Benchmark

The Rise of Digital Acquisitions

Posted on May 29, 2018 By

Acquiring digital companies has become increasingly commonplace, with 2018 being no exception. The year has already seen a number of digital companies acquired, and these were not necessarily by those who operate in the same sector. Traditional retailers, for example, have been acquisitive in this area, particularly as they wish to gain access to next generation technology, as well as new capabilities.

Examples include Nordstrom, which acquired two digital companies, BevyUp and MessageYes. BevyUp facilitates communication between sales associates and encourages shoppers to share information with each other. MessageYes sends personalised notifications to shoppers, allowing brands to text customers.

Another traditional retailer also pursuing digital companies is Target, which acquired Shipt and has assisted it with offering a same-day delivery service.

Despite these deals, it is by no means a new phenomenon. During 2013, deals of the same nature that took place include that of fitness clothing retailer, Under Armour, buying fitness tracking app developer MapMyFitness, and office supply retailer, Staples, buying e-commerce personalisation company, Runa. This trend appeared to have sustained itself as, in 2016, $125 billion worth of digital acquisitions were made by those who do not traditionally operate in the technology sector, which is the most on record. Five years prior to this, acquisitions in this sector were only $20 billion.

But it is not just traditional retailers that are pursuing acquisitions in technology. In fact, Accenture Strategy showed that companies operating in the industrial, travel and health industries have been the most active in acquiring digital companies.

Traditional companies, such as those in the motor industry, have also been on the acquisition trail, as rapid changes in technology have forced them to change the way in which they operate. Developments such as driverless cars have instigated acquisitions from businesses such as General Motors, as acquiring the technology is an easier process than building it in-house.

Even e-commerce retailers are investing further in technology, evidenced by Amazon’s acquisition of Ring earlier this year, which has allowed Amazon to integrate Ring’s doorbell systems, which are equipped with cameras and audio equipment, into its operations, boosting both Amazon’s e-commerce business and smart home business.

The most recent digital acquisition, by a digital company, is that of iZettle, a Stockholm-based payments provider, to PayPal, which operates a worldwide online payments system. With PayPal already having digital capabilities, the company has not acquired to gain access to next generation technology, but rather to gain a competitive advantage over payments company, Square, by securing a wider geographical footprint and value-added solutions, such as iZettle’s feature of inventory management.

The iZettle/PayPal acquisition does not appear to be a one-off, as more payment processors look to expand their offerings, with companies such as ShopKeep and Bindo Labs, both cloud-based iPad point of sale platforms, and Adyen BV, a payments system for online merchants, becoming attractive targets.

In all, acquiring digital companies is on the rise, whether it be from traditional companies, such as retailers, or from digital companies themselves, with MergerMarket predicting that the deal count in this sector is set to rise.

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Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.

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ABOUT BENCHMARK INTERNATIONAL

Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximising solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.

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Digital Acquisitions Portrait II

 

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