Great companies don’t get sold. They get acquired.
This quote describes the reality of M&A transactions.
Both sides of the table ask these questions:
Founders/startups: Who can we sell to?
Executives/corporates: Who can we buy?
At the end of the day, it’s as simple as asking:
what's the benefit of the transaction?
In the case of Intuit and Mailchimp, it starts with the audience: Owners of small- and medium-sized businesses (SMBs).
In the US there are roughly 30 million SMBs.
🔨 The Product Rationale: Grow & Run
Mailchimp facilitates customer acquisition, engagement, and retention through:
- 📣 Marketing: Newsletters & landing pages
- 💳 Websites & eCommerce: Checkout experience
- ⌗ Transactional email: Automated messaging for transactions
Intuit covers the money-related bases for SMBs through these products:
- 🧮 QuickBooks: Accounting software
- 💸 TurboTax: Tax filing software
The perfect funnel.
“Expanding our platform to be at the center of small and mid-market business growth helps them overcome their most important financial challenges. Adding Mailchimp furthers our vision to provide an end-to-end customer growth platform to help our customers grow and run their businesses, putting the power of data in their hands to thrive.”
Grow: Mailchimp attracts the money.
Run: Intuit manages the money.
What's the expected outcome?
- Intuit has 7 million SMB customers and Mailchimp has around 400 thousand SMB customers in the US =
upselling potential (+)
💰 The Financing Rationale: How to Pay for the Deal
Intuit paid 12,000,000,000.00 for a company that did not take any external investment.
Yet, on the plus side of things you have:
- 💵 Revenue: 2020 revenue of ~800,000,000.00
Margins: Mailchimp’s founder/CEO shared that Mailchimp has margins north of 50%!!!
- 🚀 Growth: 20% revenue growth compared to 2019
- 🗃 Customers: 800.000 paying customers (~50% in the US)
This looks like a pretty solid business to me.
Intuit will have many options to capture and expand the value it can generate from Mailchimp:
Cross-/Up-selling of Products =
Reduce OpEx =
Cost (-) --> Profit Margin (+)
🧩 The Strategy Rationale: Add the Next Piece to the Puzzle
Combination Accelerates Intuit’s Vision to Provide an End-to-End Customer Growth Platform for Small and Mid-Market Businesses
This is the first sentence from the press release.
A couple of thoughts:
- If you’re not a platform yet, what are you even doing? /s
- Intuit is playing the long game for dominance in the SMB tooling market
In short: Consistent stories evolve into a narrative. Clear narratives make it easier to align all stakeholders in the same direction. This leads to operational efficiencies.
Intuit talks over and over about becoming the main tool for SMBs:
- Vision to Provide an End-to-End Customer Growth Platform for Small and Mid-Market Businesses
- …to become the center of small business growth, and to disrupt the small business mid-market.
- We’re focused on powering prosperity around the world for consumers and small businesses.
There are 21 mentions of SMBs in the press release.
What's the expected outcome?
☺️ Instill investor confidence: Show the market that Intuit is on track to dominate the category –>
share price (+).
📢 Simplify marketing: Align messaging to the SMB audience and increase acquisition efficacy –>
Customer Acquisition Costs (-).