TL;DR

  • After the wave of M&A in 2013-2015 driven by “Big Tech”, email marketing tech deals are back
  • While the old guard (Salesforce, Adobe, Oracle) acquired during the first wave of acquisitions, new unicorns are actively scaling their tech stack through M&A
  • Email marketing software matures around the globe, with abundance of strong local players

After years of predicting the “death of email”, boosted by the growth in ecommerce, email marketing companies are snapped up by a new generation of software companies.

In our inaugural report, we look at past M&A in the segment and why the deals are back in 2021.

The first wave of M&A

The email marketing dealmaking took off in the early 2000s, when the cloud SaaS offerings were still nascent, but already the future of software. Marketing cloud was to be one of the pillars of the enterprise offering and email marketing – the core of the cloud.

The leading software vendors driven partly by FOMO bankrolled a not seen before acquisition spree in the marketing technology, getting off the market the companies that once were synonymous with the email marketing tech. Oracle, Salesforce, Adobe, IBM paid billions of dollars for the leading email marketing software companies (to this day, those still remain some of the highest multiples paid).

Of the usual suspects, it seemed only Microsoft and SAP did not make a mega-deal.

However, SAP has always been more manufacturing-focused, so had limited competitiveness in these competitive deals. Microsoft, on the other hand, ventured into social media, acquiring Linkedin in 2016, relying on integrations and AppSource partners, such as ClickDimensions, backed by Accel-KKR.

The following years were spent on integrating the newly acquired software into the large Marketing Cloud projects. The acquired companies became the core of Marketing Cloud by Adobe, Salesforce and Oracle.

Their focus on delivering massive Enterprise software left a niche for an easier SMB-focused solution. Smaller players flourished, while Mailchimp soon became the #1 platform for email marketing. Bootstrapped since founding, the company was eventually sold to Intuit in November for a whopping $12B, more than all the past email marketing mega-deals combined.

The deal is an interesting one, especially given the reports it was competitive. Intuit’s plan to build a larger platform for small businesses raises an interesting question: Will it inspire a wave of deal making by the accounting software vendors? In most countries, the bookkeeping software is still local with rather narrow functionality. Local software for email marketing, SMS marketing, ecommerce may well be great acquisition targets.

Private equity comeback

Yet while the Mailchimp deal was the most headline-grabbing, 2021 has seen a flurry of activity around the globe.

First, with the record low interest rates and abundance of dry powder, private equity funds became some of the most active investors in the market.

Constant Contact, was spun-off from a web hosting company Endurance International, and raised a $400M growth equity.

Active Campaign is taking Mailchimp’s route. Founded in 2003, the company focuses on SMBs and raised first outside money in 2016. The most recent $240M round valued the company at $3B+ and a 18x Revenue multiple.

Fundraising activity in Email marketing software

New unicorns

Second, the emerging software leaders are increasingly using M&A to boost their technology stack. If history is any guide, then the largest SaaS companies are the natural buyers for independent vendors. Indeed, Twilio, originally focused on SMS, widened their stack with the acquisition of SendGrid in 2019.

Still, many of the emerging challengers have not yet concluded an email marketing acquisition.

Shopify, a natural buyer, does not have an active M&A strategy, preferring to invest in the ecosystem. In June, they slashed commissions to 0% for app sales below $1M.

At the same time, this doesn’t mean that the M&A in the space is thus subdued – this year a $2.2B-valued SMS marketing specialist Attentive Mobile acquired Privy, a self-declared “Mailchimp for Shopify”. Klaviyo, a diversified ecommerce software provider, raised $320M in the most recent round.

The activity also accelerated among smaller players, with unicorns, such as Pipedrive or Sitecore acquiring email marketing companies. The consolidation also continues in the smaller markets: domestic deals in Poland, Brazil and Germany are good examples.

Even after the waves of acquisitions in the email marketing segment, the industry is still fragmented with many bootstrapped companies, both with local and global presence. With the continuing emergence of new marketing, accounting, ecommerce, CRM software, it seems the deal making in the space will continue, even if at a smaller scale.