M&A Alert—May 16, 2012
The Yell Group Acquires Moonfruit
Transaction Size: $37mm
Moonfruit provides easy to use software that allows small businesses to build a website, create a Facebook store and establish a mobile presence. The service operates on a freemium-based model and has been used to create 5 million websites and 230,000 online shops. The company plans to launch HTML5 mobile and Facebook versions of their platform later this year. DIY-site builders include: Weebly, Yola, Qapacity andJimdo. Founded in 1999, Moonfruit is based in the U.K., has 40 employees and has raised $4.75mm in funding from 500 Startups, Bainlab, Stephens Capital Partners, Europ@Web (private investment arm of Groupe Arnault, owned by LVMH CEO Bernard Arnault) and Macromedia Ventures (venture arm of Adobe Macromedia).
Upon close of the acquisition, Moonfruit will be integrated to Yell’s eMarketPlace – Yell’s digital product offering which has offers an online portal where consumers and local businesses can connect and transact and has recently been rebranded as Hibu. Moonfruit cofounders Chief Executive Officer Wendy Tan-White, Chief Operating Officer Joe White and Chief Technology Officer Eirik Pettersen will take senior roles in Yell Group. Wendy Tan-White and Joe White will report directly to Scott Moore, who joined Yell last December in the new global role of Chief Digital Officer. Scott was previously Partner and Executive Producer at MSN, after senior roles at Yahoo! and Microsoft.
Yell is a U.K.-based yellow pages directory publisher, which was spun off from the British Telecom Group (NYSE: BT) in 2001. The company has 1.3 million small business customers. Like many other legacy yellow pages publishers, Yell has recently been bolstering its digital capability by offering services like online profiles, online website and store, email marketing, search and display advertising, online reviews, online ordering and mobile directory. Last year, Yell announced a new strategy, which emphasizes online and digital services to merchants. Recent acquisitions include Znode, an e-commerce platform provider for $19.2mm and Trusted Places, an online social community to review, share and discover local places.
Yell will pay $29mm in cash and has agreed to pay retention bonuses of up to $8mm to Moonfruit’s executive management team of Joe White, Eirik Pettersen and Wendy Tan-White after two years, provided they remain with Yell. Moonfruit’s financial performance measures have not been disclosed.
Other comparable transactions that focus on bolstering local merchant’s digital marketing and commerce capabilities include Intuit’s acquisitions of Demandforce and AisleBuyer; Groupon’s acquisitions of Ditto.me, Breadcrumb, Kima Labs, Adku and Zappedy; Home Depot’s acquisition of Red Beacon; ReachLocal’s (NASDAQ:RLOC) acquisitions ofDealOn and SMBLive; Reply!’s acquisition of MerchantCircle and Constant Contact’s acquisition of Cardstar.
Other comparable transactions for companies which are generally oriented toward larger retailers include IBM’s acquisitions of Demandtec and Coremetrics; VeriFone’s acquisition of Global Bay; Oracle’s acquisitions of ATG and RightNow; eBay’s acquisitions of Magento, GSI Commerce, Milo, RedLaser and Where.
Yell announced its “eMarketplace” strategy in July 2011 and also recently announced their rebranding strategy for their digital product offerings. The idea is to transform from providing simple print and online advertising into a more comprehensive set of products and services focused on helping local merchants attract and transact with local customers. This includes providing a broader set of marketing services, co-branded affinity cards, loyalty programs, concierge services, payment services and assistance with business operations. Also, as can also be discerned from the eMarketplace, and the Hibu rebrand, moniker, Yell wants to assist local merchants with direct sales of products and services to their customers, not just in the store, but also online or via mobile device.
Moonfruit brings Yell an easy-to-use, self-service platform allowing local merchants a robust web, Facebook and mobile presence, both for marketing and direct commerce purposes.
Architect Partners’ Observations
M&A activity is picking up in the local/hyperlocal sector. Year to date 2012, transaction levels are up 186% compared to prior year and the list contains a large number of active acquirers. The legacy print directory publishers, like Yell, PagesJaunes and Yellow Media are becoming increasingly active with 13 acquisitions since 2010.
While the old guard remains important, particularly for their merchant relationships and sales forces, it’s a new breed of local/hyperlocal solution provider who will more likely drive headline M&A transactions. These include premium acquirers such as eBay, Intuit, Groupon, Google, Visa, Mastercard, VeriFone, NAVTEQ and Facebook as well as the smaller but important “New Stars” such as Yelp, OpenTable, Angie’s List, Zillow and Foursquare, among others.