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.
Contact: Ben Kolada
Gannett Co announced on Thursday the acquisition of Mobestream Media, maker of the Key Ring customer loyalty application. The deal is one of only a handful of mobile rewards and loyalty purchases announced so far, but as the market matures, we expect that many startups will be acquired and tucked into larger digital marketing vendors’ portfolios.
Like its pickup of social media marketing startup BLiNQ Media last month, Gannett bought Mobestream to build out its digital marketing portfolio. Mobestream’s Key Ring app allows smartphone users to store and receive merchant loyalty card information and digital coupons. The company’s retail customers also use its platform for marketing campaigns. So far, more than five million users have downloaded the app. Horizon Partners advised Mobestream on its sale (this is Horizon’s fifth M&A deal this year, but won’t be its last).
Because the mobile loyalty sector is still so young, there have only been a few acquisitions. However, there are more than a dozen startups operating in this sector, and purchases by Gannett and Constant Contact suggest that their products are better suited as part of a larger digital marketing portfolio.
As the mobile loyalty market matures, the leading startups will likely become acquisition targets for larger tech marketing vendors and publishers such as Google, Vocus, Teradata and Advance Publications. Several startups have already secured funding to propel their growth. In May, RewardLoop announced a $1m series A round, Beintoo took $5m in its A round and Belly secured $10m in its series B. Kiip followed in July with an $11m B round.
Select mobile loyalty M&A
|September 7, 2012
|September 6, 2012
||Mobestream Media [dba Key Ring]
|January 19, 2012
|December 8, 2011
|July 8, 2011
|November 9, 2010
||Hitgroup.ca (mobile solutions assets)
Source: The 451 M&A KnowledgeBase
For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.
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
|July 31, 2012
|July 10, 2012
|June 4, 2012
|May 23, 2012
|April 18, 2012
Source: The 451 M&A KnowledgeBase *451 Research estimate
For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.
Contact: Ben Kolada, Thejeswi Venkatesh
Intuit on Friday announced its largest M&A move in six years, acquiring SMB-focused marketing automation startup Demandforce for $423.5m. The deal, and Demandforce’s valuation, was primarily driven by the target’s market traction. The company, founded just in 2003, has amassed a customer roster of more than 35,000 SMBs. The transaction also demonstrates the accounting and tax giant’s desire to further penetrate this market with additional products and services – this is its first major play in marketing automation.
The Demandforce acquisition complements Intuit’s QuickBooks software and expands its offerings for SMBs. (We’d note that Intuit already offers a marketing management and productivity application called QuickBase, though that product is for enterprises.) Demandforce provides marketing automation SaaS and helps businesses maintain an online profile and better communicate with their customers. The company has grown considerably over its short lifetime. According to Inc.com’s annual survey of the fastest-growing companies, Demandforce generated $15.3m in revenue in 2010, up from $6.4m in 2009. Continuing that growth rate would put its 2011 revenue at roughly $25-30m.
Intuit is handing over $423.5m in cash for Demandforce, making this deal Intuit’s largest since it forked over $1.35bn for transaction processor Digital Insight in 2006. Demandforce’s growth certainly factored into its valuation. Assuming that Demandforce maintained historical growth rates, Intuit’s offer would value the target at a whopping 15-20 times trailing sales. If our initial estimates are correct, that valuation is double and even triple some precedent valuations. For example, in 2010, IBM bought Unica for 4.4x sales. Unica had flatlined during its final years as a public company, with revenue remaining in the $100m ballpark for the four years before its sale. The valuation is also double Teradata’s Aprimo acquisition, also announced in 2010. Teradata paid $525m for Aprimo, or 6.3x sales.
Contact: Ben Kolada
After last year’s storage and data-warehousing feeding frenzies provided outsized returns to target companies’ venture investors, a new breed of ‘big data’ vendors is renewing venture capitalists’ interests. So-called NoSQL and NewSQL database firms had already been catching investors’ attention, securing millions of additional dollars in VC financing. Eventually, we expect the fast growth that drew interest from VCs to also draw interest from corporate buyers. However, the price potential acquirers will have to pay is constantly rising.
VCs are attacking big data pains again, this time by investing in a number of promising database startups. 10gen, Couchbase and Neo Technology, for example, each secured more than $10m in financing in the third quarter. The size of these recent rounds, which were almost certainly substantial up-rounds, is due in part to the fact that some of these startups have already proven themselves and are posting triple-digit growth rates. My colleague Matt Aslett recently wrote that Basho Technologies is aiming to increase its revenue seven-fold this year. And we’ve got our thumb on the pulse of another startup that expects to nearly quintuple its annual revenue, surpassing its initial 300% growth projection.
While most of the NoSQL and NewSQL startups are still in the single-digit millions of revenue, continued growth rates will likely increase their current valuations. Further, additional venture investments needed to fuel that growth will lead to even wider gaps in valuations between potential acquirers and sellers. In our recent survey of corporate development executives, half of respondents expected the valuation gap between buyers and sellers to widen. And from our view, already sky-high valuations in hot sectors such as big data and cloud computing will almost certainly rise, regardless of what happens in the public markets. If so, potential suitors such as Oracle, Informatica or Teradata will have to reach deeper into their pockets to snare promising database properties.
Select recent NoSQL venture investments (rounded to nearest $m)
Source: 451 Group research, listed by size of round
Contact: Ben Kolada
Just a month after Greenplum was swallowed by EMC for an estimated $400m, fellow data-warehousing startup Kickfire was sold for probably one one-hundreth of that amount to Teradata. Why did the two data-warehousing vendors – both venture-backed, Silicon Valley startups targeting the same market – see divergent outcomes? The answer to that multimillion-dollar question lies in each company’s targeted markets.
The scrap sale of Kickfire was the end result of a misguided approach by the Santa Clara, California-based startup to the low end of the data-warehousing market. Basically, Kickfire was trying to sell appliances through an expensive direct-sale model. However, the economics of a high-cost business model for a low-cost product only work on big sales. Kickfire never got anywhere close to that, collecting only about a dozen customers in its four years of business. (We would contrast Kickfire’s business model with that of its closest competitor, Infobright. That company, which sells a software-only product through an indirect channel, has more than doubled the number of customers over the past year to 120.)
As Kickfire was struggling to sell to small businesses, 30 miles up the road in San Mateo, California, Greenplum was ripening nicely by selling to enterprises. The company’s high-revenue customer accounts helped it quickly grow total sales to just shy of $30m at the time of its sale to EMC. (That works out to an eye-popping valuation of 14 times trailing sales – a multiple that’s twice as high as any valuation the data-warehousing sector has seen in major acquisitions.) Part of the reason it garnered such a high price is that Greenplum counted some 140 customers at the time of its sale.
Other data-warehousing vendors have also experienced the highs of the enterprise market. Netezza and Teradata both made it to the public markets. (Although we heard a rumor that Netezza was almost erased from the market. Word is that EMC first talked to Netezza, even floating a bid earlier this year that basically would have valued Netezza at its current price on the NYSE. Needless to say, talks didn’t go too far between the two Boston-area companies.) And of course, DATAllegro was scooped up by Microsoft for an estimated 7x trailing sales.
With all of this consolidation playing out, we expect that much of the attention in the data-warehousing space is now turning to Aster Data Systems. The fast-growing vendor, which is based in San Carlos, California, has raised $27m in venture backing. If Aster Data gets snapped up in a trade sale (like many of its rivals have), we wouldn’t be surprised to see Dell as the buyer. The two companies are currently partners, and Dell has shown an increasing interest in big data following its continued attempts to buy 3PAR.
Earlier this week, SAP marked the first anniversary of its largest deal ever, the $6.8bn purchase of Business Objects. Now, some folks in the market are already lining up the next multibillion-dollar acquisition for the German giant. JMP Securities analyst Pat Walravens has floated the idea that SAP may be planning to buy data-warehouse titan Teradata. (Incidentally, Teradata celebrated its own first anniversary this week, having started trading on the NYSE on October 9, 2007.)
The pairing would make a fair amount of sense. We noted a year ago that SAP and Teradata have a deep partnership, sharing more than 200 customers. And SAP clearly needs more technological heft if it wants to sell a stand-alone data warehouse. (It currently offers its data warehouse as part of the NetWeaver BI integration stack.) But we have a hard time seeing SAP reaching for Teradata, which sports a $2.9bn market capitalization.
Typically, SAP doesn’t make consolidation plays like Teradata. (That’s the role of Oracle, which is likely to be less interested in Teradata since recently rolling out its high-end data-warehouse offering, HP Oracle Database Machine, which is its answer to the massively parallel-based warehouses offered by Teradata and others.) Instead, SAP generally favors small technology purchases, and one startup that we think would fit SAP pretty well is Greenplum. SAP thought well enough of Greenplum to put some money into its series C earlier this year.
However, SAP might find itself in competition for Greenplum with the startup’s other strategic investor, Sun. Greenplum has a data warehouse appliance for Sun servers. There’s also the alumni connection: Greenplum CEO Bill Cook worked for 19 years at Sun before running the startup. That said, Greenplum is not the only data-warehouse vendor Sun has invested in, having taken a minority investment in Infobright’s series C last month.
A few months after indicating it was ready to buy its way into analytics, Netezza has inked its first deal as part of the initiative. The company said last Thursday that it will pay $6.4m for NuTech Solutions. It’s largely an HR move, with Netezza picking up 30 scientists and engineers from the startup. The addition should help Netezza as it looks to run different types of complex analytics inside Netezza Performance Server, rather than just enlist help from partners – including vendors, academic institutions, developers and consultancies – through its existing Netezza Developer Network.
Rival data-warehousing vendors are also looking to add more smarts to their boxes. So far, however, that hasn’t meant much shopping. For instance, Teradata and SAS Institute cozied up and unveiled a joint roadmap last October involving integrating various SAS wares, including its analytics and data-mining algorithms, into the Teradata database. (Netezza also has partnerships with SAS and rival predictive analytics vendor SPSS.) Meanwhile, Greenplum also announced support for embedded analytics in the latest release of its warehouse, G3.
We wonder if the NuTech deal – Netezza’s first acquisition – is a bit of an appetizer ahead of a larger bite of the analytics market. We’ve highlighted a couple of tasty targets for Netezza, including existing partner Manthan Systems, which focuses solely on the retail industry, or KXEN, which would fit well with Netezza’s mission to expand the scope of its query technology. With its treasury stuffed with cash from its recent IPO, Netezza certainly has the resources to do the deals.
Selected data warehousing-analytics transactions