Monday, October 6, 2014

Intuit quietly emerges as one of tech's most active M&A players

Cromwell Schubarth for the Silicon Valley Business Journal writes: Finance and tax software supplier Intuit Inc. isn't the first Silicon Valley company to come to mind as a major tech acquirer — but a new report suggests it should be.
The Mountain View company has been on a buying spree over the past two years, scooping up more companies in that time than it did in the previous five years combined.
Database research firm CB Insights ranks CEO Brad Smith's business as tech's fourth most-active buyer so far this year, tied withApple Inc. and trailing only Google Inc., Yahoo Inc. and Twitter Inc. in the frequent-buyers club.
It bought six companies in last year and has purchased eight so far in 2014, with the $360 million acquisition of Palo Alto-based Check in May as the biggest in that two-year stretch.
The most recent deal came in August when Intuit bought U.K.-based PaySuite to beef up the international presence of its QuickBooks Online small-business accounting service.
The company has been shifting away from its desktop software cash streams toward the cloud, hoping to bring in more predictable revenue flow. But this has come at a cost to its profit margins, which prompted at least one analyst to downgrade its stock to underweight.
Investors appear to approve of what Intuit is doing, pushing its stock up by more than 50 percent since it bottomed out in June 2013. Intuit's market capitalization in that time jumped from about $17 billion to more than $24 billion.
Smith has concentrated on buying up companies in Intuit's core business areas, doing four deals in accounting and finance and three in billing and expense management. All three of the billing deals happened in the past year, involving India-based Invitco, Southern California-based Lettuce and Massachusetts-based Prestwick Services.
Most of his purchases have been in California, where he has done 10 deals since 2008 and eight in the past two years.
Intuit's business development and strategy chief Andrew Westergren said earlier this year that the company is simply trying to seize opportunities to expand its impact on small business owners when they pop up.
"When we reach out to companies, we have typically already thought through deals, learned a lot about the business, and know the management team well. We may even have been partnering with them first for 6 months or so," he told Pando Daily. "When we make a proposal, there’s typically not multiple other companies bidding, which allows us to acquire at attractive valuations while still making for a positive outcome for all involved."
Whether Intuit will find more such opportunities isn't clear, but from the track record over the past two years it appears Smith is shopping and Intuit's stock price gives him the spending money he needs to strike when he sees something he likes.
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