Acquisitions You Should Be Talking About
I simply can’t help myself when I see names like Instagram, Friendfeed, OMGPOP in the headlines. I blow through those articles like a set of self-help tapes wondering why I can’t devise one of these seemingly simple schemes. Its just those simple ideas that everyone thinks they could have come up with. When you hear these names they are probably being criticized, or adored because of their recent acquisitions. The surprising price tag in relation to their sales is the topic of discussion. Upon further investigation, it appears all part of a guided strategy. Think about it in terms of a “what does God look like?” strategy. If everyone has their own interpretation, who’s to argue with your perspective? If a company has no sales you can draw any kind of conclusion/valuation you would like. Of course social is leading this pump and dump madness. The Facebook (Nasdaq:FB) purchase of Instagram proves too much money has moved into too small of a space. With absolutely no recorded revenue Instagram was acquired by Facebook for around $1 Billion. This translates into $28/user for Instagrams 35 million users. Is the new advertising currency Cost per User? While the cost per user is on par with other large tech acquisitions, Instagram only has 13 employees. Making it one of the most expensive Cost per Employee Transactions.
We’ve been here before. Anybody remember Mark Cuban, the Pittsburg native? I think it was somewhere around 1999 he sold broadcast.com to Yahoo! for $5.9 billion in Yahoo! Stock. This was a company with less than $100 million in annual revenue that had never turned a profit. Today Yahoo only has a market cap of $19.06B and well broadcast.com redirects you to yahoo.com. The cost per user argument to justify a large purchase is only relevant to a point. At some point there has to be a conversion of those users to profitability to justify any long term sustainability.
First to market seemed so relevant back then, but has apple or Starbucks taught us anything? You don’t have to be first, you just have to do it right. The Ipod wasnt the first mp3 player. By right, I mean the company should demonstrate sustainability as its own business. Remember back when we were all dreaming about what the internet was going to be. We know a little bit more now, but are we making the same mistakes? We know how fragile success can be. First to market is still relevant, but it shouldn’t be blown out of proportion.
Acquisitions With A Strong Focus On Sales
There are some acquisitions that involve the other end of the spectrum; companies with a focus and history of growing sales. How do I know? They are all previous/current Selling To Zebras customers. We have witnessed some pretty incredible sales force transformations. This year has been especially interesting for the following companies:
One of those companies is from Mark Cuban’s old neighborhood. Pittsburg based Vivisimo is a leader in big-data analytics and previously a privately held enterprise search software company. On April 25th IBM announced a definitive deal to acquire Vivisimo for an undisclosed amount. Vivisimo allows enterprise users to find information regardless of source, location or type. If you’re unfamiliar with the concepts, it’s a search engine inside of a company. This allows, as one example, customer facing professionals quick and accurate access to documents and data that is usually hard to find. This access brings additional value to existing information. An IDC study says the market for big data technology and services will grow from $3.2 billion in 2010 to $16.9 billion in 2015. IBM is strategically positioned to capitalize on this growth with the acquisition of Vivisimo in relation to its current offerings. This seems smart considering your average daily business activity creates 2.5 quintillion bytes of data according to IBM. This includes data produced by social media among others. Therefore, without having to predict the winner of a social media race, you can safely bet that no matter who wins, data will continue to be produced. In a world where information is king, IBM has made a very strategic move. Along with great technology Vivisimo has built a portfolio of stellar customers including; Airbus, U.S. Air Force, Bupa, Cisco, Eli Lilly, Social Security Administration, Defense Intelligence Agency, U.S. Navy, Procter & Gamble, and LexisNexis. There is also a great new set of qualified prospects for additional IBM solutions.
Taleo is yet another Selling to Zebras customer acquired in 2012. On February 9, 2012 Oracle (Nasdaq:ORCL) announced an agreement to acquire Taleo for $1.9 billion, (or as I like to say two Instagrams). Previously, Larry Ellison of Oracle had asserted his opposition to SaaS(Software as a Service), but the move was a direct response to SAP’s (Nasdaq:SAP) purchase of SuccessFactors for $3.4 billion. Taleo is a leading cloud-based talent management provider. 15% of all US hires flow through Taleo and about half of the top 30 career sites in the world are powered by Taleo. Taleo has 5,000 customers(half of the fortune 100 included) and 1400 employees. Taleo lost $14.5 million last year on revenue of $309 million. I’m not so sure yet why Yahoo! passed on this kind of a deal. Taleo was purchased for a hefty premium of 6 times last year’s revenue, while SAP paid 11 times revenue for SuccessFactors.
Another cloud play was the acquisition of StarCITE by Active Network (NYSE:ACTV) on January 5, 2012. StarCITE is a leader in global corporate strategic meetings management and Selling to Zebras customer. StarCITE’s technology platform brings transparency to the costs of event planning, booking and management and will complement Active Network’s Business Solutions division. StarCITE’s products are used to handle functions such as scheduling, procurement, event registration, and hotel
and airline reservations. The company’s offerings are used by corporations, suppliers (including hotels and airlines), and other hospitality providers such as travel bureaus, convention centers, and travel firms. StarCITE also offers services for creating event-specific Web sites and e-mail campaigns. StarCITE’s global customer base and SaaS technology introduces Active Network to the strategic meeting management market. StarCITE was able to develop their market by identifying and quantifying pain in the marketplace. Their ability to offer differentiation through value, helped them grow revenue by more than 600% in less than three years. Read More