Industry analysts weight in on digital marketing giant being reportedly in discussions to purchase B2B marketing automation vendor, Marketo, from its private equity owners
Adobe is reportedly in talks to purchase best-of-breed marketing automation vendor, Marketo.
According to reports this morning on Reuters, the marketing platform giant is in active discussions with Marketo’s private equity owner, Vista Equity Partners, who took over the business two years ago in a deal worth $1.8 billion. The report suggests the price tag Adobe can expect to pay will be significantly higher than that paid by Vista when it acquired the vendor from its founders, although the price tag has not been disclosed.
According to Reuter’s sources, there is no certainty the talks between Adobe and Vista will lead to a deal, and neither party has commented on the discussions.
While Adobe has been rapidly building out an enterprise-grade marketing technology stack, the purchase of Marketo would certainly add a much-needed B2B capability to the portfolio. Marketo was established in 2006 and is arguably one of the last standalone, best-of-breed marketing automation players in the martech lumascape.
Last year, Marketo generated revenues of US$321 million, according to Moody’s Investor Service as quoted by Reuters. Adobe, on the other hand, has a market capitalisation of US$130 billion with annual revenue of US$7.3 billion.
Adobe is certainly not shy to growing via acquisition, either. Most recently, the vendor bolstered the digital commerce capabilities of its Adobe Experience Cloud by purchasing Magento for US$1.68 billion in May.
Adobe’s digital marketing offering in fact began with the acquisition of Web analytics platform, Omniture, back in 2009 in a deal worth US$1.8 billion. It followed this up with acquisitions such as Web content management software vendor, Day Software, in 2010; audience optimisation vendor, Demdex, in 2011; cross-channel campaign management platform, Neolane, in 2013; community engagement tech, Livefyre in 2016; and video adtech player, TubeMogul, in 2016.
Marketo hasn’t been averse to acquisitions either. On its list are performance management vendor, Bizible in April this year; sales enablement platform, ToutApp, in 2017 to grow its account-based marketing (ABM) offering; Vessel in 2015; Insightera and Optify in 2013; and Crowd Factory in 2012.
Speaking to CMO about the rumours, principal of Pund-IT research firm, Charles King, said it's highly likely that when Vista bought Marketo in 2016, it had an eventual sale in mind. He noted the firm lists more than 40 companies in its current portfolio, and nearly 30 are in the "former" category.
"In other words, acquiring and building/rebuilding businesses that it then sells for a profit is in VEP's DNA. Plus, it's likely that the $2 billion the company is likely to get for Marketo can be put to good use in current assets or future acquisitions," he said.
King agreed Adobe pursuing Marketo makes strategic and practical sense as it actively expands its digital marketing business.
"However, since the company already paid out US$1.7 billion for Magento in May, some might argue that doing another large deal in such short order would be foolhardy. But that really depends on how a deal is structured," he continued. "With nearly $3 billion currently on its books, Adobe could certainly afford to consider moving ahead.
"Plus, if Adobe believes that a major competitor, such as Microsoft, Oracle, SAP or Salesforce is sniffing around Marketo, it might be well-worth extending itself to take the company off the board."
IDC analyst, Gerry Murray, pointed out there have been plenty of rumours about Marketo's sell-off over the years. He could see some big positives in Adobe picking up the business, one of which is the US$300 million in revenue. Another is the mid-to enterprise B2B market customer base that might align well with the Magneto base, while a third is it takes a competitor off the table.
"But there are obviously huge functional overlaps in the marketing campaign management space making it doubtful that it will be entirely additive," Murray said. "Marketo is also tied to Google Cloud while Adobe is committed to Microsoft Azure, so that will need to be reconsidered.
"Under private equity ownership, Marketo has been under greater pressure to cut cost and boost bottom line performance. But is it a good match? It's certainly a surprise. If Adobe wants to be the customer experience system of record I'd think they'd want to look into capabilities outside marketing like the Magneto deal."
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