UPDATED 20:44 EST / SEPTEMBER 20 2018

CLOUD

Adobe acquires marketing automation software firm Marketo for $4.75B

Adobe Systems Inc. today said it has acquired San Francisco-based marketing automation software firm Marketo Inc. for $4.75 billion, a week after rumors emerged the companies were in talks about a potential deal.

Founded in 2006, Marketo offers a cloud-based marketing automation software solution that is designed for both growing small companies and global enterprises.

Said to be “built for marketers, by marketers,” Marketo’s service is designed to allow companies to manage marketing campaigns from day one while scaling up as they develop.  The service offers support for sales leads, inbound marketing, lead management, social marketing, event management, customer relationship management integration, sales dashboards and marketing returns reporting and analytics.

Coming into the acquisition, the company is said to have more than 6,000 customers, including major brands such as Microsoft Corp., Hyundai Motor Co. andPanasonic Corp.

Adobe plans to add Marketo’s engagement platform to its Experience Cloud to “offer an unrivaled set of solutions for delivering transformative customer experiences across industries and companies of all sizes.”

“The imperative for marketers across all industries is a laser focus on providing relevant, personalized and engaging experiences,” Brad Rencher, executive vice president and general manager of Digital Experience at Adobe, said in a statement. “The acquisition of Marketo widens Adobe’s lead in customer experience across B2C and B2B and puts Adobe Experience Cloud at the heart of all marketing.”

Bringing Marketo’s customers onboard will provide an immediate boost to Adobe’s marketing division. The unit’s revenue rose 18 percent, to $586 million, in the second quarter, while total revenue rose 24 percent, to $2.2 billion,. Although Marketo’s numbers are not public, it’s believed that company generated about $321 million in revenue last year.

Industry contacts of ours have suggested that synergies with Adobe’s existing products are relatively limited, noting some overlap with capabilities of existing products (Adobe Campaign, in particular). However, we can see benefits to Adobe in context of its recent acquisition of e-commerce platform Magento and further advantages from adding products to the portfolio already sold by Adobe. While few marketers take complete suites of marketing tech software from any one vendor, we can still see some opportunities for bundling.

Adobe’s shares closed down 2 percent Friday. “Industry contacts of ours have suggested that synergies with Adobe’s existing products are relatively limited, noting some overlap with capabilities of existing products (Adobe Campaign, in particular),” Brian Wieser, an analyst with Pivotal Research Group, wrote in a note to clients. “However, we can see benefits to Adobe in context of its recent acquisition of e-commerce platform Magento and further advantages from adding products to the portfolio already sold by Adobe. While few marketers take complete suites of marketing tech software from any one vendor, we can still see some opportunities for bundling.”

Wieser said it’s likely the marketing tech business likely will remain fragmented, however. As a result, he said, “In our view, synergies from consolidation will not likely come from pricing power as much as they will come from general cost savings associated with scale to a company’s underlying operations. Towards these ends, acquisitions such as Marketo, while expensive, can still offer benefits to acquirors such as Adobe.”

The biggest winner from the deal is Marketo’s owner, Vista Equity Partners Management, a private equity firm active in the technology industry. It acquired Marketo in August 2016 for $1.79 billion, meaning in just over two years it has earned a $2.96 billion profit.

This isn’t Adobe’s first big buy this year. The venerable software-as-a-service provider acquired e-commerce software provider Magneto Inc. for $1.68 billion in May.

The Marketo deal is expected to close in the fourth quarter subject to regulatory approval and the usual closing requirements.

With reporting from Robert Hof

Image: Marketo

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