Intuit to acquire Constant Contact for $700mm

joe

Ok — this isn’t true. But, here are some thoughts on why this could make sense:

  • Intuit is focused on small businesses with a financial bent (think TurboTax, Quicken).
  • Constant Contact is focused on micro/small businesses but from the marketing side.
  • Constant Contact is dipping into the SMB payment side with their event marketing / registration product. This is a good intersecting product for the two companies.
  • Intuit has a history of doing acquisitions, although this would be much bigger than most. Think Mint, Homestead, MyCorporation, …
  • Intuit has a history of running their acquisitions as distinct sub-brands versus rolling them into a uber-platform. This would be very important in realizing value of something like CTCT (or like competitor) given the fickle nature of their customer base. Someone one described to me that the micro-business customers that make up the bulk of CTCT’s customer base have almost a symbiotic relationship with the product. Alter it a lot, like what would happen if it were redesigned to fit into someone else’s platform, then there would be significant churn.

Here are thoughts on the valuation:

  • Intuit (INTU) has a market cap of $9b. Constant Contact (CTCT) has a market cap of $500mm.
  • I put a 40% premium on the deal from their public market cap. Omniture had a 45% premium, which is rich but not unrealistic.
  • The revenue multiples make sense. CTCT did about $130mm last year. They have about $50mm in cash. So, 700 – 50 is 650. Divided by 130 makes it 5. A valuation at a 5x revenue multiple would be consistent with other acquisitions.

Of course, Intuit could buy a smaller competitor like iContact or Vertical Response, but my gut tells me that they would step up to the plate with a good mix of cash and stock (Intuit has about $1b in the bank) to make a solid stake in this area versus opt for something less.

You heard it here first. If it ends up happening then the investment bankers can send me some of that multi-million dollar fee. Thanks.

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