TBP Spotlight – Adobe Acquires Magento

Adobe
Magento

Adobe Acquires Magento

Deal Financials

Enterprise Value ($m): $1,680m
EV / LTM Revenue: 11.2x

Transaction Overview

  • On May 21, 2018, Adobe announced its acquisition of Magento, a former private equity-backed B2C e-commerce software provider.
  • The transaction signifies Adobe’s expansion outside of its successful digital media offering and into e-commerce.
  • This concludes Adobe’s multi-year hunt for an e-commerce platform – Adobe was rumored to have bid on both Hybris, which was acquired by SAP for $1.35 billion in 2013, and Demandware, which was acquired by Salesforce for $2.84 billion in 2016.

Magento’s M&A Lifecycle

  • eBay initially acquired a 49% stake in Magento for $22.5 million in 2010 and acquired the rest of the business a year later. eBay then combined it with the larger e-commerce software provider GSI Commerce, which it bought for $2.4 billion in March 2011, to create eBay Enterprise.
  • eBay Enterprise was later divested for $925 million, 61% less than the purchase price of GSI Commerce alone, to private equity firms Permira, Sterling Partners, Banneker Partners, and Longview Asset Management in July 2015.
  • Under the ownership of Permira, the annual merchandise volume processed through the Magento platform tripled from $50 billion to $155 billion in less than 3 years. In April 2017, Magento also acquired Shopial, a social network-focused e-commerce platform.

E-Commerce and the Amazon Effect

  • The Amazon Effect has decimated physical retail – Amazon has increased customer expectations with its fast and frictionless shopping process, and brick-and-mortar stores have struggled to compete. In response, both consumer brands and physical retailers have been investing in e-commerce and omnichannel strategies, with Wal-Mart notably acquiring Jet.com for $3.3 billion in 2016.
  • With its acquisition of Magento, Adobe has broken into the growing e-commerce space and added another large competitor to Salesforce’s Demandware, SAP’s Hybris, Oracle’s ATG, and IBM’s Websphere.
  • As these software giants and their ecosystems compete in an increasing number of areas, the demand for services providers specific to those ecosystems has increased as well. In recent years, large ecosystem-focused SIs like Bluewolf, AST Corporation, and Fruition Partners have been seeing more M&A activity as a result. To learn more about M&A trends among ecosystem-specific services providers, read TBP’s reports on the Salesforce and ServiceNow ecosystems.

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About True Blue Partners, LLC
True Blue Partners is a boutique M&A advisory firm that serves lower mid-market enterprise software, service and solutions companies. It brings the rigorous strategic and financial perspective of bulge bracket firms with a company building approach and a steadfast partnership that only an independent boutique firm can deliver. For more information please visit www.truebluepartners.com or email us at info@truebluepartners.com.

TBP was NOT an advisor to this transaction.