Q2 M&A Activity In the SMB Space

Sell Side

It’s been a very exciting quarter, with 4 of the 42 companies in the SMB index being acquired.

ReachLocal Joins Gannett

On June 28th, Gannett announced that it will acquire ReachLocal for $4.60USD per share — a 188% premium on the closing price on June 24th, 2016. This puts ReachLocal’s enterprise value at $156M USD. As a publisher and media company, Gannett owns notable brands such as USA Today, and owns 108 media organizations across the United States.

ReachLocal Stock Performance in Q2

With its acquisition of ReachLocal, Gannett hopes to bolster its digital business and enhance its SMB focus and reach. With Gannett’s presence in 107 local media markets already ReachLocal presents a good opportunity to generate digital revenue from Gannett’s existing local presence. This transaction marks the end of a tough period for Reachlocal as a public company. Their stock price declined steadily since their IPO.

NICE job inContact in getting acquired!

On May 14th, inContact announced a definitive agreement agreement to be acquired by NICE at $14 USD per share — a 55% premium over the prior day’s closing price, representing a $940M valuation for the business. inContact, as a market leader for cloud contact center solutions, fills in the final piece of NICE’s strategy to offer an end-to-end solution in customer experience fulfillment and analytics.

inContact Stock Performance in Q2

This acquisition was valued at 3.5x revenue, which represents a significant discount compared to recent acquisitions (7.2x revenue on the LinkedIn acquisition by Microsoft). Other similarly publicly traded companies in call centre or workforce management solutions such as Netcall and Atoss Software are trading at upwards of 5.6x EV/revenue.

With NICE largely being focused on the enterprise segment (80 of the Fortune 100 companies are on their NICE customers), it’ll be interesting to see if inContact stays true to its SMB roots.

Cvent Gets Acquired by Vista Equity Partners

Vista Equity Partners has had a busy quarter — acquiring Cvent, Marketo, Vertafore and Ping Identity. Vista announced the purchase of Cvent on April 17th at $36.00 per share, a premium of 69% at closing on April 15th for a total of $1.65B USD.

Cvent stock performance in Q2

Being taken private, Cvent now has the opportunity to try new international products they haven’t been able to before due to public market considerations. These includes more international customizations and data analytics, which means better services for their non-domestic SMB customers in the long-run.

Qlik Technologies to be acquired by Thoma Bravo LLC and Shareholders are NOT Happy

Qlik stock performance in LTM

Qlik announced on June 2nd that it was being acquired by Thoma Bravo for $3B USD in cash. The offer was for $30.50, a 40% premium to the unaffected 10 day average stock price prior to March 3, 2016. However, it is only a 14.4% premium to closing price on the last unaffected day, which is significantly lower than comparable deals seen in this quarter. Qlik was trading at a 52 week high of $41.92 and the offer price was significantly below analysts’ price targets.

Buy Side

Following the massive acquisitions of Constant Contact ($1.1B by Endurance International) and Yodle ($343M by Web.com) in Q1, this quarter has been more modest on the buy side by the publicly traded SMB players in our Index, with none exceeding the $100M mark.

GrubHub acquired LABites and Bask Labs

GrubHub announced its acquisition of LABites (local food order and delivery service) on May 3rd. The Wall Street Journal reported the deal as worth $65M USD. The aim of the acquisition is to help GrubHub grow its footprint in LA.

In April, GrubHub acquired Bask Labs — a proprietary recommendation engine for food ordering — in April. This helps GrubHub attempt to differentiate its service in an increasingly crowded market up against UberEats and Amazon Fresh.

GoDaddy Acquires FreedomVoice

GoDaddy entered an agreement to acquire FreedomVoice on May 17th for $42M USD in cash with an additional $5M in potential future milestones payments. FreedomVoice is a hosted voice service offering cloud number routing, hosted PBX, and business phone services for SMBs. FreedomVoice is highly aligned with GoDaddy’s continued movement away from domain name hosting to becoming a full suite of products for SMBs.

This acquisition is particularly interesting as this positions GoDaddy into competition with another company in our index, RingCentral, which specializes in telephony services for small businesses with 20+ employees. While FreedomVoice does focus on sole proprietors and sub-20 employee teams.

Stamps.com acquired ShippingEasy

On June 20th, Stamps.com announced that it will acquire ShippingEasy, an online multi-carrier shipping software for order fulfillment, for $55M in cash plus an additional 87,000 shares contingent on meeting performance targets. Ken McBride, CEO of Stamps.com, notes that the acquisition is strategic towards continued investment into their e-commerce shipping business. E-commerce shipping remains one of the fastest growing segments in Stamps.com’s product portfolio. The acquisition was completed July 5th.

Shopify Acquires Kit CRM

Kit CRM, an e-Commerce marketing platform, was picked up on April 14th by Shopify. Kit, a messaging app that helps businesses with online marketing, bolsters Shopify’s advancement into chat-based commerce. The details of the acquisition were not disclosed.

Qlik Acquires Industrial Codebox

Industrial Codebox, an app development shop, was acquired by Qlik on May 2nd for its QlikView integration expertise. As a Qlik partner since 2011, Industrial Codebox has offered out-of-the-box connectors to link data from cloud-based sources back into Qlik applications. This opens up Qlik to increase their cloud offerings and enhance their time to value.

At SurePath Capital Partners we help startups raise the capital needed to become market leaders. When the time is right, we help our clients achieve profitable, deliberate exit strategies. We only work with startups in the SaaS, e-commerce and marketplace segments. Across those segments we have a deep focus on companies serving the global SMB market. Say hello: info@surepathcapital.com

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