M&A Alert—May 2, 2018
Cisco acquires relationship intelligence platform Accompany for $270mm
Author: Eric Risley, Benjamin Jamison
Transaction Size: $270mm
Cisco Systems, Inc. (NASDAQ: CSCO) announced an agreement to acquire relationship intelligence platform Accompany for approximately $270mm in cash and assumed equity incentives.
Accompany offers a relationship intelligence platform which helps senior executives and sales & business development professionals understand the people they know, navigate to the people they should know, and generally build stronger relationships.
Accompany offers a combination of in-depth, up-to-date profiles on 300mm corporate executives and 20mm companies derived from public sources combined with AI-based software. Capabilities include contextual information and news about relationships, better understanding of corporate organizational structures, assessment of relationship strengths, and integration of contact information.
Accompany was founded by current CEO Amy Chang, formerly the Global Head of Product, Google Ads Measurement at Google. Ms. Chang has also served as a member of Cisco’s Board of Directors since October 2016 and is stepping down from the board in conjunction with the transaction.
Accompany raised a total of $40mm in seed through Series B rounds between 2013 and 2016. Investors included CRV (Devdutt Yellurkar), Cowboy Ventures (Aileen Lee), Iconiq Capital, and Ignition Partners (Nick Sturiale). Accompany has approximately 40 employees.
Accompany’s competitors include traditional CRM companies (Salesforce, Oracle, and SugarCRM), more specialized relationship and contact management companies (LinkedIn, Relationship Science, BoardEx, ZoomInfo and Nimble) and data aggregators (Bloomberg, CrunchBase, Thompson Reuters, and FactSet). Accompany is based in Los Altos, California, and was founded in September 2013.
Cisco develops, manufactures, and sells networking hardware, telecommunications equipment and related services. The company has centered its focus on five key industries: networking, multi-cloud, security, data, and collaboration. Accompany will be incorporated into Cisco’s Collaboration Technology Group, with Amy Chang replacing the departing Rowan Trollope as SVP of the group. The acquisition follows Cisco’s announcement in April 2018 to integrate its Spark and Webex platforms into a single ecosystem of services called Webex Teams, complete with a common user experience and cloud back end. Webex Teams’ tools include video, messaging, whiteboarding, simple guest access, and content sharing. Based in San Jose, CA, Cisco has a market capitalization of $214 billion and LTM revenues of $48 billion.
Cisco is acquiring Accompany for approximately $270mm in cash and the assumption of equity awards, representing a multiple of 6.8x invested capital. Further financial details of the transaction were not disclosed. The deal is expected to close in Cisco’s fourth quarter ending July 31, 2018.
Comparable M&A transactions include Microsoft’s acquisition of LinkedIn on June 13, 2016 for $25.8 bn (8.1 x revenue), Dun & Bradstreet’s acquisition of NetProspex on January 8, 2015 (6.3x revenue), Great Hill Partners’ acquisition of ZoomInfo on August 14, 2017 for $240mm (6.0x revenue) and the acquisition of BoardEx by TheStreet on October 7, 2014. Others of note include 6sense’s acquisition of ZenIQ on April 11, 2018 (details not disclosed), Dun & Bradstreet’s acquisition of Avention on January 10, 2017 for $160mm (2.5x revenue), Influitive’s acquisition of Triggerfox on March 22, 2016, and FullContact’s acquisition of Brewster on March 23, 2016 (details not disclosed).
Cisco achieves two strategic objectives with this acquisition. First, software-assisted relationship development and management remains an unsolved problem with virtually all solutions being focused on sales process instead of relationship development. While Cisco’s Webex Teams platform isn’t necessarily the optimal starting point, it’s clear that Cisco understands the strategic opportunity to deliver on this unmet need. Second, Cisco is acquiring well regarded talent with Silicon Valley credibility and experience. It’s clear that Ms. Chang’s competence is well recognized and appears to solve a near-term problem for Cisco by assuming responsibility for the Collaboration Technology Group as Rowan Trollope leaves to take the CEO position at Five9.
Architect Partners’ Observations
As users of a wide variety of CRM and relationship management platforms over the years, we’ve long felt that, as a rule, existing platforms are primarily designed for sales management rather than sales practitioners. Accompany, and a few others in the marketplace, are rethinking this orientation and seeking to deliver high-value products to better understand, nurture, and improve relationships. This is a multi-billion-dollar market opportunity when correctly executed. The key building blocks to this next generation of relationship management software are extensive data on people and companies, deep technology to clean, manage and analyze that data, and a streamlined user interface which can be easily integrated in an executive or sales practitioner’s daily workflow. LinkedIn (now Microsoft) probably comes closest to this reality, however, self-reported or user contributed data isn’t enough to deliver the full value proposition.