M&A Alert—December 20, 2013
Oracle Acquires Digital Marketing Company Responsys for $1.5 Billion
Author: Eric F. Risley
Transaction Size: $1.5 billion
On December 20, 2013, Oracle (NYSE: ORCL; market cap: $166.6b) announced the acquisition of digital marketing provider Responsys (NASDAQ: MKTG; market cap: $1.4b), for a total consideration of $1.5 billion, net of Responsys’ cash. Oracle is paying $27.00 per Responsys share, representing a 38 percent premium to Responsys’ previous day closing price.
Responsys provides cloud-based software that businesses use to manage their marketing campaigns across e-mail, mobile, social, display and the web. Responsys emphasizes marketing “orchestration,” an approach to marketing that focuses on optimizing a set of related cross-channel interactions. For example, Responsys worked with rental-car company Dollar Thrifty Automotive to increase the percentage of people who showed up for their reservations. Responsys crafted personalized emails and mobile reminders that appeared for people who had Dollar Thrifty reservations in coming days. Responsys claims the percentage of people who followed through on bookings increased by 22%.
LinkedIn, Orbitz, Lenovo, Lufthansa, Pottery Barn and Jet Blue Airways are among a few of Responsys’ customers. Founded in 1998 and headquartered in San Bruno, California, Responsys employs more than 1,000 people in the US, Brazil, India, Europe and Asia Pacific.
Responsys raised $79.2mm in its April 2011 IPO by selling 6.6mm shares for $12 apiece. Shareholders in the company include Accel Partners, Sigma Partners, Foundation Capital, Redpoint Ventures and Lighthouse Capital Partners.
Oracle’s legacy is its market-leading database management systems. Over the last decade, Oracle has built and acquired a broad range of enterprise software products including tools for application development, enterprise resource planning (ERP), customer relationship management (CRM) and supply chain management software. Since 2012, Oracle has acquired 19 companies including Eloqua ($871mm; cloud-based marketing automation software), Vitrue ($300mm; social marketing platform provider) and Taleo ($1.9b; cloud-based talent management provider).
Mark Hurd, Oracle President and Thomas Kurian, Oracle EVP of Development, were key executive sponsors of this transaction.
Oracle is paying $27.00 per Responsys share, which amounts to a 38 percent purchase price premium, or $7.48 above Responsys’ previous day closing price of $19.52. In total, Oracle is spending approximately $1.5 billion in cash. Responsys posted LTM revenues of $194.3mm, with an operating income of $1.6mm.
Transaction Value: $1.5 billion
TV/TTM Revenue ($194.3mm): 7.7x
There have been a number of recent transactions within the digital marketing space, including Salesforce’s acquisitions of ExactTarget ($2.5b, 8.6x revenue multiple), Buddy Media ($745mm; 29.8x revenue multiple) and Radian6 ($276mm, 9.3x-9.7x revenue multiple), Adobe’s acquisitions of Neolane ($600mm) and Omniture ($1.8b, 5.2x revenue multiple), Oracle’s acquisitions of Eloqua ($871mm, 9.7x revenue multiple), Vitrue ($300mm), and Involver, Google’s acquisition of Wildfire ($350mm) and IBM’s acquisition of Unica ($490mm, 4.1x revenue multiple).
Oracle will integrate Responsys in the Oracle Marketing Cloud and market it alongside Eloqua, the marketing automation company it bought exactly a year ago for $871mm. The result will be a marketing cloud offering that unites the historically distinct business-to-business and business-to-consumer ends of the marketing spectrum onto one platform.
Architect Partners’ Observations
This is yet another milestone transaction for the digital marketing sector in 2013, following Salesforce’s acquisition of ExactTarget and Adobe’s acquisition of Neolane both in June. Oracle ended last December with its own noteworthy acquisition of Eloqua, paying 9.7 times Eloqua’s trailing-twelve-month revenue. As indicated by these valuations, the digital marketing sector has momentum and will continue to receive increased M&A attention as the industry matures.
Competitors Marketo (NASDAQ: MKTO; market cap $1.4b), a cloud-based marketing provider and Constant Contact (NASDAQ: CTCT; market cap $938.2mm), an email marketing company, both saw their shares trend upward on the day of Oracle’s announcement – an 11 percent jump for Marketo and a 7 percent increase for Constant Contact.