Marketleap Acquired By DigitalImpact

The M&As of the large SEM firms continue

[bakedjake]

[marketleap.com...]

Digital Impact, Inc. (NASDAQ: DIGI), a leading provider of integrated digital marketing solutions for Global 2000 enterprises, today announced that it has signed a definitive agreement to acquire Marketleap, a San Francisco-based Internet marketing firm specializing in search engine marketing services...

[Brett_Tabke]

Congrats Noel!

[digitalimpact.com...]

"We are extremely pleased to be joining forces with Digital Impact," said Noel McMichael, President and co-founder of Marketleap. "We know our clients are eager to expand their use of email to retain and grow their online customer relationships. We are equally eager to offer our acquisition tools and services to Digital Impact's blue chip base of clients, many of whom are expected to expand their search strategies this year."

[creative craig]

I met Noel McMichael at the last Pubcon, seems like a really nice guy.

Well done :)

[skibum]

So that's about 3.75 million between stock and cash. That seem high or low?

DIGI Stock Quote [finance.yahoo.com]

[Shak]

congrats to all concerned

those notebooks of their's come real handy in our office and at meetings :)

Shak

[hdpt00]

Looking on hoovers, digital impact hasn't made a profit. They've made some huge gains since a few years back, however. I don't get how a company can survive with such huge losses up front.

Anyhow, congrats to whomever owns marketleap. Few million ain't bad. Get a nice ferrari and such.

Congrats!

[mrwhy2k]

Seems high considering the EBITDA is only $300,000. Basically, they aquire for 12x the EBITDA.... I would have sold for 12x the value.

[iblaine]

Acutally I think the price is ~$3.1M for marketleap. $1.5M in cash, $1.25M in stock and 200k shares of DIGI at $1.8/share(if marketleap reaches some revenue goals). It's good to see publicly traded SEO/SEM companies.

[iblaine]

woops, that's 1.5M in share so 1.5M * $1.8/share + whatever else...

[Compworld]

hmm.. 1.5million for marketleap... Not that much money (considering some of the other deals that had been done within the past few weeks or so). Heh, and I thought some real evaluations for Internet companies were starting to come back. Guess not...

CompWorld

[sidyadav]

An Excellent E-mail Marketing Company + An Excellent Search Marketing Company = An Excellent Web Marketing Company.

Wish the best of luck to the guys at Marketleap, hope both companies make a good team.

Sid

[mfishy]

Sounds like they were probably doing under 1 mill. per year if they sold for that price. Not a heck of a lot for one of the bigger search marketing companies. Sounds like a small ma and pa to me.

Unless of course there was strong reason for them to believe that business was not going to continue at or near the same pace. Conservatively speakiung a business doing 1 mill. per year will sell for 4-5 million.

[Compworld]

Agreed, I would have thought that they would be worth at least 7.5 million. Their sectors market cap is like 10X as high. Eh, there maybe some things behind the scenes that we are not privy too that may have diluted the price for the company.

CompWorld

[sagerock]

I remember talking with Noel briefly about the growth of his company. I was excited to see he was making big moves as far as growth was concerned. And now it looks like it all paid off. Nice work Noel!

[Brett_Tabke]

>Not a heck of a lot for one of the bigger search marketing companies.

Bigger? I'd think they would be more visible than big. I mean, we have members here earning that out of their spare bedroom.

[creative craig]

When I met him at Pubcon, he said they have around 10 people working there. We have more in our offices :)

[Warren]

An interesting point really. How do you consider the size of an SEM and what makes it "big"?

Is it:

Number of employees?
Revenue?
Gross Profit?
Number of clients?
Profile / visbility?
Growth of all of these?

Rather it is probably a mix of all of those.

[ropak9]

I would love to comment on the math being done in this forum in depth, but I think I would only get myself into trouble. All I will say is that we went for about 2.2x net sales (that's minus $$$ that go to P4P and PI engines - companies that are reporting only gross revenues will have to make some changes if they want to make a deal). 2.2x is not a premium, but it is definitely respectable (Let's wait to fully value this deal when we see where DIGI stock is trading in about a year). If you look at the past couple of SEM deals, both went for less than 4x (these companies were heavy into arbitrage and affiliate network revenues, not professional services - let's see how they handle integration with their new behemoth Parent companies). I don't know where people are getting numbers like 10x and 15x. Sure, we saw deals that big (and bigger) during the 90s, but most of the "crazy deals" in those days were actually closer to 5x, depending on the scalability of revenues (i.e. transaction vs professional services rev).

The big reason for the deal is the synergy between search and email. When done properly, you can drive some seriously kick-ass results for clients. This deal should be looked at more as a merger/tradeup, and not a sell-out/retirement plan for the founders. We all know this space is taking off like gangbusters and that major consolidation is underway. The question you will have to ask yourself is, "can I hold out for premium $$, or should I pick the right strategic partner before all the good ones are gone?" Timing is everything. The multiples of dot-com days may be history, but one thing is for sure, Web Time (or Moore's Law) is still very much in effect.

Anyway, I want to thank all the guys in this forum for your comments. I really had a great time at the last PubCon. I can't wait for Vegas!

See you at the finish line.

PS> I'm sure Brett will go for way more than 5x when he's ready! :) See you in Margaritaville, Brett.

[Brett_Tabke]

Thanks NM!

As they say - the heaven is in the details.