The InterWebs were buzzing this morning with an Atlanta Business Chronicle article reporting that IBM is negotiating to buy Silverpop. My only reaction was, What the heck took so long? The other enterprise-level B2C email vendors (ExactTarget, Responsys) have already been bought at wondrously high prices, and every B2B marketing automation vendor I talk to tells me that potential investors are approaching them constantly. So it was a totally safe bet that Silverpop was fielding many offers as well. With $50 million in funding, most of it provided years ago, it was an equally safe bet that Silverpop had some investors eager to cash out.
IBM as an acquirer also makes perfect sense. Although they bought B2C marketing automation leader Unica several years ago, they lack enterprise-scale B2C email engine and B2B marketing automation. This makes Silverpop a perfect fit.
The only surprise in this deal is the price, rumored to be about $270 million or 3x revenue. ExactTarget and Responsys both sold for 6-7x revenue and I would have expected Silverpop to yield something similar. The company has always been very tight with financial information, although client and employee counts they’ve provided for our VEST report suggest recent growth rates of 20% to 30% per year, which considerably lags the industry as a whole. We don’t know anything about profitability, but I’d guess they run close to break even, since they haven’t announced any new investment recently and the slow growth rate would reduce the need for capital. In general, the market seems to reward growth over profitability, so these results may depress their price somewhat.
The company’s mix of B2B and B2C clients may also confuse potential buyers and drive down the price a bit. Plus, there just aren’t that many enterprise software companies who still need what Silverpop is offering: Oracle and Salesforce.com have already made their purchases, Adobe is part of the way there with Neolane, and SAS and Teradata have their own tools and are probably less interested in B2B because most buyers are small or mid-size firms. SAP might be a potential buyer but hasn’t really shown an interest and just announced a deal to resell Adobe’s marketing suite. You could make an interesting case for Marketo as a buyer – to gain market share and some good technology, while leveraging a stock valued at more than 10x revenue – but that doesn’t seem to be part of their strategy.
So we’ll see. I wouldn’t be surprised if someone else offered Silverpop a higher price, but it’s not obvious who that would be. And if the IBM deal goes through, Silverpop will fit nicely into its new home.
And what about Experian (aka Cheetahmail)? Lyris? OK, Really Experian Marketing Technology?
ReplyDeleteWhen Responsys was acquired I looked to see whether Experian got any bump in their stock price - they didn't. Which had me wondering why Experian has failed to be recognized as the de facto marketing technology leader?
My definition of technology from a buyer perspective is not just the functionality, but the marketing execution widgets plus data, integration, process, resources - In this big data world, shouldn't Experian be head and shoulders above every option? Experian data plus data and communication capabilities seems to be sooo good that in a parallel universe, if Experian, the data company,were to attempt to buy Experian the marketing technology company, the government and privacy folks would block acquisition. (Of course Experian uses their power for "good"). Does Experian get this?Apparently not - I don't see the brochure or webinar - I Experian Exec Mngt missing the forest?
Thoughts?
Valuations?
So what should the valuation be? What should be the criteria? You suggest a higher premium for the ability of these marketers to market themselves - but that evaporates the day they get acquired.
Can you look at the aging of their contracts and renewal rates and monetize the strength of their current and 5 yr book of business and therefore the LTV potential per customer?
Yes, you could break out the Customer Experience Matrix and estimate the value of each offer based on the channels and interactions covered + the potential lift per interaction (like Amazon or Google/Doubleclick might)
The market facing valuation, potential client revenue lift would be a practical measure for evaluating technology value - but successful sales and marketing of their own message is ironically the REAL market metric.
Thank you for thoughtful comments
mrhoffman
Thanks Michael. I don't know that I'd consider Experian the de facto marketing technology leader, although they certainly have a great deal of technology. Their primary business is still data. Marketing tech and marketing services are more about leveraging their data asset than anything else, in my opinion. That said, they and other companies (Acxiom, V12, InfoGroup, Neustar, etc.) are competing in some sense for the same business as the pure marketing tech and email firms.
ReplyDeleteAs to stock market values...I long ago gave up thinking they had much rational basis. More about herd mentality.