Tag: Salesforce.com

A market-moving marketing move

Brenon Daly

Contact: Brenon Daly

In the largest-ever transaction in the rapidly emerging marketing automation industry, salesforce.com said on June 4 it will hand over $2.5bn in cash for ExactTarget. The deal represents a significant bet by the SaaS kingpin, which has talked about cross-channel marketing becoming a $1bn business in the coming years. Salesforce.com will nearly clean out its coffers to cover its purchase of ExactTarget, which is three times the size of salesforce.com’s second-largest deal.

Under terms, salesforce.com will hand over $33.75 for each share of ExactTarget. That represents the highest-ever price for the 13-year-old marketing automation vendor, which went public in March 2012 at $19. (J.P. Morgan Securities led ExactTarget’s IPO and advised the company on its sale. Bank of America Merrill Lynch worked the other side.) The deal is expected to close by mid-July.

At an enterprise value of $2.4bn, ExactTarget’s valuation of roughly 7.6 times trailing sales splits the difference between the two previous largest transactions in the marketing automation space. In December 2012, Oracle paid an uncharacteristically rich 9.7 times trailing sales for Eloqua, and Teradata paid 6.5 times trailing sales for Aprimo in December 2010, according to the 451 Research M&A KnowledgeBase. (For its part, rival Marketo, which salesforce.com and others were rumored to have looked at last fall, trades at nearly twice ExactTarget’s multiple.)

With the purchase of ExactTarget, the three largest deals salesforce.com has done have all been aimed at expanding the company’s marketing offering. It picked up Buddy Media in mid-2012 for $689m for its agency relationships after spending $326m on social media monitoring startup Radian6 in March 2011. But don’t look for any more deals in that space or any other from salesforce.com soon. During a call discussing the ExactTarget purchase, CEO Marc Benioff said salesforce.com will be on ‘vacation’ from M&A for the next 12-18 months.

Consolidating the Google Apps ecosystem

Ben Kolada

Contact: Ben Kolada

The Google Apps ecosystem saw continued consolidation on Wednesday as UK Google Apps developer and reseller Ancoris announced that it was acquiring Appogee for an undisclosed sum. Google and other enterprise apps providers are using resellers to target the SMB market, a strategy that has spawned a plethora of application systems integrators. Consolidation in this sector has taken off in the past few years and is providing extremely fast growth for some companies.

Application software OEMs, such as Google but also including salesforce.com, have focused their efforts on targeting the enterprise segment, and instead have used resellers to penetrate the SMB market. Meanwhile, cloud services are now affordable for SMBs, and millions have migrated away from their old premises-based systems to modern cloud services.

VARs like Ancoris and Cloud Sherpas add functionality to the apps they resell, such as multiple domain setup, administrative capabilities and more fleshed-out instant messaging capabilities. Essentially, they’re making paid Google Apps more suitable for SMBs by answering shortcomings not addressed by default by Google.

Increasing adoption of cloud services combined with consolidation has played out particularly well for Cloud Sherpas, which has acquired eight companies in the past two years, including two so far this year. The company’s CEO has publicly said he expects revenue to break $100m this year, up from about $75m last year and less than $1m in 2009.

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

As shares of salesforce.com continue to grow, could its M&A follow suit?

Ben Kolada

Contact: Ben Kolada

Salesforce.com continues to satisfy investors, even after paying up for its largest-ever acquisition. Shareholders barely blinked after the company forked over $689m for Buddy Media – the highest-valued acquisition in the social media marketing segment. As long as its shares continue to appreciate, salesforce.com has received a vote of confidence to continue to announce large deals.

The company reports its fiscal third-quarter earnings after the close of business today. Equity analysts on average are expecting the company to report about $738m in revenue for its fiscal Q3, above the company’s previously reported guidance, which was already above analysts’ estimates. CRM shares have already appreciated 46% since the beginning of the year, and analysts are predicting a median price target for each salesforce.com share of $170.

As long as it keeps growing the value of its shares, investors may not mind the company doing more – and larger – acquisitions. We’d also note that they apparently don’t mind salesforce.com covering those deals with its own stock – one-third of Buddy Media’s total purchase price was covered with its own equity. The Buddy Media buy is also only the third time that salesforce.com has covered a portion of a transaction with its own equity.

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

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.

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.

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.

Taking care of unfinished business, Oracle snares InQuira

Ben Kolada

Contact: Ben Kolada

Oracle scratched a lingering itch recently, as it announced that it is acquiring knowledge management and customer service automation vendor InQuira for an undisclosed amount. The announcement comes nearly three years to the day after Oracle was stinted by salesforce.com in its attempt to scoop up InQuira rival InStranet. And although terms of the deal weren’t disclosed, we suspect that the database giant paid up for its expansion in this sector.

As usual, Oracle hasn’t disclosed terms of the transaction. Nearly all precedent deals in this sector have fallen in the range of $30-50m. However, InQuira could have broken this benchmark since the company was growing and was more mature than its acquired rivals. InQuira has expanded from about 135 employees serving 50 customers when we last covered the firm in 2008 to more than 85 customers today, with a headcount surpassing 200. Assuming its average deal size has remained somewhat constant, we would roughly place the company’s trailing revenue in the ballpark of $55-65m. Based on precedent valuations (comparable transactions have been valued at 1.3-1.8 times trailing sales) and our loose estimates of the company’s revenue, Oracle could have paid about $100m for InQuira. In comparison, salesforce.com forked over just $32m for InStranet in 2008.

Privately held InQuira offers integrated applications for Web self-service, knowledge management and agent-assisted support by bringing together intelligent retrieval, content management, collaboration and analytics. The acquisition, which is expect to close in the fall, will become the core of Oracle’s Fusion CRM product line.