A Bolt-On Strategy in Action: Intuit Agrees to Acquire Mailchimp for $12B
Updated on October 22, 2021
What Happened
On September 13, 2021, financial software giant Intuit announced a plan to acquire marketing juggernaut and media platform Mailchimp for $12 billion in cash and stock advances. The move marks the largest acquisition to date for Intuit, which also owns TurboTax, QuickBooks, Mint, and Credit Karma.
Intuit rolled out a Big Bets multi-strategy earlier this year, identifying five areas of planned growth. Among those areas are becoming the “center of small business growth” and “to disrupt the small business mid-market.”
Along with the Big Bets, Intuit has an overarching goal of becoming an AI-driven expert platform. The Mailchimp acquisition, with its full-service marketing software and AI-driven technology stack, is designed to further those goals by creating a comprehensive AI-powered platform to serve the needs of small and medium-sized businesses (SMBs).
What we’re seeing is a classic services bolt-on, when a company acquires smaller brands in a similar or complementary industry to extend either their product offerings, their brand reach, or both. It eliminates the hassle of building the product or service from scratch, giving the acquiring company a competitive advantage once the deal is closed. It’s an often-effective strategy that can be applied to both traditional and online businesses.
How Does Intuit Benefit From a Bolt-On Strategy?
“Together, Intuit and Mailchimp will work to deliver on the vision of an innovative, end-to-end customer growth platform for small and mid-market businesses, allowing them to get their business online, market their business, manage customer relationships, benefit from insights and analytics, get paid, access capital, pay employees, optimize cash flow, be organized and stay compliant, with experts at their fingertips.”
The planned acquisition of Mailchimp isn’t the only billion-dollar bolt-on Intuit has done in the last year.
After researching the costs and time involved with building both personal finance and marketing platforms to address the pain points of SMBs already using QuickBooks, Intuit decided it would take a minimum of five years to be competitive with industry leaders like Credit Karma and Mailchimp.
Instead of investing time and money into developing proprietary software, Intuit made the decision to acquire Credit Karma in December 2020 for $8.1 billion. The decision was based on two factors:
- Credit Karma was offering a free tax preparation service, which was in direct competition with Intuit’s TurboTax.
- Acquiring Credit Karma enabled QuickBooks users a way to accept payments, manage payroll, and pay bills.
Likewise, the Mailchimp acquisition allows QuickBooks customers to keep their email marketing and CRM data synced with their customer purchase data and vice versa. Blending these services together enables Intuit to keep their customer base within the Intuit sphere while reaching a new audience.
How Does This Affect Mailchimp Users?
“Together with Intuit, we’ll deliver an innovative small business growth engine powered by marketing automation, customer relationship management, accounting and compliance, payments and expense, and e-commerce solutions, creating a single source of truth for your business.”
“We know that our customers and partners expect consistency and continuity as much as they expect new features and functionality, and we’re committed to meeting your needs as we move forward together with Intuit.”
One of the most humanizing aspects of this deal is Mailchimp’s response to its customers.
Although Mailchimp is excited to see Intuit continue the Mailchimp legacy and take it to new heights, they also want to maintain continuity in their services to keep their customers happy and protect the strong brand image they’ve worked hard to build.
Continuity immediately before and after an acquisition is a pain point for many sellers. After years of investing time and money in a successful business, they want it to stay successful. Too much change too quickly can create unhappy customers and abandoned subscriptions.
Mailchimp knows this better than a lot of companies. In 2016, when it integrated its own transactional email service, Mandrill (now Mailchimp Transactional Emails), it gave Mandrill customers only 60 days to sign up with Mailchimp to continue accessing Mandrill. In a bid to set itself apart from competitors Amazon SES and SendGrid, Mandrill users were obligated to purchase a Mailchimp plan before they were allowed to buy Mandrill credits, creating a double-billing situation that caused major backlash.
By focusing on the financial access Mailchimp customers will soon have access to, they’re building up excitement for new services while allaying fears about disruptions to service or major changes in the immediate future.
Our Two Cents
There’s increasing consolidation within the fintech space, and the Mailchimp acquisition is another example of that trend. Acquiring a brand that isn’t directly related to a business’s current assets is a bold move—one that doesn’t always work.
When evaluating whether a bolt-on strategy makes sense for a company, it’s important to keep in mind long-term goals for driving growth. This is especially true when acquiring brands that don’t seem to fit immediately into the existing products and services offered by a business.
Looking at a company like Intuit, financial services acquisitions like Credit Karma may appear to make more sense on the surface. However, bolting on assets that aren’t directly related to their current offerings can facilitate large-scale growth at a faster rate. Because Intuit had specific benchmarks for reaching certain segments of the general population, it was logical for them to acquire a company that could help them reach those goals while simultaneously providing more outreach and brand awareness.
Mailchimp dominates 72% of the market share for email marketing, but Intuit is getting more out of this deal than just additional services and customers. They’re also getting direct contacts and data, which can be used for internal and external marketing and product development. With Mailchimp’s past landgrab of Courier Media in 2020, Intuit will gain control of an in-house media arm that specifically targets entrepreneurs and small business owners.
In fact, Intuit will be able to communicate not only with Mailchimp’s customers but also with the customers of Mailchimp’s customers. A significant number of Mailchimp customers are in the marketing, content creation, and B2B eCommerce sectors. They’re actively targeting SMBs, which aligns perfectly with Intuit’s Big Bets vision for the future.
It also bolsters Intuit’s efforts to become a major player in the SMB services market outside the United States. With 50% of Mailchimp customers outside of the U.S., Intuit will be able to extend its global reach at a faster rate than it would have if it had developed its own marketing platform.
Mailchimp is just the latest in big-dollar acquisitions by Intuit to make them the go-to source for SMBs. But the question is, is it the last? Given that the company has a $100 billion market cap and has financed less than 10% of that for its recent acquisitions, there’s still plenty of room for more. Watch this space.
