September 15, 2021

Breakingviews: Intuit bites off a lot with $12 bln Mailchimp deal

by Breakingviews.

Intuit, the $154 billion maker of TurboTax and QuickBooks, wants a lot more small bananas. It’s paying about $12 billion for Mailchimp, the digital marketing and automation firm, in an effort to better crack the massive market for small business services. Mailchimp’s record suggests that it has a shot. But Intuit is also busy integrating personal finance site Credit Karma, which it bought last year for $7 billion. The key to success will be avoiding indigestion.

Mailchimp is private, and details of the deal are sparse as a result. What is known is that it made $800 million of revenue last year, about 20% higher than the previous year and nearly all of which is recurring. A price tag of about 15 times 2020 revenue may appear high compared to, say, small business-focused web firm GoDaddy, which is valued at about one-third as much. But Mailchimp is growing nearly twice as fast and probably has higher operating margins. The company has also managed to finance growth through internal cash flow, as it has never taken outside investors in the 20 years since it was founded.

Intuit says buying Mailchimp will increase its total addressable market by over $30 billion. But small business services are fragmented between many separate providers, and plenty of firms, from giants like $1.9 trillion Alphabet to startups, all want pieces of the pie. Doing two relatively big deals in two years means Chief Executive Sasan Goodarzi will have to work hard to show he’s not biting off more than he can chew.

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