At first blush, the $12 billion Intuit-Mailchimp deal might not make a heck of a lot of sense. But people tend to pigeonhole companies, and in this case they might see Intuit as purely a financial software company and Mailchimp as an email marketing firm and nothing more. If that’s as far as your perspective goes, the deal is confusing. From a wider lens, however, there’s more to both companies than you might think.
Let’s start with Intuit. If you go to the company website and scan the product set, it’s clearly all about managing finances for consumer and small businesses alike. The latter category appears to be what the company wants to exploit and expand upon with this deal.
Prior to yesterday’s news, Intuit’s biggest acquisition had been on the consumer side buying Credit Karma for $7.1 billion last year. That deal gave the company’s customers a way to access their credit scores outside of the big three reporting companies: Experian, Equifax and TransUnion. Apparently not content with only that transaction, it set its sights on Mailchimp to throw some money at the business side of the house.
Mailchimp, a company that famously bootstrapped from zero to $12 billion, has been expanding upon its core email marketing functionality for the last couple of years now, at least partly via six acquisitions it’s made since 2019, with two coming that year, another three last year and finally one so far this year.
Today, it is aiming squarely at the sales and marketing needs of a small business customer with a variety of tools from marketing automation to CRM and website design to analytics. While these various features are probably minor revenue generators compared to the core email marketing business, with Intuit’s financial resources it can (and probably will) expand these parts of the platform.
Laurie McCabe, co-founder and partner at SMB Group, says the deal signals a shift toward a broader SMB market as the company moves beyond finance. “Intuit is positioning itself to become a hub for everything small businesses need to manage their finances and grow. They stayed out of the marketing and sales area for a long time, but I think at this point it represents a big opportunity for Intuit to extend its value for small businesses. After all, companies want everything to work together and this will ensure that these two [companies] do,” McCabe told me.
Brent Leary, founder and principal analyst at CRM Essentials says the two companies should actually fit well together. “Marrying the meat and potatoes of managing finances and accounting with a trusted email marketing platform is a costly but important way for Intuit to deepen the relationship they have with these small businesses in a way not many other companies can claim to do,” Leary said.
Holger Mueller, an analyst at Constellation Research says that it’s a lot of money, and Intuit probably won’t recoup all of its investment, but it is using its financial clout to expand its market. “Intuit knows that it has to grow with an expansion of its functional footprint and moving into marketing and email automation is an essential piece of small-medium business functionality,” he said.
The two companies themselves see the best fit between Mailchimp’s suite of products and Intuit’s small business accounting package QuickBooks. “Together, Mailchimp and QuickBooks will become a powerful engine for small and midmarket business customers to get, engage and retain their customers, run their businesses, optimize cash flow and remain compliant,” Alex Chriss, executive VP and GM at the Intuit Small Business and Self-Employed Group said in a statement.
It’s worth noting that Mailchimp added the bulk of the newer functionality beyond core email marketing only in 2019. It’s hard to know if that was in anticipation of a possible sale like this or simply a way to expand the business and drive additional revenue after 20 years in business.
In a 2019 interview with TechCrunch’s Ingrid Lunden around the time of that platform expansion, Mailchimp CEO and co-founder Ben Chestnut showed little interest in being acquired:
On acquisitions, I’ve had multibillion-dollar offers, but it’s not about the money. It’s about being useful, and this is extremely fulfilling to us. The only thing I ever worry about is a succession plan for someone else to take over. PE firms sometimes prey on that fact, too. But I’m a pretty competitive son of a bitch.
Barron’s reports that the company has $800 million in sales growing at about 20% annually. While the companies probably have some shared customers with the acquisition, Intuit gains access to Mailchimp’s 13 million users. Of that, the company reports 2.4 million monthly active users and 800,000 paying customers.
Rumors of the deal had been circulating for several weeks with an initial price of $10 billion, but the company has reportedly been talking with potential buyers since last year. In the end, they were able to find common ground with the $12 billion price tag.
Chestnut gave a familiar argument for selling beyond simply cashing in. “By joining forces with Intuit, we’ll take our offerings to the next level, leveraging Intuit’s AI-driven expert platform to deliver even better products and services to small businesses,” he said in a statement.
McCabe says the price made sense in the context of deals today. “Given that it’s an extremely good fit and that Mailchimp has been extremely successful, I think that the price in today’s world where everything is inflated is a good one,” she said.
Comment