiring the company from Hellman & Friedman for $3.3bn. The consortium is paying nearly 40% more for the company than H&F did just four years ago when it took Getty private in a $2.4bn deal. The deal is the largest Internet content and commerce acquisition since Silver Lake Partners and Warburg Pincus announced in May 2010 that they were taking Interactive Data Corp private for $3.4bn.

With the exception of a dip in 2003, M&A volume in the broad Internet content and commerce category has risen every year since we began tracking tech acquisitions in 2002. Unlike the greater tech sector, Internet deal volume was even resilient during the recent recession. According to The 451 M&A KnowledgeBase, while overall yearly tech M&A volume dropped 25% from its high of 4,032 transactions announced in 2006 to 3,020 in 2008, Internet M&A volume rose 10.5% over the same period.

Both older Internet properties and hot upstarts are attracting interest. The advent of social media has enabled today’s Internet startups to rapidly market their products to millions of consumers through powerful word of mouth marketing. Meanwhile, older Internet vendors that survived the tech industry’s nuclear winter a decade ago have now matured, and many are seeking liquidity.

Also driving M&A activity is the rise of serial Internet acquirers such as Google, which has picked up 31 Internet firms. And we’re seeing a resurgence of Internet consolidation shops, such as Rebellion Media and MITRE.

Internet content and commerce annual deal volume

Year Deal volume % change
2012 YTD 441 N/A
2011 787 26%
2010 625 9%
2009 572 13%
2008 504 4%
2007 485 6%
2006 456 53%
2005 298 62%
2004 184 8%
2003 170 -36%
2002 265 N/A

Source: The 451 M&A KnowledgeBase

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Google’s admission of failure?

Ben Kolada

Contact: Ben Kolada

Google has finally found a way to monetize Facebook’s platform. After failing to acquire Facebook when it had the chance several years ago, and now with its own attempts at social networking a bit spotty, official word came on Tuesday that Google is acquiring social marketing startup Wildfire Interactive. Google is reportedly paying $250m for Wildfire, a respectable price tag that likely values the target at 7-10x revenue.

Google’s own ‘Insights for Search’ search analysis engine shows interest in Orkut, its attempt at a social network that found most of its popularity outside the US, and its Google+ social network trending downward over the past 12 months. Meanwhile, interest in Facebook has remained remarkably high.

In acquiring Wildfire, Google is recognizing its social shortcomings, and not a moment too soon. There has been rapid consolidation of social marketing startups in just the past three months.

Sector stalwarts Vitrue and Buddy Media have already been acquired by Oracle and salesforce.com, respectively, leaving only a few hot startups left. Beyond Wildfire, we’d point to GraphEffect, Hearsay Social, Syncapse and Lithium Technologies as the next to go. And there will likely be bidding competition for these firms. Large CRM vendors SAP and Microsoft could make a play here, as well as Teradata, which could buy into social to build on top of its recent purchases of marketing specialists Aprimo and eCircle.

Recent select M&A in social marketing

Date announced Acquirer Target Deal value
July 31, 2012 Google Wildfire Interactive Not disclosed
July 10, 2012 Oracle Involver Not disclosed
June 4, 2012 salesforce.com Buddy Media $689m
May 23, 2012 Oracle Vitrue $325m*
April 18, 2012 Marketo Crowd Factory Not disclosed

Source: The 451 M&A KnowledgeBase *451 Research estimate

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

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.

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.

Citrix consolidates collaboration

Ben Kolada

Contact: Ben Kolada, Thejeswi Venkatesh

In its third collaboration deal in the past 18 months, Citrix Systems said Wednesday that it will acquire small Copenhagen-based startup Podio. The target provides team collaboration SaaS for SMBs, apparently mostly through a ‘freemium’ model. Its product is used for project management, social information sharing, sales lead management and employee recruitment management. It also provides related Apple iPhone and Google Android applications. But Citrix isn’t the only company consolidating in the collaboration market – its Podio buy comes at a time of record interest in this sector.

While there are many collaboration vendors in the market, Podio has a different approach – it enables users to create their own applications to carry out specific tasks. This allows teams to tweak the platform to cater to their specific needs. Citrix will integrate Podio into its GoTo cloud services suite, making it easy for existing customers to adopt the platform. Podio already integrates with Dropbox, Google Docs and Box.

Citrix isn’t disclosing terms of the acquisition, but we suspect that the three-year-old firm probably generated less than $5m in revenue. Podio claims tens of thousands of customers in 170 different countries, but the majority of them are likely only using its free product. If our revenue assumption is correct, then this deal should be considered more of ‘tech and talent’ play than anything else. Citrix traditionally pays above-average valuations, but we doubt that it paid more for Podio than the $54.2m it forked over in its last collaboration acquisition – ShareFile. The 27-employee firm had raised a total of $4.6m from Sunstone Capital, CEO Tommy Ahlers and private investors Thomas Madsen-Mygdal and Ulrik Jensen.

Beyond Citrix’s recent consolidation, the collaboration market is seeing increasing interest overall. The 451 M&A KnowledgeBase shows 79 collaboration acquisitions in 2011 – nearly double the volume in 2010 and an all-time record. Throughout the collaboration sector, some of the most notable transactions since the beginning of 2011 include Yammer buying oneDrum (announced just today), salesforce.com reaching for Manymoon and Dimdim, Citrix competitor VMware acquiring Socialcast and SlideRocket, and Jive Software picking up OffiSync (click on the links for disclosed and estimated valuations). Jive itself made its own splash in social collaboration when it went public in December. The company hit the Nasdaq at $850m and has since seen its market cap balloon to nearly $1.6bn, or 14 times projected 2012 revenue.

Citrix’s collaboration acquisitions

Date announced Target Collaboration sector Deal value
April 11, 2012 Podio Team collaboration Not disclosed
October 13, 2011 Novel Labs (aka ShareFile) File sharing & team collaboration $54.2m
December 17, 2010 Netviewer AG Web conferencing $115m

Source: 451 Research M&A KnowledgeBase; Click on the links for disclosed and estimated valuations

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

Millennial Media doubles on debut

Ben Kolada

Contact: Ben Kolada

Taking advantage of the emerging market for mobile advertising, platform vendor Millennial Media leapt onto the public stage Thursday, creating nearly $2bn in market value in its debut on the New York Stock Exchange. The company priced its 10.2 million shares at $13 each – the high end of its proposed range. Shares traded at about twice that level in early afternoon. Millennial Media is trading under the symbol MM. Morgan Stanley, Goldman Sachs and Barclays led the offering, while Allen & Company and Stifel Nicolaus Weisel served as co-managers.

Millennial Media, which has nearly 75 million shares outstanding, currently garners a market cap of $1.9bn. That values the company at 18 times trailing sales, in the ballpark of where we estimate Quattro Wireless was valued in its sale to Apple, but about half the valuation we believe AdMob received from Google. Those two companies are Millennial’s primary rivals, although Millennial stakes its claim as the largest independent mobile ad platform provider.

Interest in advertising technology has been building throughout both the equity and M&A markets. Earlier this month, for instance, telco SingTel announced that it was acquiring Amobee for $321m. (We estimate the startup, which provides mobile ad campaign management software, garnered roughly 9x trailing sales in its purchase by the Singapore telco giant.) Meanwhile, the Adtech pipeline is far from dry, even after a recent slew of big-ticket exits. Earlier this month, advertising intelligence firm Exponential Interactive filed its paperwork to go public. The company, which plans to trade under the symbol EXPN, increased revenue 35% last year to $169m.

Selling to Facebook

Ben Kolada

Contact: Ben Kolada

Rather than buy into Facebook after it debuts on the open market, many companies may consider selling to the social networking giant after its IPO. Facebook is already rich with cash, and is about to become much richer. Meanwhile, its M&A strategy has so far focused on acquiring smaller startups for their IP and engineering talent, but the company has said it may do bigger deals in the future.

According to The 451 M&A KnowledgeBase, Facebook has so far bought 25 companies, mostly for their specialized employees such as software engineers and product designers, but also for complementary technology. The company has been fairly cash conscious in its transactions, preferring to motivate acquired personnel with stock options rather than upfront cash payouts – in fact, Facebook spent just $24m in cash, net of cash acquired, on the deals it closed in 2011.

While innovative startups with skilled personnel, particularly those in the collaboration and social networking sectors, should still consider selling to Facebook a viable exit, midmarket and larger technology firms should also consider Facebook a potential suitor. In both public reports and in its IPO prospectus, the company has said it could put its treasury to work on larger deals. And it will certainly have the fire power – adding proceeds from its $5bn public offering to its treasury would bring its total spending power to nearly $9bn (including cash and marketable securities).

Facebook could apply some of its rationale for buying smaller vendors to larger acquisitions. For complementary technology, it could target a larger mobile advertising network (it picked up development-stage rel8tion in January 2011). The lack of a mobile ad platform is a gaping hole in Facebook’s portfolio, especially considering it had 425 million mobile monthly active users at the end of 2011. A company similar to AdMob (which sold to Google) or Quattro Wireless (acquired by Apple) such as Millennial Media or Jumptap would go some way toward filling that gap. For regional expansion and consolidation, Facebook could make a move for any of a number of international competitors, including Cyworld in Korea, Mixi in Japan, Vkontakte in Russia or Renren in China. As the trend toward consumerization in the enterprise continues in the form of social networking and collaboration (salesforce.com’s Chatter or Oracle’s Social Network come to mind), Facebook could look at an enterprise offering as well. The leading candidate in this sector would be Jive Software, one of the most prized properties in the social enterprise space with a market valuation of about $1bn.

Intel: the latest tech giant to buy patents

Contact: Thejeswi Venkatesh

Intel has announced the acquisition of 190 patents, 170 patent applications and video codec software from RealNetworks for $120m. The transaction comes just eight months after Intel bought SiPort, a Santa Clara, California-based company that made audio-processing semiconductors. We see these moves as an indication that Intel wants to integrate more media and graphics capabilities into its chips, which these purchases should help with.

Barely three days ago, Intel inked a deal with QLogic to buy its InfiniBand business for $125m. That already makes Intel’s M&A spending for 2012 more than 60% of its full-year 2011 spending. What’s more, Intel was reportedly one of the bidders for InterDigital Communications, whose patent sale was called off earlier this week due to a gap in valuation expectations (InterDigital was reportedly looking for $3bn).

Patent sales have become one of the overarching themes of recent M&A activity, and one that we expect to continue throughout the year (see our 2012 M&A Outlook – Introduction for a full report). The reason for this is partly for offense (to expand a vendor’s existing product portfolio, like this Intel transaction) and partly for defense (as a hedge against a lawsuit, as is the case in Google’s reach for Motorola Mobility). The importance of these deals also registers on the other side of the transaction, the seller of the IP. Consider the contrast: Wall Street sent shares of RealNetworks soaring (up about 34%) on word that it had struck its deal with Intel, while it punished shares of InterDigital for not getting a sale done. InterDigital is currently trading at just half the level it was last summer.

Intel’s M&A activity

Fiscal year Deal volume Deal value
2011 11 $377m
2010 7 $9120m
2009 3 $884m
2008 3 $8m
2007 1 $110m

Source: The 451 M&A KnowledgeBase

Social software M&A on the uptick in 2011

Contact: Brian Satterfield

As more businesses leverage social networking websites for marketing and customer support purposes, many big-name buyers are finding social media software vendors to be increasingly attractive targets. The number of deals in the sector rose more than 150% in 2011 from 2010, while spending during that same period soared more than five-fold from $75m to $389m.

The bulk of 2011 social software spending came in March, when salesforce.com forked over $326m for Radian6, a Canadian startup that had raised just $6m. Radian6 was both the CRM giant’s largest deal as well as the priciest transaction ever in the sector. Salesforce.com bought Radian6 in order to add social media monitoring features to a number of products in its portfolio. On a smaller scale, we saw similar purchases around that same time by Meltwater Group, which added JitterJam for $6m, and call-center software maker KANA Software, which reached for Overtone.

But enterprise software providers aren’t the only takers in the social software world. Many tech companies that have partial or completely social business models got in on the action, presumably in order to track activity on their own networks. Twitter, for instance, picked up social media monitoring software maker BackType, while Google bought a similar company called PostRank.

Microsoft pays a princely premium for Skype

Ben Kolada

Contact: Ben Kolada

In its largest-ever deal, Microsoft announced today that it is buying VoIP provider Skype for $8.5 billion in cash. This is the third time Skype has changed hands since 2005. Microsoft claims that the deal is yet another move in its long line of real-time communications initiatives, but we suspect that the true intent, and more so the price, was driven by a desire to keep the hot property out of the hands of search rival Google, which is expanding its own communications prowess.

That Skype attracted Microsoft should come as no surprise, since the company has consistently garnered more than its fair share of attention in its eight-year history. Since its founding in 2003, Skype has been acquired by eBay, sold to a consortium of private equity investors led by Silver Lake Partners, filed for an IPO, rumored to have been a target by Facebook and Google and is now being scooped up by Microsoft. Its three trade sales combined have totaled more than $13bn in deal flow.

Indeed, Facebook and Google’s rumored involvement in the bidding process would certainly have contributed to the stellar valuation. Consider this: on an equity value basis, Microsoft is paying nearly twice as much as Skype received in its previous two trade sales combined. When factoring in the assumption of cash and debt, the offer values Skype at nearly 11 times its 2010 revenue, and 34x last year’s adjusted EBITDA. And while the price paid represents a fraction of the $50bn in cash and short-term investments Microsoft held at the end of March, it should be high enough to prevent a competing offer from Google alone. A topping bid from Big G would most likely exceed $9bn – or one-quarter of the total cash and short-term investments the search giant held at the end of March.

Skype’s suitors

Date announced Acquirer Deal value
May 10, 2011 Microsoft $8.5bn
September 1, 2009 Silver Lake Partners/Index Ventures/Andreessen Horowitz/Canada Pension Plan (CPP) Investment Board $2.03bn
September 12, 2005 eBay $2.57bn

Source: The 451 M&A KnowledgeBase