M&A Alert—June 6, 2012
BazaarVoice Acquires PowerReviews
Transaction Size: $151mm
PowerReviews provides a customer review platform which enables retailers, brands and e-commerce sites to collect, organize and analyze customer ratings, comments and other user-generated content. PowerReviews also enables merchants to encourage and reward customer ratings and measure social engagement. PowerReviews alsopowers a consumer-facing site, Buzzillions.com, that aggregates reviews from its partner retailers. The site includes over 15 million product reviews. Buzzillions has recently been growing by 1 million reviews per month. In September 2011, PowerReviews launched two products that are integrated into Facebook: i) Facebook Discovery which allows customer conversations around particular products, categories and reviewers to be posted directly on their Facebook newsfeed and ii) Facebook Community which gives brands and retailers a way to foster community among their customers both on their product pages and fan pages. PowerReviews has built a client base of more than 1,100 retailers, of which about 800 are small and mid-size North American retailers, and of which about 350 are large retail companies, such as Gap, REI, Staples and Toys ‘R’ Us.
PowerReviews competitors include Bazaarvoice, Revieworld, alaTest, RateVoice, andWize. Founded in 2005, PowerReviews is based in San Francisco and has raised $41mm in funding from Menlo Ventures (John Jarve), Draper Richards, Lehman Brothers, Tenaya Capital (Benjamin Boyer, Brian Paul), Four Rivers Group, Atomico and Woodside Fund.
Bazaarvoice provides SaaS-based social commerce solutions that enable clients to capture, display and analyze online word of mouth, including consumer-generated ratings and reviews, questions and answers, stories, recommendations, photographs, videos, and other content about clients’ brands, products, or services. Products include BrandVoice — which enables brands to display review content on retail Websites, BrandAnswers — which allows brands to interact directly with consumers on retail Websites to answer questions and provide suggestions on alternative products and Analytics — which provides analytics and self-service administration tools. BazaarVoice was founded in 2005 and went public in February 2012. BazaarVoice has 737 clients including Macy’s, BassPro, Cabela’s, Infiniti, Panasonic, Timex, Fujitsu and Geico.
Bazaarvoice will pay $31.0 million in cash and issue 6.4 million common stock and assume PowerReviews’ vested and unvested options equivalent to 1.6 million options to purchase the common stock of Bazaarvoice. At the closing share price on May 23, 2012, the value of the transaction is approximately $151.9 million. Bazaarvoice announced that PowerReviews’ 2011 revenues were $11.5mm.
Enterprise Value (EV): $151.9mm
Other comparable transactions that focus on helping retailers and businesses understand customer engagement and manage social media engagements include Oracle’s acquisition of Vitrue, Walmart’s acquisition of Kosmix and Saleforce’s acquisitionof Radian6.
PowerReviews complements the predominately large retailer customer base of BazaarVoice with 800 small – medium size retailer customers and more than doubles their total customer count. PowerReview also brings a small retailer oriented self-serve product offering, branded Express, which complements the higher functionality and complexity products offered by BazaarVoice.
Architect Partners’ Observations
This is a great example of an aggressive strategic move by one of the “New Stars” of hyperlocal. BazaarVoice is newly public, has strategic imperative to build upon their core business momentum and has the financial means to act. BazaarVoice is currently trading at a premium valuation of 9.8x enterprise value / trailing 12 month revenue. In this circumstance, PowerReviews was able to command a premium above that level, selling for approximately 13.2x, as mentioned above. The equity markets reacted positively to the announcement with BazaarVoice’s stock up 7% the day following the announcement.