IBM as an acquirer also makes perfect sense. Although they bought B2C marketing automation leader Unica several years ago, they lack enterprise-scale B2C email engine and B2B marketing automation. This makes Silverpop a perfect fit.
The only surprise in this deal is the price, rumored to be about $270 million or 3x revenue. ExactTarget and Responsys both sold for 6-7x revenue and I would have expected Silverpop to yield something similar. The company has always been very tight with financial information, although client and employee counts they’ve provided for our VEST report suggest recent growth rates of 20% to 30% per year, which considerably lags the industry as a whole. We don’t know anything about profitability, but I’d guess they run close to break even, since they haven’t announced any new investment recently and the slow growth rate would reduce the need for capital. In general, the market seems to reward growth over profitability, so these results may depress their price somewhat.
The company’s mix of B2B and B2C clients may also confuse potential buyers and drive down the price a bit. Plus, there just aren’t that many enterprise software companies who still need what Silverpop is offering: Oracle and Salesforce.com have already made their purchases, Adobe is part of the way there with Neolane, and SAS and Teradata have their own tools and are probably less interested in B2B because most buyers are small or mid-size firms. SAP might be a potential buyer but hasn’t really shown an interest and just announced a deal to resell Adobe’s marketing suite. You could make an interesting case for Marketo as a buyer – to gain market share and some good technology, while leveraging a stock valued at more than 10x revenue – but that doesn’t seem to be part of their strategy.
So we’ll see. I wouldn’t be surprised if someone else offered Silverpop a higher price, but it’s not obvious who that would be. And if the IBM deal goes through, Silverpop will fit nicely into its new home.
