First Analysis Investment Banking Industry Update
July 2013
Chicago, IL 60
First Analysis Corporation
One South Wacker • Suite 3900
Chicago, IL 60606
312-258-1400 • www.firstanalysis.com
Industry Focus: Wave of Consolidation Changing Landscape for
Digital Customer Engagement Solutions
With the global eCommerce market continuing to be the growth hotspot, there is increasing need for platform
companies to offer a full suite of solutions to digitally engage customers. More than ever, retailers are focused on
maximizing resources to deliver targeted marketing to attract new customers, recapture lost revenue, drive up-sell
and cross-sell opportunities, and keep their customers engaged. This puts increasing pressure on internal and
external marketers to relevantly connect with the consumers via assorted online channels.
In an unprecedented wave of activity, a number of large business software providers, media companies, and
marketing players are rapidly acquiring digital customer engagement solutions to provide a more comprehensive
suite of services for their clients. This consolidation includes eCommerce platforms (SAP buys Hybris), email
marketing (Salesforce.com buys Exact Target), and marketing automation (Oracle buys Eloqua). These
established, scalable software solutions are receiving premium multiples as deals are competitive, they can provide
increasingly critical customer engagement channels and enable a plug-and-play add-on solution to an existing
business. However, these early acquisitions represent just a start to consolidation as the broader solution
providers will strive to build a comprehensive one-stop-shop digital customer engagement platform that will include:
CRM, ad tech, digital marketing, eCommerce, marketing automation, personalization, video sharing, social
engagement, loyalty, and other behavioral commerce analytics solutions. End-to-end digital marketing is in sight
(from customer acquisition, to close, to renewal, to add-on) and consolidation should continue.
The Wave of Consolidation
Source: Capital IQ.
Public Digital Customer Engagement Index includes: ACN, ACXM, ADBE, CTCT, DWRE, DRIV, EBAY, GOOG, MKTO, N, ORCL, SGE, SAP, SAPE, DATA, and TDC
Responsys buys Eservices Group IBM buys Unica Oracle buys
Art Technology Teradata buys Aprimo
Rightnow buys
Q-go.com Google buys BeatThatQuote.com
DemandTec buys M-Factor
eBay buys GSI Commerce
IBM buys DemandTec SAP buys buys Oracle buys Salesforce.com buys Adobe buys
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
9.0x
10.0x
11.0x
Digital Customer Engagement Index EV/Fwd Revenue
M&A Transactions EV/Revenue
Expon. (M&A Transactions EV/Revenue)
Correlation between M&A Activity and Valuation
Ariba ExactTarget Pardot
Eloqua Neolane
Page 2 of 6
Industry Focus (continued)
Review of Select Notable Digital Customer Engagement Deals
Date
Announced
Target
Acquiror
Rationale and Comments
Oct 2012
Pardot
ExactTarget
Will extend ExactTarget’s ability to serve both business-to-business
and business-to-consumer marketers worldwide.
With the addition of Pardot, ExactTarget will attempt to redefine
marketing automation and deliver the most scalable, comprehensive
automation solution that helps both B-to-B and B-to-C marketers
leverage the power of data to connect with customers across email,
mobile, social media and the Web.
Dec 2012
Eloqua
Oracle
Oracle bought Eloqua to create a comprehensive Customer
Experience Cloud offering to help companies transform the way they
market, sell, support and serve their customers.
The combined offering is expected to enable organizations to
provide a highly personalized and unified experience across
channels, create brand loyalty through social and online interactions,
grow revenue by driving more qualified leads to sales teams, and
provide superior service at every touchpoint.
June 2013
ExactTarget
Salesforce.com
Salesforce.com bought ExactTarget to further its mission of being
the world’s leading CRM platform by combining ExactTarget’s
leading digital marketing capabilities with Salesforce.com’s leading
sales, service and social marketing solutions.
Salesforce.com customers will be able to extend their investments in
sales, service and social marketing with access to a comprehensive
marketing automation solution. ExactTarget’s customer base will
have access to social marketing capabilities, and will be able to
leverage Salesforce.com’s leading sales, service and platform
solutions to transform their end-to-end customer experience.
June 2013
Hybris
SAP
SAP primarily plans to boost its e-commerce platform and improve
its customer experience with proper insight across all its channels.
SAP believes that hybris’ business perfectly complements its exiting
flagship HANA (specializing in analytical and cloud applications),
JAM (social software platform) and 360 Customer solution (which
introduced the SAP CRM application).
June 2013
Neolane
Adobe
The acquisition of Neolane will enable Adobe to utilize a number of
social media-tracking and analysis tools for handling leads,
marketing resource management, high-volume email marketing
campaigns and a real-time offer recommendation engine for
personalized as well as one-to-one messages.
After the closure of the deal, Neolane will become a part of Adobe’s
Marketing Cloud product line.
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Industry Stock Market Performance
The First Analysis Digital Customer Engagement Index has outperformed the broader market indices over both the
long-term (last five years) and nearer-term (last year) periods.
5 Year Indexed Performance
(June 2008 to June 2013)1 Year Indexed Performance
(June 2012 to June 2013)Source: Capital IQ.
Public Digital Customer Engagement Index includes: ACN, ACXM, ADBE, CTCT, DWRE, DRIV, EBAY, GOOG, MKTO, N, ORCL, SGE, SAP, SAPE, DATA, and TDC
Public Market Trading Multiples
Median public market valuations for companies in the industry are currently 3.41x 2013 consensus estimate
revenue.
2013E Revenue Multiples
2013E Revenue Growth
Source: Capital IQ. Data as of June 30, 2013.
(50%) 0% 50% 100%
Jun-08 Jun-09 Jun-10 Jun-11 Jun-12
Customer Engagement Index S&P 500 NASDAQ
(5%) 0% 5% 10% 15% 20% 25% 30%
35% Customer Engagement Index S&P 500 NASDAQ
16.29x 16.17x 11.85x 10.32x 5.00x 4.17x 3.80x 3.41x 2.86x 2.72x 1.56x 1.43x 1.39x 1.28x 0.81x
DATA N DWRE MKTO ADBE GOOG SAP ORCL SGE TDC ACXM ACN CTCT SAPE DRIV
51.2% 32.0% 25.0% 42.2% (6.7%) 19.2% 8.0% 1.6% (3.9%) 5.2% (1.2%) 2.0% 13.3% 11.7% 3.6%
DATA N DWRE MKTO ADBE GOOG SAP ORCL SGE TDC ACXM ACN CTCT SAPE DRIV
17.9% 28.9% 16.0% 81.2% 48.4% 25.5% Median Metrics EV / Revenue: 3.41x Median Metrics Revenue Growth: 8.0%
Page 4 of 6
Industry Merger & Acquisition Activity
M&A activity across the sector has been very robust with strategic, and to a lesser extent financial, buyers actively
seeking acquisitions. Select strategic buyers continue to “suite-up” as they try to develop a more comprehensive
solution suite while financial buyers prefer to look for opportunities where technology is being leveraged to more
efficiently deliver services.
Select Industry M&A Transactions
(Announced from 01/01/12 to 06/30/13) Date
Announced Status Target Buyer Target Business Description
Transaction Value
($ millions)
06/27/13 Announced Neolane SA Adobe Systems, Inc. Provides enterprise marketing software to manage, automate, and optimize marketing programs.
$600.0
06/05/13 Announced Hybris GmbH SAP AG Operates as a vendor of multi-channel communication and commerce software solutions.
ND
06/04/13 Announced ExactTarget, Inc. Salesforce.com, Inc Cross-channel digital marketing SaaS solutions that enable organizations to communicate with their customers through the interactive channels.
$2,350.6
05/08/13 Closed OrderMotion, Inc. NetSuite Inc. Provides Web based order management and analytics solutions for eCommerce and direct-to-consumer businesses.
ND
02/06/13 Closed Channel Intelligence, Inc.
Google Inc. Provides technology services that drive online purchases. $125.0
01/10/13 Closed (m)PHASIZE, LLC Sapient Corp. Develops marketing mix and cross marketing analytics solutions. ND
01/10/13 Closed Retail Anywhere Inc. NetSuite Inc. Provides point of sale and cloud-based retail management systems for midsize retailers in North America.
ND
12/20/12 Closed Eloqua, Inc. Oracle Corporation Provides on-demand revenue performance management software solutions for businesses.
$957.9
11/28/12 Closed Incentive Targeting, Inc.
Google Inc. Provides targeted shopper promotion systems. ND
10/11/12 Closed Pardot, LLC ExactTarget, Inc. Provides cloud-based B2B marketing automation software solutions for companies with multi-touch sales cycles.
$95.4
10/11/12 Closed iGoDigital, Inc. ExactTarget, Inc. Provides a suite of integrated product recommendation and social commerce solutions.
$20.7
10/02/12 Closed Viewdle, Inc. Google Inc. Enables the creation of new user experiences in mobile gaming, social networking, social media, advertising, and marketing.
$45.0
09/17/12 Closed SelectMinds, Inc. Oracle Corporation Provides software-as-a-service social networking solutions to companies around the world.
ND
09/10/12 Closed Brilig LLC Merkle, Inc. Operates as a cooperative data marketplace for online advertising. ND
07/31/12 Closed Wildfire Interactive, Inc.
Google Inc. Develops tools that enable organizations to engage various users of social network sites, such as Facebook and Twitter.
ND
Page 5 of 6
Select Industry M&A Transactions
(Announced from 01/01/12 to 06/30/13) Date
Announced Status Target Buyer Target Business Description
Transaction Value
($ millions)
07/10/12 Closed Involver Inc. Oracle Corporation Provides social marketing management platforms for brands and agencies to connect across the social Web.
ND
06/13/12 Closed SinglePlatform, Corp.
Constant Contact, Inc.
Provides and monetizes local restaurant content for publishers. $92.9
06/05/12 Closed Collective Intellect, Inc.
Oracle Corporation Provides Web-based, automated, real-time text mining, and analytics software that enables social CRM.
ND
06/04/12 Closed Buddy Media, Inc. Salesforce.com, Inc Provides a cloud-based software solution that enables agencies and brands to manage their social media presence and marketing campaigns.
$745.0
05/23/12 Closed Vitrue, Inc. Oracle Corporation Provides social marketing publishing technology that enables businesses to manage, message, and moderate their presence on social networks.
ND
05/22/12 Closed Ariba Inc. SAP America, Inc. Provides collaborative business commerce solutions for buying and selling goods and services.
$4,607.8 05/02/12 Closed TeaLeaf Technology, Inc. International Business Machines Corporation
Provides customer experience management solutions for companies doing business online.
ND
04/18/12 Closed Crowd Factory, Inc. Marketo, Inc. Provides crowd-powered marketing applications. ND
02/21/12 Closed aiMatch, Inc. SAS Institute Inc. Provides cloud-based advertising server technology that allows digital publishers to sell and manage online ad inventory.
ND
02/01/12 Closed Social Amp Inc. Merkle, Inc. Provides Facebook Open Graph and OAuth solutions for Fortune 500 brands and agencies internationally.
ND
01/02/12 Closed MobManager Constant Contact, Inc.
Owns and operates an online tool that enables to manage daily deals for small business owners.
ND
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First Analysis Securities Corporation
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Chicago, IL 60606
www.firstanalysis.com
Brian Friedman
(312) 258-7110
[email protected]
Matt Nicklin
(312) 258-7181
[email protected]
Dane Guarino
(312) 258-7118
[email protected]
This report has been prepared by the Investment Banking Department of First Analysis Securities Corporation and is provided for informational purposes only. This report is an overview and analysis of trends and is not intended to provide investment recommendations on any specific industry or company. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities. This is not a complete analysis of every material fact regarding any company, industry, or security. The opinions expressed herein reflect our judgment at this date and are subject to change. The information has been obtained from sources we consider to be reliable, but we cannot guarantee the accuracy. Past performance and any projections herein should not be taken as an indication or guarantee of future performance. First Analysis Securities may act as financial advisor and/or underwriter for companies mentioned in this report. This report may contain information which was previously included in a First Analysis Research Report. A complete listing of all companies covered by First Analysis Equity Research and applicable research disclosures can be obtained by calling 1-312-258-1400 or writing to: First Analysis Securities Corporation, Equity Research, One South Wacker Drive, Suite 3900, Chicago, IL 60606. First Analysis Securities Corporation is a registered broker/dealer with FINRA and member SIPC.
