Contact: Ben Kolada
Coinciding with its fourth-quarter earnings release, mobile Web developer Opera Software has announced the acquisition of mobile video optimization startup Skyfire Labs for $50m in cash and stock, with an earnout potentially tripling that price. The deal is a strategic combination – bringing together Skyfire’s carrier-focused mobile video optimization offerings with Opera’s mobile browser products – but its conservative structure suggests that Opera isn’t yet confident enough to put all of its eggs into the video optimization market.
Using an enterprise value of $50m (Skyfire had $8m cash on its balance sheet), the purchase – Opera’s largest ever – is valued at 12.2x trailing revenue. However, if Skyfire’s sales live up to expectations, its price-to-projected revenue valuation would be a more palatable 2.9x. Architect Partners, which helped Skyfire raise its $8m series C round, advised the company on its sale. Skyfire had raised $41m in venture capital. (We’ve made our M&A KnowledgeBase record on the transaction, which includes full financial details and round-by-round funding information, freely available here.)
Besides the $50m upfront payment, Opera is on the hook for an earnout of up to $105m in cash and stock. We’d note that although Opera also just announced a $100m credit facility, it could elect to pay $79m of the earnout in stock.
Opera is no stranger to earnouts, using them in all six deals we’ve recorded for the company, but the sheer size of this earnout suggests that the company isn’t fully confident in the video optimization market’s potential. And rightfully so – nearly every video optimization vendor we know of has seen total revenue flatten over the past few years, and many are anxiously seeking exits. (For a longer report on the mobile video optimization market, click here.)
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