Twilio Segment Acquisition Might Make it an M&A Target

Customer communications platform provider Twilio recently acquired CDP (Customer Data Platform) provider Segment.

Twilio said that it will acquire Segment for an estimated $3.2 billion in Twilio Class A stock on a fully diluted and cash free, debt free basis. Segment will become a division of Twilio when the transaction closes in the fourth quarter of 2020.

The company says the purchase is aimed and bolstering Twilio’s customer engagement software suite.

Twilio Wants to Be the Go-To Engagement Platform

“Data silos destroy great customer experiences,” said Jeff Lawson, co-founder and CEO of Twilio. “Segment lets developers and companies break down those silos and build a complete picture of their customer. Combined with the Twilio Customer Engagement Platform, we can create more personalized, timely and impactful engagement across customer service, marketing, analytics, product and sales. We are thrilled to welcome Segment to the Twilio team.”

Twilio’s stock hit a record high after the deal was announced.

Twilio
Twilio
Photographer: Carlos Muza | Source: Unsplash

Largest Acquisition of CDP Provider to Date

But Segment’s exit is significant because it was the industry’s largest standalone provider with 574 employees and $284 million in funding. A ways behind is Tealium, with just over 500 employees and funding of $168M. Then there is Treasure Data (400-plus, $54M), according to CDP Institute research from last July.

Analysts say that by pure-play CDPs once dominated the market. But the market now also has CDPs from Microsoft, Adobe, SAS, Salesforce, Informatica, Oracle, and SAP — which only recently announced its CDP. In fact, Gartner Research has predicted that by 2023, larger marketing technology vendors will acquire 70% of independent CDP vendors. Either that, or they will diversify through M&A of their own to enter adjacent categories. These categories include personalization, multichannel marketing, consent management, and/or MDM for customer data.

Is Twilio an M&A Target?

The San Francisco-based Twilio garnered strategic investments from Salesforce and Amazon five years ago, when it raised a $130 million Series E. Now it will be a direct competitor of Salesforce and Adobe.

RealTime Capture of Customer Activity

As one analyst noted, if large vendors start to see this market more strategically, they’re likely going to have to acquire the technology rather than invest in creating it. Twilio is the dominant vendor with a very large 10 million developers in its system.

However, interest in a Twilio-Segment union may be attractive nonetheless. The company was already a potential acquisition target for these companies, but Segment makes it a little more attractive, one analysist said.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.

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