How Adobe’s $4.75 Billion Acquisition Of Marketo Was A Huge Win For Vista Equity

By Amit Chowdhry ● September 23, 2018

This past week, Adobe announced a $4.75 billion acquisition of marketing automation company Marketo. This was a huge win for Vista Equity Partners, which took Marketo private for $1.8 billion in cash in May 2016. This means that Vista Equity Partners — which is headed up by Robert Smith (founder, chairman, and CEO), Brian Sheth (Co-founder and President), and David Breach (COO and chief legal officer), Vista Equity Partners — saw a $2.95 billion profit in about two years from Adobe’s acquisition of Marketo.

Smith had founded Vista Equity Partners in 2000 after a career at Goldman Sachs in investment banking. And due to the success of Vista Equity Partners, Smith became the wealthiest African-American.

But buying Marketo was a major gamble because the company struggled to grow its revenues and the stock price dropped around 50% in the first few months of 2016. And when Vista acquired Marketo for $1.8 billion, it was at a 64% premium on the stock price at the time. Clearly, that gamble really paid off.

Vista Equity replaced Marketo CEO Phil Fernandez shortly after the acquisition and replaced him with Steve Lucas, who is a former SAP executive. Lucas was able to turn Marketo around by pursuing larger deals in the enterprise space, which made it easier to upsell according to Forbes senior editor Nathan Vardi. Marketo’s revenue increased to $321 million in 2017 from $209 million in 2015.

“Adobe and Marketo both share an unwavering belief in the power of content and data to drive business results,” said Lucas. “Marketo delivers the leading B2B marketing engagement platform for the modern marketer, and there is no better home for Marketo to continue to rapidly innovate than Adobe.”

Marketo has nearly 5,000 customers who use the service for planning, engagement, and measurement capabilities. And its feature-rich and cloud-native platform will have “significant opportunities for integration across Adobe Experience Cloud.”

And Marketo was not Adobe’s only big acquisition this year. In May, Adobe acquired e-commerce company Magento for $1.6 billion. These two deals give Adobe a tremendous advantage over rivals like Microsoft, SAP, Oracle, and Salesforce.

Salesforce is one of the most noteworthy competitors listed because that company recently acquired a Marketo rival called Exact Target in 2013. And Salesforce acquired Magento rival Demandware for $2.8 billion a couple of years ago.

Even though technically Microsoft and Adobe are rivals, the two are partners as well. Microsoft and Adobe have a partner ecosystem where they offer custom solutions and services for their combined enterprise products.

A couple of weeks ago, Adobe hit record third-quarter earnings at $2.29 billion — which is a 24% increase year-over-year. Most of Adobe’s net income comes from the Creative Cloud products such as Photoshop, Illustrator, and InDesign.

Lucas is going to join Adobe’s executive team and he will report to Adobe’s executive vice president and general manager of Digital Experience Brad Rencher. “The imperative for marketers across all industries is a laser focus on providing relevant, personalized and engaging experiences,” Rencher added. “The acquisition of Marketo widens Adobe’s lead in customer experience across B2C and B2B and puts Adobe Experience Cloud at the heart of all marketing.”