When I heard the Adobe and Omniture deal on the Twitterverse, I started scratching my head. What is it I don’t know? Does Omniture has something that Adode really want and have to pay $1.8 billion for it?
Whilst Omniture has suites of different products but there aren’t any that fits with what Adobe does. Does Adobe want to extend into developing a next generation full marketing suite using rich media applications that can benefit from Omniture’s analytic capabilities? Is this the "game changer" move that Adobe’s CEO Shantanu Narayen talked about?
Adobe is one of the companies that I believe is best position to challenge Microsoft. My best guess is Adobe is trying to measure the impact of rich media in a way that it cannot be properly measured today, called it the science behind the art. I can see that developing advance dashboarding technology to allow marketers with a means of tracking the impact of cross-channel rich media campaigns on brand perception, purchase intent, customer acquisition, retention etc. This can help CMOs to synthesize disparate data into intelligence that is actionable and can be used to make sense of different creative execution..
The acquisition price of $1.8 billion represents a 45% premium to Omniture's average closing price for the last 30 days (higher than the average premium 25-30%). Omniture has about 1,200 employees and took in just under $300m last year.
The two companies said the deal is expected to close during Adobe's fourth quarter and is subject to government approvals. Omniture will become a new unit within Adobe, with Omniture CEO Josh James continuing to lead the business as an Adobe senior vice president. Adobe said the deal should add to earnings in fiscal 2010.
This type of pricey acquisitions often raised questions around value creation. Historically, many mergers and acquisitions fail to meet their objectives, which are typically to accelerate growth, cut costs, increase market share or take advantage of other synergies or create dominance in an industry.
AOL Time Warner charged up to $60 billion to its net worth for impaired goodwill from past deals underscores the burdensome legacy that many companies confront long after completing their acquisitions. And for eBay, Skype doesn’t worth anything close to $3 billion. EBay has written off roughly half the value of its investment in Skype in the first two years and is now finally getting rid of it.
So why do so many M&As fail to meet expectations? Or are those strategic assumptions realistic in the first place? And what can organizations do to improve the chances of a successful deal? Deals can fail without a “strategic-architectural” and “people/capabilities” related logic. Both need to make sense.
Some quick stats here to give you some perspectives, McKinsey reviewed nearly 1,000 global mergers and acquisitions from 97 to 06 and compared share prices two days before and two days after each deal was announced. The analysis shows that value created in deals between 03 and 06 averaged 6% of the transaction values, whereas those between 97 and 00 average less than 2% and though an alarmingly high 58% of all acquiring companies are still overpaying for acquisitions - this is better than the 70% that were doing so in 2000. It is all about the acquisition premiums. A good strategic deal can still be a bad deal when premium is up and value creation potential is down.
