M&A Alert - January 4, 2010
Apple Agrees to Acquire Quattro Wireless
Transaction Overview
On January 4, 2010, Apple (NASDAQ: APPL) announced that it has agreed to purchase Quattro Wireless for $275mm.
Target Description
Quattro Wireless offers a mobile advertising network (matching advertisers to mobile advertising inventory) as well as targeting and analytics capabilities. Quattro’s customers include P&G, Ford, NetFlix, Time Inc., Visa, Disney and the NFL. Competitors include Admob (in the process of being acquired by Google), Millennial Media, AOL, Microsoft and Jumptap among others. Quattro has received $28.3mm in venture funding in three rounds from Highland Capital Partners (Bob Davis) and Globespan Capital Partners (Andy Goldfarb). Founded in 2006, Quattro Wireless is based in Waltham, MA.
Buyer Description
Apple sells PCs, mobile communication devices, and portable digital music and video players. Apple is most known for its Macintosh (computer/laptop), iPhone (smartphone), and iPod (digital music/video player) products. It also sells digital content including applications, movies, music, podcasts, games and TV shows through the iTunes Store. Founded in 1976, Apple is headquartered in Cupertino, California.
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| Equity Value of Consideration: | $275mm |
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| Equity Value Multiple: | |
| Net Revenue Multiple1 | 13.10x |
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1) Net Revenue Multiple is based on estimated $21mm annual revenue (source: IDC)
The purchase price multiple to revenues of 13.1x is roughly a 30% discount to the multiple Google is planning to pay for Admob at 18.8x.
Strategic Rationale
Apple has clearly come to realize the importance of advertising as an important way to monetize applications and content. Google has convincingly demonstrated the tremendous value of the advertising revenue model as a complement to or a replacement of the traditional outright sale of applications and content. Apple must bring competitive advertising revenue capabilities to its mobile application developers as well as music, film and TV content partners. Quattro Wireless is a small first step in that direction.
Architect Partners’ Observations
This transaction is all about the convergence of the internet, mobile and digital media industries, the founding premise of Architect Partners. Apple has clearly been a major force in this emerging convergence, but had not embraced the traditional monetization vehicle of media, advertising, until now. This represents a major shift, where Google, Apple’s most dangerous competitor, gets innovator’s credit. The ramifications will play out for some time to come.