Marketo, a vendor we evaluate in RSG's Martech research stream, has announced that it will be acquired by private equity company Vista Equity Partners. Founded in 2006, Marketo went public in 2013 and through this transaction will become a private company again.
Marketo assures that nothing will change for customers and partners. Yes, not much may change in the short term while the deal closes. For example, the company says your current contract terms will remain the same.
But you can definitely expect things to change for (1) future customers and (2) future contracts of current customers. This becomes clear when you consider the typical private equity playbook.
A private equity firm typically buys an underperforming company and tries to improve the bottom line in short order (i.e., in 3-4 years) to be able to sell off the company at a profit.
What levers do they pull in this pursuit?
- Improve sales force effectiveness (e.g., hire more sales personnel, improve sales management cross-sell / up-sell)
- Optimize pricing strategy (i.e., usually higher price points for key capabilities)
- Redesign products and services to increase margins (e.g., lower R&D/product development costs)
On top of these, you may also see some churn in personnel.
Then there is financial engineering. The terms of the Marketo deal are not disclosed but if there is any debt financing involved, part of future cashflows need to get applied to future interest/principal repayments.
Why This Matters to You
It is difficult to see how these changes do not impact customers and prospects in the medium term. To be sure, Wall Street was a tough master and can sometimes foster short-term decision-making among public vendors. But the DNA of the new Marketo could become altogether different.
To be sure, it can still be a good fit for you depending on your specific situation and requirements. As a potential customer, be aware of the implications of this acquisition for you before you sign on the dotted line.