Transaction Overview: Constant Contact Acquires SinglePlatform

On June 13th 2012, Constant Contact (NASDAQ: CTCT, market cap: $564mm) agreed to acquire SinglePlatform for up to $100mm.

Target Description
SinglePlatform helps local businesses manage and maintain listing data about their businesses on multiple online sites including search engines, local review sites and travel guides such as the Yellow Pages, the New York Times, FourSquare and UrbanSpoon. Local businesses can update multiple listings via a single interface, establish mobile presence, manage social pages and easily publish information such as menus, products, prices, events and photos.  SinglePlatform has listing information for 600,000 small businesses of which 10,000 pay SinglePlatform a monthly fee. The company distributes the listing data to over 100 publishers that reach 200mm consumers per month.  Competitors include Yext (recently raised $27mm at $270mm valuation), Localeze (owned by Neustar) and Universal Business Listings (acquired by BounceBack).  Founded in 2009, SinglePlatform is based in New York, has 60 employees and has raised $4.7mm in funding from DFJ (Thatcher Bell), First Round Capital (Howard Morgan), Gunderson Dettmer, RRE Ventures and New World Ventures (Jeffrey Maters).

SinglePlatform’s CEO, Wiley Cerilli, will join Constant Contact as VP, reporting to Constant Contact’s CEO, Gail Goodman.

Following the acquisition, Constant Contact expects to begin offering basic listing services free of charge and offer more in depth capabilities such as menus, photos, and pricing information for a fee.

Buyer Description
Constant Contact provides online marketing services including email and social media marketing, online survey and event marketing to over 500,000 small and medium sized businesses.  Recently, Constant Contact has aggressively expanded their social and mobile offerings. Constant Contact acquired mobile loyalty provider CardStar, social CRM startup Bantam Live and social email startup Nutshell Mail.

Transaction Parameters
Constant Contact will pay $65 million in cash to shareholders, $5 million in cash and equity for employee retention and an additional earnout of between $10mm and $30 million based on achieving revenue objectives of $74mm over the next two years.

Constant Contact expects SinglePlatform to contribute $1mm in revenue and to reduce EBITDA by approximately $10mm for the second half of 2012. 2013 revenue estimate is $10mm.

Purchase Price:                                 $70mm-$100mm
Purchase Price/TTM Revenue (a):            35.0x-50.0x
(a) Assumes TTM revenue of $2mm based on guidance of $1mm provided for the second half of 2012.  This likely overstates actual TTM revenue.

BounceBack’s acquisition of Universal Business Listings (which has recently been branded as UBL Interactive) is a comparable recent acquisition. Universal Business Listings is a first generation provider of aggregated local business information.

Other comparable transactions focused on expanding hyperlocal capabilities include BazaarVoice’s acquisition of PowerReviews; the Yell Group’s acquisition of Moonfruit, Intuit’s acquisitions of Demandforce and AisleBuyer; Groupon’s acquisitions of Ditto.me, Breadcrumb, Kima Labs, Adku and Zappedy; Home Depot’s acquisition of Red Beacon; ReachLocal’s acquisitions of DealOn and SMBLive and Reply!’s acquisition of MerchantCircle.

Strategic Rationale
Constant Contact is well established as a leading email marketing provider to merchant and SMB customers.  However, email is only one of many marketing options available to merchants.   Constant Contact has been aggressively building out its capabilities to offer a variety of small business marketing tools including social media marketing, surveys, deals, loyalty programs and event marketing.  Single Platform extends Constant Contact’s value proposition to merchants by ensuring accurate and timely information is widely distributed to a variety of online publishers.  This improves the probability of customers discovering, understanding the important selling points of the merchant’s business and ultimately attracting the customer to the business.  In addition, Constant Contact believes that SinglePlatform’s merchant and publisher relationships largely complement their existing customer base, providing a cross-sell opportunity.

Architect Partners’ Observations
While a clear strategic fit, Constant Contact made a bold financial move with this acquisition. Valuation paid is clearly based on the expectation of strong revenue growth in 2013 and beyond as well as the strategic value of SinglePlatform’s products and customer and publisher relationships.

From a financial perspective, the acquisition is expected to be significantly dilutive to Constant Contact’s 2012 results, with Constant Contact guiding EBITDA estimates downward for calendar year 2012 by approximately 22%.  Constant Contact also guided that the acquisition would not be accretive to earnings until the latter half of 2013.  M&A transactions with such negative near-term financial impacts are relatively unusual.  Constant Contact’s stock price was down 15% on the day of announcement with trading volume roughly 9x larger than a typical day.

Resources
Constant Contact’s Investor Presentation
Constant Contact Acquires Business Lisitngs Startup, SinglePlatform

Constant Contact Acquires SinglePlatform, Update Biz Info once, Reach Thousands of Sites