Transaction Overview: Go Daddy Acquires Locu for $70 Million | Street Fight

Transaction Overview

Transaction Overview: Go Daddy Acquires Locu for $70 Million

0 Comments 20 August 2013 by

Target: Buyer:

Transaction Size: $70mm

Transaction Overview
On August 19, 2013, Go Daddy announced its agreement to acquire Locu, a San Francisco-based startup that helps local merchants efficiently disseminate information about their business online. Although financial terms were not officially disclosed, AllThingsD reports Go Daddy paid $70mm in cash and stock.

Target Description
Locu helps more than 30,000 local businesses – including restaurants, spas, salons, photographers, accountants and home-remodeling companies – manage listing data regarding their businesses on search engines and local review sites. The company has built profiles for more than one million businesses across the U.S. by sending contractors to input menu or service information into a semantic analysis platform. As these local businesses find their Locu page on search results, they have the ability to claim and expand their profile.  Locu data reaches more than 200mm consumers per month via partnerships with Yelp, YP.com, Foursquare, TripAdvisor, Facebook, CitySearch and OpenTable. Locu allows local businesses to manage their identity and business information (menus, products, prices, events, photos) across multiple important on-line and mobile sites via a single interface.

Although Locu originally focused on helping restaurants, a third of new Locu sign-ups come from businesses that are not restaurants, such as spas, dentists and other professional and personal care services. In July 2013, Locu signed its latest and largest partner, Yelp, which sends local businesses to Locu and competitor SinglePlatform (acquired by Constant Contact in June 2012) to help keep their listing information current.  Other competitors include MomentFeed, Yext, Localeze (Neustar-owned) and Universal Business Listing (acquired by Bounceback).

Locu earns revenue from its licensing partners and also began charging $23 – $65 per month in May 2013 for its range of services.  Founded in 2011 by a group of MIT graduates, Lucu is now headquartered in San Francisco, CA and has an additional office in Cambridge, MA.  Locu has raised $4.6mm in funding from General Catalyst Partners (Lawrence Bohn, Nitesh Banta), Lightbank, Lowercase Capital, Quotidian Ventures and SV Angel.

The 20-employee Locu team will continue to operate out of their San Francisco and Cambridge offices and will retain branding for the moment.

Buyer Description
Go Daddy is the largest domain name registrar and Web hosting provider, with more than 56mm domain names under management and over 11mm customers worldwide. Go Daddy’s web platform offers products designed for small businesses, including website building, SSL certification, online storage and e-Commerce solutions (online store builder, merchant accounts, etc.)  The company is recognized as the world’s number one ICANN-accredited domain registrar (Internet Corporation for Assigned Names and Numbers).  In February 2013, Go Daddy acquired M.dot, an iOS mobile app that enables consumers to directly build mobile websites, for a reported $15mm.  KKR, Silver Lake Venture Partners and Technology Crossover Ventures privately hold the company after acquiring $2.25 billion in equity in June 2011.

GoDaddy is in the process of remaking itself.  Go Daddy hired Blake Irving as CEO in January 2013.  Prior to Go Daddy, Irving was the Chief Product Officer at Yahoo and a senior executive at Microsoft.

Transaction Parameters
Although financial terms of the deal were not officially announced, AllThingsD reports Go Daddy paid $70mm in cash and stock for Locu, with additional management incentives.

Invested Capital Multiple ($4.6mm): 15.2x

Constant Contact’s $70 – $100mm acquisition of SinglePlatform is the most recent comparable transaction, representing a 35.0x – 50.0x trailing twelve month revenue multiple.  Other comparable transactions focused on expanding hyperlocal capabilities include BounceBack’s acquisition of Universal Business Listings, BazaarVoice’s acquisition of PowerReviews, the Yell Group’s acquisition of Moonfruit, Intuit’s acquisitions of Demandforce and AisleBuyer, Home Depot’s acquisition of Red Beacon, ReachLocal’s acquisitions of DealOn and SMBLive and Reply!’s acquisition of MerchantCircle.

Locu’s historical revenue is likely quite small given it’s only recent adoption of merchant monetization.

Strategic Rationale
Go Daddy is a very well-established provider of small business services, albeit limited in product scope. Locu is a natural product extension for Go Daddy’s small business clients who need to create and manage their digital identity across both their own website as well as a multitude of third party sites.  The proliferation of mobile phones and devices with instant access to on-line information, has made managing a compelling digital identity even more important for local merchants as they compete against larger, more digitally sophisticated retailers and service providers.

Architect Partners’ Observations
With the acquisition of Locu, Go Daddy is beginning to move beyond its legacy domain registration and web hosting legacy and showing that it has the strategic aptitude and willingness to acquire to provide a more complete solution for local businesses to manage and market themselves. We expect Locu to be a compelling value proposition to Go Daddy’s 11 million customers, however it will be interesting to see how merchant pricing is adapted, if at all, given how Constant Contact chose to offer elements of the SinglePlatform service without charge following that acquisition.

At a 15.2x invested capital multiple, Locu’s exit represents a premium value return for investors.

Resources
AllThingsD: Go Daddy Acquires Merchant “Finder” Startup for $70 Million
VentureBeat: GoDaddy Acquires Locu to Help Small Businesses Get Listed and Found Online
AllThingsD: How Locu Became Every Local Business’ Personal Publisher




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