Earlier today Marketo agreed to be acquired by Vista Equity Partners for the cool sum of $1.79 billion which works out to $35.25 per outstanding share. Vista has its eyes open and Marketo is a public company with fiduciary responsibility to maximize shareholder value (a logical construct that I have always questioned). So let them go and do what they do, but to play devil’s advocate, I think someone made a mistake.
First, there’s the obvious question: How does Vista make money on this long term? At some point they’ll want to sell Marketo at a higher price but that suggests there will be such a “greater fool.” But is there?
In the last several years all the major CRM vendors have bought up the independent marketing tools and folded them into their suites. Salesforce had been rumored to be the most likely candidate to buy Marketo just before it surprised the world and bought Exact Target instead. Today Salesforce doesn’t need a marketing product, thanks, just the same. Ditto for Oracle, which bought Eloqua to kick off the buying frenzy. Other vendors, SAP, Microsoft, etc. are fine too. Sugar could use a high quality marketing automation solution to round out its offering but at nearly $2 big ones it’s hard to see that combination happening. So the question of who is a likely buyer becomes very important.
Suppose the likely buyer doesn’t exist yet; suppose that the best fit for Marketo is a new CRM suite that will be cobbled together from spare parts by Vista. That could happen but if so the prospect of a synthetic new vendor would mean spending billions more to assemble the suite and millions more to make it all work. That’s like starting the Indy 500 by spotting the competition 450 laps. It doesn’t make a lot of sense to me, but I’m just an analyst.
I can’t really think of a third option unless it’s using Marketo as the seed crystal of a new category of front office products whose business model revolves around marketing and lead development. That would give you a broadcast-advertising model that leverages audience development with targeted message development. This isn’t such a bad idea but it isn’t exactly new either and the existing front office players each have salient in this area too. Thus we’re back at the Indy 500.
I’ve always thought highly of Marketo. They spent a lot of time and effort, not to mention capital, building a new idea about analytics based marketing. The idea was new and foreign in most circles when they got started but it has become mainstream. In all of this you’d have thought some other CRM company would have bought Marketo before this because it would have been a good fit for several possible suitors.
But that didn’t happen and Marketo found itself in a game of musical chairs without a clear future. Stand-alone marketing appears to be a declining phenomenon. So now Vista no doubt has a plan and it will be interesting to watch it play out.
Almost forgot. The re-IPO strategy is a more likely scenario but then you would have an improved balance sheet, a tidy company, and a higher valuation to sell the stock. But even if this strategy works to perfection you will still have a stand-alone marketing automation company.