M&A Alert - August 16, 2010
IBM Buys Unica
Transaction Overview
On Aug 13, 2010, IBM (NYSE: IBM) announced an agreement to acquire Unica (NASDAQ: UNCA, market cap: $448mm) for approximately $490mm.
Target Description
Unica offers cross-channel marketing analytics and management software for corporate marketers, enabling them to automate and manage their marketing planning and offer targeted marketed campaign.s For example, marketers can use Unica’s platform to track, analyze and predict consumers’ behavior (via various channels such as their web click history, in-store activity or call-center-interaction) and use this information to display relevant web landing pages and send marketing offers that are of most interest to the consumers. In addition, marketers can monitor marketing process, manage marketing budget, or track inventory of marketed items and determine relevant marketing offers based on the inventory level of these items. Clients include Best Buy, ING, Monster, eBay and Starwood. Unica’s platform has won multiple industry awards, including Gartner’s Leaders Quadrant for CRM Multichannel Campaign Management, Gartner’s Magic Quadrant for Marketing Resource Management and Forrester Research’s Leader in Cross Channel Campaign Management. Based in Waltham, MA, Unica has 1,500 customers. Its 500 employees will join IBM’s Software Solutions group upon acquisition.
Buyer Description
IBM provides a broad array of hardware, software and services to business customers. IBM’s software offerings span many categories and are generally oriented toward helping large and medium-sized businesses run their businesses more efficiently. The sponsoring organization, IBM’s Business Analytics and Optimization Consulting, lies within IBM’s Solutions Group, has 5.000 consultants and made $11b acquisitions in the last five years. Earlier this year, IBM’s CEO, Sam Palmisano mentioned IBM is planning to spend about $20b on acquisitions in the next five years. Craig Hayman, GM of Industry Solutions was the key executive sponsor of the acquisition.
Transaction Parameters
IBM will pay $21/share to Unica’s shareholders.
Purchase Price $490mm1
Enterprise Value $447mm2
Enterprise Value Multiples
Revenue 4.1x3
EBITDA 44.4x4
Premium Analysis
1 day prior 120%
30 day prior 108%
1) Based on 21.5mm outstanding common shares and 2.5mm outstanding stock options
2) Assuming 6/30/2010 net cash of $42.8mm
3) Based on 6/30/2010 TTM revenue of $109.19mm
4) Based on 6/30/2010 TTM EBITDA of $10.08mm
Strategic Rationale
This transaction highlights IBM’s continued efforts to bolster its online marketing and analytics solutions offerings. Unica brings a marketing platform that enables corporate marketers to collect and analyze consumers’ preferences and behavior and use the data to execute efficient and targeted marketing actions. Unica’s marketing platform capabilities also complement IBM’s other marketing-oriented offerings via their recent acquisitions of Sterling Commerce (an e-business platform provider) in May 2010 for $1.4b and Coremetrics (a web analytics provider) in July 2010, both of which lie under IBM’s Software Solutions group.
Architect Partners’ Observation
IBM is clearly seeking to assist enterprises’ needs to track and analyze marketing data and to quickly act upon these data. MediaPost wrote an insightful article about this transaction and discussed key drivers. Below are two drivers that are mentioned, with some of our additional thoughts/observations:
1) As Yuchun Lee (Unica’s CEO and Co-Founder) mentioned, companies are now focused on increasing the effectiveness of their marketing campaigns, via data, measurement and analytics, instead of increasing marketing budgets. Mr. Lee stated that companies are spending about $3 trillion annually on online and offline marketing, much of which could use vastly improved assessment of effectiveness.
2) The explosion of Internet-enabled devices has driven the rapid growth of interactive marketing (including mobile, email, social media, search and display), further enabling consumers to choose to be approached by marketers and/or share their needs and preferences online. This necessitates effective marketing data collection, analytics and measurement that are well coordinated across multiple channels (online and offline) in order for marketers to understand consumers’ needs and efficiently deliver relevant marketing campaigns. Forrester projects interactive marketing to increase from $26b today to $55b in 2014.
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