M&A Alert—October 3, 2016
Salesforce acquires data management platform Krux Digital for a reported $700 million.
Author: Eric Risley, John Ascher-Roberts
Transaction Size: $700mm
On October 3, 2016, Salesforce (NYSE: CRM) announced an agreement to acquire data management platform Krux Digital for $700 million, of which $340 million is to be paid in cash and $360 million in stock.
Krux Digital offers a cloud-based data management platform for marketers, media companies, publishers, and ad agencies worldwide. Its data management platform, the Intelligent Marketing Hub, unifies consumer data from sources, analyzes the data to identify and understand individual consumer preferences and expectations to create audience segments. Its platform then uses machine learning to intelligently help its clients deepen consumer engagement by suggesting the right message at the right time via the right marketing channel for each individual consumer. The company has approximately 200 customers, including major brands such as ABInBev, Centro, ConAgra Foods, JetBlue, Kellogg’s, Spotify, and Warner Brothers.
Tom Chavez, CEO, and Vivek Vaidya, CTO, co-founded the San Francisco-based company in 2010. Prior to its acquisition, it had received $50 million in funding from investors including Accel Partners (Arthur Patterson), IDG Ventures, Sapphire Ventures LLC (Nino Marakovic, Rajeev Dham), Temasek Investments., The Entrepreneurs’ Fund, Time Warner Investments, Ulu Ventures, Visionnaire Ventures, and Western Technology Investment. In its latest financing round, a Series B in 2014, Krux Digital was valued at $150 million. Krux Digital had roughly 183 employees upon its acquisition.
Salesforce is a global SaaS software company based in San Francisco, CA. Founded by Marc Benioff in 1999, Salesforce has traditionally provided a cloud-based CRM product. Now, Salesforce offers a portfolio of other cloud products including Sales Cloud, Service Cloud, Marketing Cloud, Community Cloud, and Analytics Cloud. Recently, it announced the launch of its artificial intelligence engine, Einstein, that works across and pulls in data from all of its products. Today it has over 100,000 customers. Salesforce’s stock last closed at $71.15 per share at a market capitalization of $48.2B, and it has LTM revenue, as of July 31st 2016, of $7.5B.
Salesforce is purchasing Krux Digital for $700 million, with $340 million of the consideration being paid in cash and the remaining $360 million in stock.
Transaction Value: $700M
TEV/ Invested Capital: 14.0x
Comparable transactions include Neustar’s acquisition of MarketShare Partners in November of 2015 for $450mm (7.9x LTM revenue, covered in our M&A alert), Oracle’s acquisition of Datalogix in December of 2014 for $1.1B (9.2x LTM revenue, covered in our M&A alert), Acxiom’s acquisition of LiveRamp in May of 2014 for $310mm (11.0x LTM revenue, covered in our M&A alert), Oracle’s acquisition of Bluekai in February of 2014 for $350mm (5.5x LTM revenue, covered in our M&A alert), and Neustar’s acquisition of AggregateKnowledge in October of 2013 for $119mm.
Salesforce has been aggressively beefing up its SaaS portfolio in the last twelve months, spending nearly $4 billion on companies such as Demandware ($2.8B), Quip ($750mm), and BeyondCore ($110mm). Nevertheless, its Marketing Cloud has lagged behind that of Adobe’s, IBM’s and bitter rival Oracle’s in terms of market share, according to Gartner’s Magic Quandrant of leading marketing cloud hubs. With all of those major players already owning their own data management platform (Adobe’s Audience Manager, Oracle’s Datalogix, IBM’s InfoSphere), Salesforce’s acquisition of Krux allows it to remain competitive with key competitors.
Architect Partners’ Observations
Understanding consumer preferences via collection of data is a priority for many of the leading companies to compete with the extraordinary insights possessed by Facebook and Google. The prize is precisely reaching targeted consumers with marketing & advertising messages that result in a clear return on marketing investment.
Many of the largest acquisitions in 2016 have echoed this trend as we’ve seen Verizon acquire Yahoo ($8.5B), Microsoft acquire Linkedin ($26.2B), Time acquire Viant (undisclosed, covered here), and Telenor acquire Tapad ($360mm, covered here).