IBM has this week announced the landmark acquisition of open-source software company Red Hat. In a deal that will bring together two leading hybrid cloud providers, IBM will acquire all issued and outstanding common shares at $190 per share (currently a 63% premium), making this the largest ever software acquisition. Red Hat will continue to operate as an independent cloud team, maintaining the current product portfolio and open source development legacy model currently in place.
In e-commerce innovation news, e-commerce financing platform SplitIt has recently surpassed 1,000 merchants utilizing the service across more than 100,000 consumers. SplitIt allows e-commerce merchants to offer consumers interest-free payment plans, reducing the purchase barrier and improving offerings among competitors. The Israel-based company helps customers merge existing lines of credit rather than apply for new ones, and may ease the high interest burdens found in the US (where interest payments are expected to reach $30 trillion by 2030) and the UK (where credit card spending hit £1.1 billion in July 2018), as well as other countries.
The world of mobile Apps this week saw Google float the idea of an Android app subscription service. Facing a gap of nearly 10x compared to Apple’s revenue per user, the Google Android Store is seeking to overcome resistance to paying for apps through bundling the most popular downloads into one monthly subscription for users. While certain code references and a Google Opinion Rewards survey suggest a “Play Pass” app subscription service may be in production, Google has announced no definitive dates for the release.
New in SaaS business listings this week we have a $492K B2B sales and marketing business, with years of operational history leading to a firm positioning in the Shopify ecosystem, rapid MRR growth with revenues reaching a CAGR of c.38% for the period 2014 to (e)2018, over 1,200 positive product reviews facilitating organic growth and high Shopify App Store ranking, strong product market fit as demonstrated by vast customer base of over 1,700 paying customers and solid revenue diversification and economies of scale across four complementary Apps.
New in software business listings this week we have a $402K tourism and telecommunication business, with steady revenue growth of 107% CAGR for the period 2015-2018(e), innovative Wi-Fi rental business model with fine-tuned operations and robust supplier relationships allowing for access to industry-leading technology at below-market rates, glowing customer reviews, a high-performing team transitioning with the business and high, still-rising ARPO of c.$90 in the past year.
Featured in e-commerce business listings this week we have a rare $10M Amazon vendor health and beauty portfolio, with a wholesale partnership with Amazon via the highly sought after, invite-only Vendor Central account, impressive growth for the period 2013 to 2017, reaching a c.28% CAGR, secure foothold in the $3.7 trillion health and wellness industry as well as the $445 billion beauty industry, obust operations with a proven track record of over a decade and on-demand product ordering from Amazon allowing for a simple and highly scalable cost structure. If you are interested in any of the above businesses, please follow the link to request a prospectus.
In events news, the FE team had a fantastic time attending Chiang Mai SEO Conference in Thailand this week, where Founder Thomas Smale had a chance to catch up with leading digital marketing experts and valued clients. Next up, Thomas will be delivering his exit strategy workshop at Ungagged Las Vegas November 4-7, where he will cover “A Winning Exit: Your 4 Step Strategy to Building a Sellable Business.” Respond to this email if you will be in the area and would like to set up a meeting!
Continue reading below for more on IBM’s acquisition of Red Hat, Android App subscription pricing and SplitIt surpassing 1000 merchants.
- Years of operational history leading to a firm positioning in the Shopify ecosystem
- Rapid MRR growth with revenues reaching a CAGR of c.38% for the period 2014 to (e)2018
- Over 1,200 positive product reviews facilitating organic growth and high Shopify App Store ranking
- Product market fit as demonstrated by vast customer base of over 1,700 paying clients
- Portfolio of complementary Apps allowing for diversified revenues and operational synergies
Yearly net profit: $131,000
Asking price: $492,000
- Steady revenue growth of 107% CAGR for the period 2015-2018
- Innovative rental Wi-Fi business model with hands-off operations and existing team in place
- Robust supplier relationships allowing for access to industry-leading technology at below-market rates
- Glowing customer reviews and a high-performing team transitioning with the business
- High ARPO of c.$90 in the past year and still rising
Yearly net profit: $144,000
Asking price: $402,000
- Wholesale partnership with Amazon via the highly sought after, invite-only Vendor Central account
- Impressive growth for the period 2013 to 2017, reaching a c.28% CAGR
- Secure foothold in the $3.7 trillion health and wellness industry as well as the $445 billion beauty industry
- Robust operations with a proven track record of over a decade
- On-demand product ordering from Amazon allowing for a simple and highly scalable cost structure
Yearly revenues: $16,500,000
Asking price: $10,000,000
In The News…
IBM Acquires RedHat
IBM has agreed to acquire Red Hat open-source cloud company in the largest ever software acquistion to date, totaling $34 billion.
IBM will pay a 63% (based on current PPS) premium of $190 a share for all issued and outstanding common shares. Red Hat, which has been described as one of the leading providers of open source cloud software, will continue to operate as a separate cloud entity within IBM, led by the existing management team. IBM chairman Ginny Rometti states, “Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs. The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.” Long-time partners, IBM and Red Hat have collaborated in shaping the software and cloud computing community for nearly 20 years, since IBM supported Linux in the early days. Maintaining the legacy of Red Hat, IBM “will remain committed to Red Hat’s open governance, open source contributions, participation in the open source community and development model, and fostering its widespread developer ecosystem. IBM and Red Hat also will continue to build and enhance Red Hat partnerships, including those with major cloud providers, such as Amazon Web Services, Microsoft Azure, Google Cloud, Alibaba and more, in addition to the IBM Cloud,” according to the official announcement.
In this landmark SaaS acquisition, the advising financial entities might see as much as $115 million in commissions.
SplitIt Reaches 1000 Merchants
SplitIt, the Israel-based interest-free e-commerce financing company, has surpassed 1000 merchants and 100,000 consumers served in a milestone on its mission to make purchases more affordable for consumers.
The company differentiates itself from the likes of eBay and PayPal because it does not require customers to apply for new lines of credit, but rather allows them to use existing credit and debit cards in order to finance their purchases. As credit card spending increases in most countries, the amount each household owes in interest payments has grown significantly, with recent studies showing that the amount Americans pay in interest is set to quadruple by 2030 to reach $1 trillion. Of the company’s mission, CEO and Co-founder Gil Don stated, “There was a need, very simply, and no-one was covering this need. Using our platform gives consumers a better way to manage their cash flow; they don’t need to apply for another line of credit. They just use their existing credit or debit cards to split a purchase into monthly payments with no late fees.” Indeed, customers are able to split the total cost of a purchase into as many interest-free payments as may be necessary. Recently, as of July 2018, credit card spending reached £11.1 billion in the UK, which represents an increase of over 8% from July 2017.
As more consumers need help paying off credit card bills and interest repayments, SplitIt represents an opportunity for merchants to ease consumer burdens.
Google’s Android App Subscription
In order to overcome resistance to paying for apps, Google may introduce app subscription pricing.
Hints at a “Play Pass” app subscription service for the Google Play Store have been spotted in certain code references, as well as in a Google Opinion Rewards survey. In the survey, it was suggested that there is the possibility to offer “hundreds of dollars” worth of apps and games to Android users at one monthly rate. The subscription package would replace the pay-per-download model currently in place, in an effort to overcome consumer resistance to paying for app downloads. Studies have shown that Apple’s App Store leads Google Play in revenue per user by around 10x, and while this would not be the first ever Android app subscription service, it has potential to be one of the most significant. If customers are willing to pay an affordable monthly fee for a group of several apps they already use, it may help close that gap.
There has not been any indication from Google regarding when the service might be set live.