The deal for the closely held company would be TurboTax maker’s largest ever.
By guest authors Cara Lombardi and Miriam Gottfried from the Wall Street Journal
The cash-and-stock deal for closely held Mailchimp would be Intuit’s largest deal ever and set it up to offer more services to small businesses such as marketing and customer-relationship management.
Mailchimp, established in 2001, is based in Atlanta and is still owned by founders Ben Chestnut and Dan Kurzius, according to its website. The company, which hasn’t taken any outside funding, began as a web-design agency and ran an email-marketing service on the side that later became its focus. Today it also offers other digital-ad services and customer-relationship- management tools.
Already popular among small businesses, Mailchimp became something of a household name in 2014, when it advertised on the first season of the hit podcast “Serial.” The company now serves 2.4 million monthly active users, including 800000 paying customers. Half of its customers are outside the U.S. It had about USD 800 million in annual revenue last year, a 20 % rise from the year earlier.
Intuit’s goal is to give small-business owners, who lack the resources of their bigger competitors, access to easy-to-use marketing technology. By combining Mailchimp with Intuit’s bookkeeping software QuickBooks, the company said it would enable businesses to do everything from setting up online stores and displaying ads to potential customers to invoicing clients and managing payroll.
Intuit said in a presentation about the deal that a survey it ran found nearly 80% of small and midmarket businesses don’t have a formal customer-relationship management system despite citing attracting customers as one of their biggest challenges.
In addition to TurboTax, INTU the online software that millions of people use to file their taxes, Intuit’s biggest products include QuickBooks, used by more than 7 million small and midsize businesses, and Mint, an online-budgeting platform that also pitches financial products to individuals.
Intuit has a market value of over USD150 billion following a torrid rise in its shares over the past several years, partially driven by a growing demand for cloud-based small-business services.
The company has been pushing further into the finances of the individuals and businesses it serves by adding more offerings to its platform, especially as competitors providing free tax-preparation services eat into TurboTax’s business. It said on a recent earnings call that its total share of tax returns was roughly flat last year.
The deal for Mailchimp would surpass its roughly USD 7 billion acquisition last year of personal-finance portal Credit Karma Inc., which was at the time its largest deal ever.
Both deals were driven by Intuit Chief Executive Sasan Goodarzi, a veteran of the company who took the top role in 2019 after leading its small-business and self-employed group, which had accounted for much of the company’s growth.
Mountain View, Calif.-based Intuit was founded in 1983 and went public in 1993. It reported revenue of roughly USD 7.7 billion in 2020, up about 12 %.
The deal will be financed with cash on hand and about USD4.5 billion to USD 5 billion in new debt, and is expected to boost Intuit’s fiscal 2022 earnings. The price includes about USD 300 million of Mailchimp employee transaction bonuses that will be issued in the form of restricted-stock units, expensed over three years.
The companies expect the deal to close in the second quarter of next year. Mailchimp’s headquarters will remain in Atlanta.
The deal adds to a wave of merger activity as companies seek to position themselves for a hyper-digital post-pandemic world. Healthcare, technology and other companies in the U.S. have struck nearly USD 2 trillion of takeover deals so far this year, almost triple the level in the comparable period in 2020, according to Dealogic. Activity has also been boosted by a surge in special-purpose acquisition company deals, which have become an attractive alternative to a traditional initial public offering for many.
The IPO market is booming too, with richly valued private companies opting for public listings after years in which staying private was the preferred option for many. In some cases, however, a sale to a cash-rich public company with a strongly valued stock currency proves more alluring.
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