MessageMedia acquired for $1.7 billion as M&A activity steps up a gear

Melbourne SMS marketing tech company MessageMedia has been acquired by Swedish rival Sinch in a whopping US$1.3 billion ($1.7 billion) deal, as M&A activity in the sector continues to trend up.

And, according to one expert, we could only be at the beginning of this trend, with the volume and value of deals in the second half of the year expected to “eclipse” the first.

Founded in 2000 by Grant Rule, Justin Lau and Regina Hill, MessageMedia is a web-based software-as-a-service solution allowing businesses to embark on SMS marketing campaigns without any need for coding.

Now, the business has more than 60,000 SME users across 200 countries, and facilitates sends of more than 420 million messages each month.

“It’s been a remarkable journey over the last two decades,” Rule said in a statement.

“Our success has been born out of a love for technology and problem-solving with our customers and it’s those values which will see our growth continue with Sinch.”

The business is now headed up by chief executive Paul Perrett, who said in a statement that it represents an “incredible reinforcement of the world-class people, products and capability we have in place”.

MessageMedia will continue to be run as its own entity, he added, “but with a supercharged mission” under its one-time competitor.

“I’m very proud of what we’ve achieved to date, but with Sinch, I believe it’s just the start,” he said.

Acquisition overload

The MessageMedia acquisition is still subject to regulatory approval. But if and when it closes, it will become one of the biggest tech transactions in Australian history. And it comes just a week after another.

Last week, Melbourne-based enterprise training startup A Cloud Guru announced its own mammoth acquisition, later revealed to be worth $2 billion.

It also follows a string of acquisition announcements (albeit not quite as large) coming out of the local tech scene over the first half of the year.

Back in January, NAB announced plans to acquire neobank 86 400 for $220 million, and games developer Big Ant agreed to a $55 million deal that founder Ross Symons said could put the Aussie sector on the map.

Neto was acquired by marketing tech firm Maropost for $60 million; and PoweredLocal, Insync and Earnd have also been snapped up, with values undisclosed.

Across the ditch, New Zealand cloud-based retail management platform Vend agreed to a $350 million acquisition deal from Canadian company Lightspeed.

So, what’s going on here? Why the sudden influx of interest — and dollars invested — in Aussie tech?

A maturing industry

M&A activity in tech has been expected to spike for some time, Michael Sonego, corporate finance partner at Pitcher Partners, tells SmartCompany.

Now, it’s finally meeting those expectations.

One of the issues in recording this is that tech deals span all kinds of sectors, he notes. A proptech startup acquisition falls under property, or a fintech deal under financial services, for example.

There have always been question marks over whether deals are being classified correctly.

However, over the past 13 months or so, he says has noticed an increase in tech deals, “I think as Australia is being seen more as a tech hub with tech opportunities”.

In particular, international players are starting to take more of an interest here.

“We’re starting to see the work that’s been invested into tech over the past five or ten years coming to fruition,” Sonego says.

At the same time, the COVID-19 pandemic has likely played a role. For tech companies, its often easier to do due diligence remotely. There’s no need to fly in to view fixed assets or properties.

The pandemic — and the shift towards working, studying, shopping and socialising from home — has highlighted the importance of tech in our day-to-day lives.

That’s led to more interest in collaboration tools and e-commerce, for example.

And finally, businesses are on the lockout for any tech that can help them operate more efficiently and cost-effectively, Sonego says. Something like MessageMedia could allow a small doctors’ surgery to confirm appointments by text, for example, instead of having someone call each patient.

The tech sector has had enough work going into it that we now have “businesses of size and substance” to attract interest.

While the pandemic amplified the demand for technology both among individual and businesses, startups and tech companies were ready to meet it.

“The industry is mature enough,” Sonego says.

Just getting started

The technology sector has also simply been given an opportunity to shine, Sonego explains.

Activity in almost every other sector has dropped right off, “and that comes down to the actual ability to complete a deal”.

That said, this is a boom coming off of a relatively low starting point. And, while the total value of M&A activity in tech is at pre-COVID, the number of deals is not.

And it’s the volume of deals, not the value, that Pitcher Partners uses as a real indicator of how healthy the market is — it’s a figure less likely to be swayed by one or two big deals.

“We are lagging the rest of the world,” he says.

But as we head towards the second half of the year, Sonego expects to see both the volume and value figures trending up.

These kinds of deals take time and momentum, he notes. Deals that have been in the pipeline for six months or more will likely come to light in the coming months.

“With the momentum that is picking up, we’re going to see the second half of the year eclipse the first half.”