Vista Equity Partners Buying Marketing Tech Firm Marketo for $1.79 Billion

Deal Follows Marketo's Investment in Ad Tech and Agency Relationships

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Marketo's website advertises a range of data-fueled services for marketers.
Marketo's website advertises a range of data-fueled services for marketers.  Credit: Marketo
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Vista Equity Partners is set to acquire marketing tech firm Marketo for $1.79 billion in an all-cash deal that highlights the growing demand for marketing software -- as well as heavy competition in the space.

Marketo software can use existing customer data to track a customer's actions from the time they get a promotion such as an email offer to a point of sale.

"Given our proven track record and focus on investing in high-growth SaaS platforms, we are thrilled to partner with Phil and the broader Marketo team to help the company accelerate innovation, growth, and excellence," said Brian Sheth, co-founder and president of Vista, in a statement. SaaS refers to the software-as-a-service business model at Marketo and other companies, through which agencies or marketers subscribe to gain access to the software rather than buying it outright.

Vista will acquire all outstanding shares of Marketo common stock for a total value of approximately $1.79 billion, the company said in its statement. Marketo shareholders will receive $35.25 in cash per share.

The transaction, expected to close in the third quarter of 2016, is subject to closing conditions, including the approval of Marketo shareholders and antitrust approval.

At that point, Marketo will join a portfolio of software businesses at Vista Equity Partners that span advertising, IT and fleet management, among other specialist industries, including MediaOcean, Tibco, EagleView and Omnitracs, according to Vista's website.

The deal comes three years after Marketo's IPO. Since then, demand for marketing software from advertisers as well as agencies that have access to big advertisers' budgets has increased.

So has competition and consolidation. Competitors include cloud-based marketing automation providers such as Eloqua, which was acquired by Oracle in 2012, and ExactTarget, which was acquired by Salesforce in 2013. New competition is also coming from companies that have bought marketing software providers such as Microsoft, NetSuite and SAP.

Marketo said in its 2015 10-K that newcomers "such as enterprise software vendors that have traditionally focused on enterprise resource planning or back office applications, will continue to enter the marketing software market with competing products."

Marketo, which chalks up new competition to the "growing awareness of the importance of technology solutions to modern engagement marketing," has consistently reported revenue growth. But it has been spending heavily as well, at a cost to the bottom line.

Marketo generated revenue of $209.9 million in 2015, up from $150.0 million in 2014. The company reported net losses of $71.5 million in 2015, compared with $54.3 million in 2014. It also reported an accumulated deficit of $251.3 million as of December 31, 2015.

WPP CRM giant Wunderman early this year announced a formal partnership with Marketo. The marketing automation company is meant to help Wunderman build richer profiles of what clients' customers are doing, so it can send more customized and targeted messages, Wunderman CEO Mark Read said at the time. Wunderman's role is to facilitate a direct relationship between the client and Marketo, while plugging in its own customer contact data.

Marketo has also joined the swaths of marketing tech giants such as Salesforce that are getting into the business of automated ad buying, or ad tech. The company a couple years ago integrated with data provider Acxiom and automated ad-buying platform Turn, giving Marketo clients the ability to serve ads to people resembling the customers already in their marketing databases.