M&A Alert - January 13, 2010
Unica Buys Pivotal Veracity
Transaction Overview
On January 13, 2010, Unica (NASDAQ: UNCA) agreed to acquire Pivotal Veracity for $17.8mm in cash
Target Description
Pivotal Veracity provides software which enables email marketers to optimize the delivery and effectiveness of their email marketing campaigns and to build and maintain a preferred reputation. Clients include large corporations (such as Amazon, American Express, Nestle, Sears and Cisco), email service providers (such as Acxiom Digital, Digital River, Exact Target, Responsys, Silverpop, and Yesmail), as well as advertising agencies (such as Avenue A/Razorfish, MRM Worldwide, Rapp Collins, and WPP). In 2008, Pivotal Veracity’s email service provider customers sent more than 15b marketing-related emails per month. Prior to Unica’s acquisition, Pivotal Veracity had already been integrated to Unica’s on-premise email marketing solutions, eMessage. The Company’s initial funding was less than $500K from private individuals including the Company’s two founders, Deirdre Baird and Michelle Eichner, who will join Unica after the acquisition. Pivotal Veracity was founded in 2003 in Bradenton, Florida.
Buyer Description
Unica offers enterprise marketing management software allowing companies to manage and optimize their online marketing strategy and analytics as well as website marketing / personalization. The company’s software consists of modules that allow companies to identify customer interaction strategies, monitor and measure marketing program activities, manage and identify lead qualification, generate report on Web site activity as well as marketing performance analytics based on customers’ behaviors. The company was incorporated in 1992 and is headquartered in Waltham, Massachusetts. Yuchun Lee, CEO of Unica, was the key executive sponsor of the transaction.
Unica acquired Pivotal Veracity for $17.8mm in cash. Based on the disclosure provided on Unica’s Q1 2010 earnings call, we believe Pivotal Veracity’s annual revenue is between $3.5mm and $4mm annually, translating to a price/revenue ratio of between 4.5x to 5.1x.
Other recent comparable transactions include Adobe’s acquisition of Omniture (an online marketing analytics service provider) in September 2009 for $1.7b at 5.1x revenue, and Publicis Groupe’s acquisition of Microsoft’s Razorfish (a digital advertising agency) in August 2009 for $580mm at 1.4xrevenue.
Strategic Rationale
Aggressive filtering of emails by ISP’s and enterprises is commonplace. Assuring delivery of marketing emails and analyzing effectiveness is an essential element of successful email marketing. Unica, which already integrate Pivotal Veracity’s capabilities into a portion of their product offering, clearly signaled the importance of these capabilities by acquiring the company. Unica will also be able to broaden the integration of Pivotal Veracity capabilities into their full product offering. This is a classic buy vs. partner transaction where buy prevailed.
Architect Partners’ Observations
“Push” messaging, like Unica’s email marketing offerings, is a very valuable tool to marketers. While email marketing is a large and growing market ($1.2b in 2009 according to Forrester), mobile marketing via SMS messaging is an even larger market with faster growth prospects. SMS has become a large and valuable marketing platform due to the fact that essentially every mobile phone has SMS capability, the highly personalized nature of a mobile phone allowing targeting and increasingly the advent of location awareness. According to JP Morgan, mobile marketing and advertising via messaging is projected to grow by 117% from a $2.3b market in 2009 to a $5.0b market in 2012.