M&A Alert - January 13, 2012
Synchronoss Acquires Miyowa
Author: Steve Payne
Transaction Overview
On January 5th, 2012, Synchronoss Technologies (NASDAQ: SNCR, market cap: $1.1 billion) agreed to acquire Miyowa for up to $59mm.
Target Description
Miyowa provides messaging and social networking solutions for mobile devices. Its foremost solution, InTouch5, aggregates a user’s social networks, IM & Mail in one mobile interface. Miyowa has partnerships with social networks and messaging providers including Facebook, Twitter, Windows Live, Yahoo!, Gtalk and AIM to link contacts, status updates, photos and feeds into one unified interface. Miyowa’s customers include European service provider Orange and 30 other carriers and handset OEMs HTC, Samsung and ZTE. Their software is used in over 100 million mobile handsets in Europe and North America. Founded in 2003, Miyowa has 70 employees, is headquartered in Marseille, France and has raised $12mm in total funding from Credit Agricole Private Equity (Francois-Xavier Dede, Michel de Lempdes), Sophia Euro Lab and Techfund Europe Management (Kurt Kellhacker, Mike Kaul).
Buyer Description
Synchronoss Technologies provides service providers, cable operators, retailers and mobile device OEMs with in-store or online services for automating new subscriber activations, transferring and synchronizing content (media and address book data) among multiple mobile devices and provisioning new services. Synchronoss’s 2011 revenues were over $200m, with 50% attributable to AT&T Mobile and another 35% attributable to Time Warner Cable, Level 3, Verizon and Vodafone, collectively.
Transaction Parameters
Synchronoss will pay $45.5mm in cash and up to an additional $13.5mm in earnout based on Miyowa’s business achieving certain performance targets over the next four quarters. Synchronoss expects the transaction to be at least neutral to its non-GAAP earnings per share for 2012. Miyowa’s 2011 revenue was estimated at $12.7mm (a majority of which comes from carriers). Miyowa’s revenue model is based on the number of users (similar to Synchronoss) and has gross margins in the 80%+ range.
Enterprise Value: $45.5-$59.0
EV/Revenue: 3.6x-4.6x
Other comparable transactions include Motorola’s acquisition of Zecter for $40mm in December 2010, RIM’s acquisition of NewBay for $100mm in October 2011, Acer’s acquisition of IGware for $320mm-$395mm in July 2011 and Synchronoss’s acquisition of FusionOne for $49mm-$75mm in July 2010.
Strategic Rationale
This deal links Synchronoss’s mobile strength with Miyowa’s social networking capabilities to provide a broader solution set for carriers and OEMs. Miyowa brings unique relationships with mobile messaging and social network vendors (via private APIs) and also with European and Asian carriers and device OEMs. These social networking and messaging capabilities will be connected with Synchronoss’s Network Address Book sync product to allow consumers to manage and consume contacts, social media and messaging from one integrated interface on their phones. Synchronoss’s ConvergenceNow Plus+ platform and its Network Address Book in effect become a more powerful social address book.
Architect Partners’ Observations
This transaction highlights four key themes:
1) The importance of Service Provider IT (SPIT) vendors in mediating services across multiple carriers and device OEMs.
2) The attractiveness of higher-layer services that attempt to keep carriers relevant in an ecosystem where the smartphone platforms have taken a dominant position.
3) The ubiquity of social networks as a communication channel.
4) The continued interest in sync and backup products as a way for carriers, OEMs and platforms to lock in customers and generate incremental services revenues.
Resources
Synchronoss Acquires Miyowa
Synchronoss Buys Miyowa for $45.5mm, Expanding Its Cloud Software
Synchronoss Adds Miyowa’s Social Networking Capabilities to Its Mobility Platform