november 2016 tech m&a update - the jordan, edmiston …mobile gives rise to next generation...
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Tech M&A Update November 2016 | 1
November 2016
TECH M&A UPDATE
MOBILE APPS AND DIGITAL PAYMENTS A WINNING COMBINATION FOR CREATING A BETTER CUSTOMER EXPERIENCE AND MORE PROFITS FOR MERCHANTS
This coming week, JEGI will be hosting a roundtable executive dinner on the theme of “Mobile-First Technologies & Digital Payments Fueling the Next Generation of Consumers.” Our event falls five years after Google Wallet was introduced to the US market with much fanfare, but was accepted in only a handful of coffee shops in Silicon Valley. The vast majority of retailers showed little interest in accepting mobile wallets, since they required the adoption of expensive new payment devices. Similarly, most American consumers could not understand what the excitement was all about with using a phone to pay for a purchase.
The pendulum began to swing, however, as credit cards issuers established a goal of October 2015 for business to adopt EMV (Europay, MasterCard, Visa) payment technologies in the States (as has been the practice in Europe for years) to help reduce fraudulent card transactions. The rollout of EMV technologies provided a critical impetus for retailers to install card readers that enabled card acceptance by both EMV and Near-Field Communication (NFC) technologies, with the latter being significant for the widespread adoption of mobile wallets by retailers. (For those not familiar with NFC, it is the technology that allows contactless payments, such as tapping to pay with one’s Apple Watch or iPhone at retailers.)
Heavy Adoption AheadWhile CB Insights estimates that only 20% of payment terminals are equipped for contactless payments, most large retailers have adopted the payment method, and the expectation is that smaller merchants will do similarly over the next few years (smaller merchants have effectively been given an extension on the October 2015 requirements of card issuers to comply with the new guidelines).
Consumers are warming up to mobile payments for a variety of reasons, ranging from convenience (e.g., you only need to take your phone when you go out and can leave your wallet at home), to security, to the promise of better loyalty programs and discounts. A recent study found that 39% of all US mobile users made a mobile payment in 2015, which is up from 14%
Author: Joseph Sanborn, Managing Director & Co-Head of Tech [email protected] +1 617 294 6555
NFC is the communication between two electronic devices that enables proximity payments to be made by either tapping or waving a smart phone in front of the terminal, whereas EMV is the insertion of a chip
within the receiver to transfer payment.
MOTIVATIONS OF CUSTOMERS AND MERCHANTS FOR ADOPTING MOBILE WALLETS/PAYMENTS
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in 2014. It is estimated that by 2020, more than 90% of American smartphone users will have made a mobile payment. Similarly, merchants are seeing mobile payment solutions as a means to better engage with their customers, as well as streamline their operations.
Strong Effectiveness of Mobile Apps Mobile wallets allow merchants to better identify and understand their customers across the physical and digital worlds. In addition, merchants are recognizing the superior ability of dedicated mobile apps at driving purchases relative to mobile and desktop browsers. Recent studies by Criteo have shown that the average order value achieved via mobile apps is 2% higher than an order completed on a desktop, and 10% higher than on a mobile browser. The chief reason for the success of mobile apps in driving sales is that they are optimized for the mobile environment (i.e., small screens with inconsistent network quality) and tailored to each merchant’s offerings and brand experience. In addition, mobile apps have been shown to be more successful in driving purchases than mobile browsers at every point of the conversion funnel, as shown in the accompanying chart, and even exceeding the desktop rate by 20%.
Increasing Use of Mobile for eCommerceAs we look ahead to the official start of the Christmas shopping season, it is worth noting the studies from last year on the impact of mobile (both mobile browsers and mobile apps) on online purchases. Black Friday Weekend 2015 reached an unprecedented level of mobile devices being used for online purchasing, with 41% of eCommerce transactions being completed on either a mobile app or mobile browser during the three days following Thanksgiving. To put this in context, the quarterly average for mobile being used for online purchases is approximately 30%, so mobile accounted for 33% more eCommerce transactions during the most important period for retailers in 2015 (Black Friday Weekend).
With analysts widely predicting that mobile will account for more 50% of online purchases during Black Friday Weekend 2016, the challenge for merchants is how to create a mobile experience that drives engagement with their customers and results in a transaction being completed. While there are clearly benefits for merchants in having consumers constantly tethered to their mobile devices, there is also the daunting reality that the five to seven-inch screens create a potential customer with far less patience than they might have when shopping from a desktop browser. According to studies by MasterCard, the average online cart abandonment rate is 68%, but soars to a distressing 97% on mobile!
Enhancing the Customer mCommerce Experience With customers showing an increasing preference for doing more of their online shopping on their mobile devices, merchants are rushing to adopt solutions to
MOBILE APPS AND DIGITAL PAYMENTS (CONTINUED)
Note: Index implies that Black Friday Weekend experienced 5x the average daily volume of Retail eCommerce transactions
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improve the mCommerce experience for consumers, with the goal of reducing friction in converting mobile shoppers into purchasers of their goods. Amazon is widely regarded as the leading merchant for developing solutions tailored to improving the mobile shopping experience, with its success largely attributable to its ability to simplify the user checkout experience.
Recognizing what has made Amazon so successful on mobile, merchants are looking to improve their own conversion rates by leveraging mobile wallets and other related mCommerce enablement services, like Autofill, which populates customer billing and shipping information. These solutions are enabling smaller merchants to streamline the purchasing experience on mobile devices by significantly reducing the amount of information that a customer has to enter on a small smartphone screen.
Mobile Gives Rise to Next Generation Loyalty ProgramsThe combination of mobile wallets and apps is allowing a broader group of merchants to develop more comprehensive loyalty programs to better engage customers, replacing the need for physical wallets stuffed with reward cards that are easily lost or forgotten. Merchants have recognized that it is far easier to drive profits through retaining and engaging current customers than by acquiring new ones. Several studies have validated this point by showing, for example, that a 5% increase in customer retention can lead up to a 95% increase in profit, and that it costs a merchant 5-10x more to acquire a new customer than to sell to an existing one.
Sweetgreen, the quick-service salad restaurant, is regarded by many as a leader in leveraging mobile. It has achieved a cult-like following with the help of a loyalty program that is housed on a dedicated mobile app, which also processes payments. Mobile payments through the app represent the largest portion of this company’s total transaction volume, ranking higher than any credit card. The Sweetgreen app is also the fastest way to pay (saving customers between 5 and 20 seconds at check-out) and also reduces the number of cashiers required at a venue. The company uses back-end components to track and analyze customer activity captured through its app and optimizes how best to engage a specific customer.
The Mobile Payments Road Ahead…At JEGI, we are excited by the emergence of an interdependent mobile commerce ecosystem. Relying on mobile apps and mobile wallets to better engage with customers and drive profits, merchants are leveraging back-end platforms and tools tied into payments infrastructure, digital loyalty solutions and mCommerce enablement. Our firm has developed a more comprehensive report on this area; please contact Joseph Sanborn at [email protected] to schedule a time to meet to discuss it further.
MOBILE APPS AND DIGITAL PAYMENTS (CONTINUED)
THE INTERDEPENDENT MOBILE COMMERCE ECOSYSTEM
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PRIVATE COMPANY SPOTLIGHT: FEATHREach issue, we spotlight an interesting emerging growth company for our audience. As experienced tech bankers, we highlight the characteristics that enable these companies to grow into market leaders and ultimately attract the interest of investors and major strategic partners.
This month, our Private Company Spotlight shines on Feathr, a marketing software platform designed specifically for event organizers of live events.
Feathr packages multiple layers of the adtech stack still out of reach for many companies (audience analysis, audience extension, DMP integration, etc.) into a simple, automated solution that allows live events to grow attendance, engagement and digital sponsorship sales.
Founded in 2012, Feathr is headquartered in Gainsville, FL. The Company raised $2 million in venture funding in late 2015. We interviewed Aleksander Levental, Feathr’s Co-Founder & CEO, for his view on how the Company is growing and differentiating itself in the event tech industry.
What is the “elevator pitch” of the main problem(s) Feathr is trying to solve?Live events play a tremendous role in global society, and have for centuries. Their large (and consistently increasing) cultural and economic impact is ultimately a product of the event organizer’s ability to create engaging and resonant experiences. Those experiences allow consumers to connect with content that they are passionate about, professionals to engage with their industries, and suppliers, vendors, and service providers to build their businesses and brands efficiently. This is why in-person events still represent the plurality of B2B marketing spend in 2016. However, the process of designing and growing events is only getting more competitive and complicated. Attendee acquisition and retention is getting harder in a world with democratized marketing technology. Content design
is an increasingly complex task, as attendees demand more personalized experiences; and growing revenue from exhibitors and sponsors is difficult without a full complement of scalable digital tools.
Feathr uses anonymous and personally identifiable audience analytics and real-time segmentation that seamlessly connects to complementary messaging channels, such as programmatic display, social, email, and direct mail, to enable events to grow their attendance and generate revenue.
How do you define and size the Company’s market?If I’m talking to someone from the Bay Area, I would include anyone that sells tickets and sponsorships to events. I would include producers of conferences, trade shows, conventions, sporting events, music festivals, concerts and marathons. This addressable market is north of $100 billion.
Feathr uses anonymous and personally identifiable audience analytics and real-time segmentation that seamlessly connects to complementary messaging channels, such as programmatic display, social, email, and direct mail, to enable events to grow their attendance and generate revenue.
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PRIVATE COMPANY SPOTLIGHT: FEATHR (CONTINUED)
Otherwise, I would focus primarily on mid-size to large B2B events (conferences and trade shows) and large transactional B2C events (conventions, festivals, etc.). Our last estimate of this addressable market was $21 billion.
What “secret sauce” differentiates Feathr from competitors, big and small? There’s some parallelism to that question and our differentiation. Events have technology needs that are somewhere between big and small. The biggest players in the space lack the specificity and focus necessary for events. The smallest ones don’t understand the scope of the problem they should be solving. We have the appropriate breadth and depth of product and service that allows our customers to start generating ROI on day one (maybe more like day six, but I’m the CEO so I have to say sensational things), as well as scale their usage to hundreds of millions of records, across dozens of events in years two and three and beyond.
Feathr has an impressive, growing customer base. Can you provide some representative client case studies?We’ve been incredibly fortunate to work with some of the largest B2B and B2C events and organizers in the world. Some of the highlights over the last year were: 1) working with Emerald’s Kitchen and Bath Show and driving 11x ROI while influencing 11% of all registrations; 2) increasing LeadsCon’s revenue from ticket sales by $240,000; and 3) helping an event organizer generate $400,000 in incremental digital revenue during their first year with us. Here are links to some case studies for further review: KBIS, LEADSCON, and OILCOMM.
Can you share with us some insight into the growth path of the Company in the past and looking forward?Feathr launched in January 2012.
The company has been through two substantial pivots since then –evolving from a consumer mobile app focused on professional networking, to selling white-labeled mobile apps to conferences and trade shows, to building a SaaS-based data and marketing tech company targeting the events industry. And then, around late 2015, we finally found a genuine product/market fit and raised $2 million, which has made 2016 our first real year investing in growth. In 2016, we’ve grown headcount from 5 to 20, worked with around 350 events, almost tripled our average deal size, crossed $100,000 MRR, and learned that bagels might be the single most appreciated benefit we offer.
If Feathr made New Year’s Resolutions for 2017, they would read something like:
• Don’t rest on your laurels• Keep solving more and bigger problems• Remember that your customer’s
problems are your problems
We’ve learned a lot in the last year, and our product development and growth will benefit from that substantially in 2017.
What excites you when you think about Feathr’s future?That I’m beginning to genuinely believe the things we say about our market and future. It’s seeming more and more apparent that we have a real opportunity to influence a large industry with products and services that generate value, provide competitive advantage, and help people innovate.
The event tech sector will be active and competitive over the next few years, and competition is always exciting.
Events have technology needs that are somewhere between big and small. The biggest players in the space lack the specificity and focus necessary for events. The smallest ones don’t understand the scope of the problem they should be solving.
The event tech sector will be active and competitive over the next few years, and competition is always exciting.
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HEY, DID YOU SEE THIS?
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IWELCOME October 4, 2016
iWelcome’s Consumer IAM (CIAM) was ranked by Gartner as among the best in the world with an “excellent” rating for its capabilities. iWelcome helps organizations manage the identity lifecycle and access of their consumers, employees, business customers, partners and suppliers in a simple, secure and efficient manner.
ABILITY COMMERCEOctober 25, 2016
Ability Commerce, a provider of direct commerce retail platforms that help growing retail businesses increase revenue, reduce overhead and engage with their customers, has been named a Multichannel Merchant Top Commerce Platform for 2017, part of a list of leading commerce platform providers, selected by the editors of Multichannel Merchant.
CONNOTATE November 15, 2016
Connotate, a web data extraction platform provider for the information services industry and data-centric businesses, has announced availability of their new Connotate Cloud offering. With Connotate Cloud, businesses can leverage the full power of Connotate web extraction and monitoring technology in the cloud.
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HEY, DID YOU SEE THIS? (CONTINUED)
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QUALI October 19, 2016
Quali, a maker of cloud sandbox software for DevOps automation, has announced the general availability of CloudShell 7.1, which introduces application deployment for hybrid clouds with support for Amazon Web Services (AWS), among other technical advances.
LATTICE ENGINESNovember 15, 2016
Lattice Engines, a provider of revenue acceleration solutions, has announced that it has launched a predictive campaigns application now available on the Oracle Cloud Marketplace. The Lattice Predictive Campaigns application helps marketers execute hyper-personalized marketing campaigns against the highest value accounts using Lattice’s predictive analytic solutions within the Oracle Marketing Cloud.
LINKABLE NETWORKS November 2, 2016
Linkable Networks, a shopper attribution company leveraged by more than 40 national retailers across all classes of trade, has announced enhancements to its platform that enables retailers and brands to verify purchases independent of tender type – cash, credit, or debit – at the SKU-level, at any store, and for any brand.
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SELECTED OCTOBER M&A TRANSACTIONS IN JEGI TECH COVERAGE
BUYER SELLER TARGET DESCRIPTIONENTERPRISE VALUE
($MM)
salesforce.com Krux Audience management & targeting SaaS $680
Roper Technologies ConstructConnect Data management SaaS $632
LDiscovery (Carlyle, The/Revolution) Kroll Ontrack (Corporate Risk Holdings) E-discovery SaaS & services $410
Wolters Kluwer Health Emmi Solutions Patient engagement & analytics SaaS & services $170
DigitalGlobe Radiant Group (Aston Capital) Government IT systems integration $140
Proofpoint FireLayers Cloud application control SaaS $55
Vocera Communications Extension Healthcare Healthcare team collaboration SaaS $55
Aspen Technology Mtelligence Corporation Industrial equipment maintenance software & SaaS $37
Deals with Values (by size)
Deals without Announced Values (alphabetical by buyer)
BUYER SELLER TARGET DESCRIPTION
Applied Visions Software Design Solutions Software development services
Aptean (Vista Equity) GQ Life Sciences Intellectual property search engine SaaS
Casamba SourceMedical (TherapySource asset) Therapy EHR software & SaaS asset
Cisco Systems Heroik Labs Team meeting management software
Denovo Ventures (M/C Partners) CD Group Systems integration & managed services
Drillinginfo GlobalView Data management SaaS
Envestnet Wheelhouse Analytics Investment sector analytics SaaS
Exadel Amadeus Consulting Software development & consulting services
ExlService Holdings Datasource Consulting BI and data management consulting & integration
First American Financial Corporation TD Service Financial Corporation Mortgage BPO & software
Hearst Business Media CAMP Systems International (GTCR) Aviation maintenance & tracking SaaS
IBS Direct Maestro Managed Print Solutions Cloud-based marketing software
Ignite Technologies (Versata) (ESW Capital) ThinkVine Web-based marketing software
j2 Global MaxEmail Online faxing services
Kibo Software (Vista Equity) Volusion (Mozu product line) E-commerce SaaS
Kronos (Hellman & Friedman/JMI) Datamatics Management Services HR management SaaS
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SELECTED OCTOBER M&A TRANSACTIONS IN JEGI TECH COVERAGE (CONTINUED)
BUYER SELLER TARGET DESCRIPTION
Morgan Stanley Private Equity 24 Seven Digital marketing staffing services
Netsmart Technologies (Genstar Capital) HealthMEDX (Spectrum Equity/Trident) Medical facility management software
Parthenon Capital / BillingTree Management Electronic Payment Providers Payment & transaction processing SaaS & services
Perficient Bluetube Mobile application development & services
PowerSchool Group (Vista Equity) Chalkable Education & behavior management SaaS
QTS Realty Trust VMware (EMC) (Dell) (vCloud GovernmentService) Government virtualization software & SaaS
Rockwell Automation Maverick Technologies Industrial automation systems integration
Serent Capital Apex Software Technologies Payroll management SaaS
Silicon Laboratories Micrium Embedded IoT OS software
Special Counsel (Adecco North America) D4 E-discovery services & software
SS&C Technologies Salentica CRM SaaS & services
StoneCalibre Trivantis Corporation E-learning development software provider
Sutherland Global Services Nuevora Analytics Technologies India Outsourced big data analytics & SaaS
TrendShift Health Data Intelligence (assets) Healthcare analytics SaaS
TriCore Solutions (BV Investment Partners) Database Specialists Oracle database administration services
ValuD Consulting Asset Management Engineering IBM Maximo-based integration & services
Vision Media Management & Fulfillment (CenterGate) Fordela Digital asset management & streaming SaaS
WeiserMazars Integrity Consulting Solutions Management consulting & IT services
Xaxis (WPP Group) Triad Retail Media (Rockbridge/Falcon) Web marketing services & software
Deals without Announced Values (alphabetical by buyer)
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ABOUT JEGI
JEGI has been the leading independent investment bank for the global software, tech-enabled services, media, marketing and information sectors for more than 28 years. Headquartered in New York, with offices in Boston and London (via its partnership with Clarity), JEGI has completed more than 600 high-profile M&A transactions, serving global corporations; middle-market and emerging companies; entrepreneurial owners and founders; and private equity and venture capital firms.
We provide clients with a global network of prospective buyers and senior decision-makers, as well as vast industry knowledge, perspective and intelligence. This affords our clients seamless access to deep market insights and a wealth of M&A experience, enabling us to deliver the highest closing rate in our industry and drive strong valuations.
For more information, visit www.jegi.com.
600Over the past 28 years, JEGI has completed more than
M&A transactions, serving global corporations; middle-market and emerging companies; entrepreneurial owners and founders; and private equity and venture capital firms.
TECH M&A UPDATE NOVEMBER 2016
Wilma JordanFounder & [email protected]
Jeff BeckerManaging [email protected]
Scott [email protected]
Tom PechtManaging [email protected]
Tolman [email protected]
Richard MeadManaging [email protected]
Adam [email protected]
David ClarkManaging [email protected]
Bill [email protected]
Amir AkhavanManaging [email protected]
LONDONClarity, 90 Long Acre London WC2E 9RA +44 20 3402 4900 | www.claritycp.com
NEW YORK JEGI,150 East 52nd Street18th FloorNew York, NY 10022 +1 212 754 0710 | www.jegi.com
BOSTON JEGI, CIC Boston, 50 Milk Street16th FloorBoston, MA 02109+1 617 294 6555 | www.jegi.com
Doug [email protected]
Joseph SanbornManaging [email protected]
SELECT RECENT JEGI TECHNOLOGY TRANSACTIONS
Wiland is a leading data-driven marketing technology and intelligence platform.
HAS RECEIVED AN INVESTMENT
FROM
AN UNDISCLOSED INVESTOR
ecVision is a cloud-based provider of global sourcing and collaborative supply chain software solutions.
Knowledge Advisors is a pioneer and leading SaaS provider of talent analytics to HR and C-level professionals.
Instantly is a leading provider of online and mobile audiences and insights technology tools.
Iron Solutions is a leading software and data provider to the agriculture market.
Jun Group is a leading mobile video and branded content advertising platform.
RKG is a leading tech-enabled search and digital marketing agency.
PrizeLogic is a leader in digital engagement programs for major brands and retailers.
HAS RECEIVED A SIGNIFICANT
INVESTMENT FROM
Selligent is an international SaaS platform delivering omnichannel audience engagement.
ViryaNet is a leading provider of mobile workforce management solutions for field service.
erecruit is a leader in enterprise staffing software and vendor management systems for large staffing firms.
Distimo is a leading mobile app market intelligence and analytics provider.
Soonr is a leading provider of enterprise secure file sharing and collaboration services for IT business managers.
onPeak is a leading event housing software and services provider.
MyWebGrocer is a leading provider of shopping and shopper marketing software and services.
Note: Some of the transactions highlighted above were completed by JEGI Managing Directors Joseph Sanborn and Jeff Becker, prior to joining the firm.
Resource/Ammirati is a leading, US-based digital marketing and creative agency.
Accordant is a leading data-driven, full-service programmatic advertising company and technology solution provider.
HAS BEEN SOLD TO
CARCO is a leading provider of tech-enabled and compliance-driven HCM and risk management solutions.
HAS RECEIVED A SIGNIFICANT
INVESTMENT FROM