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Sinch snaps up MessageMedia for $1.3B to compete with Twilio in business SMS services
Sinch — the Swedish company that provides a suite of services for companies to build communications and specifically “customer engagement” into their services by way of APIs — has made yet another acquisition in its global march to scale up its business and compete more squarely with Twilio. The company today announced that it has acquired MessageMedia, a provider of SMS and other messaging services for businesses to manage customer relations, user authentication, alerts and more.
The acquisition is being made for $1.3 billion — comprised of $1.1 billion in cash and the rest in shares (or in Sweden’s currency, SEK10,745 million in total based on Sinch’s share price and yesterdays exchange rate). The deal is expected to close in the second half of this year.
The deal is notable not just for giving Sinch a major inroad into the world of business SMS, but also because of the timing. Less than a month ago, Sinch’s big rival Twilio announced that it would acquire ZipWhip, another big player in the same area of business SMS, for $850 million.
MessageMedia, based out of Melbourne, Australia, is currently operational also in New Zealand, the U.S. and Europe, and it focuses on providing services primarily to the SMB market with a self-service platform where customers can build and operate services, with the option of using a web portal provided by MessageMedia to handle the traffic.
It has some 60,000 customers and handles 5 billion+ messages annually, Sinch said. Growth is particularly strong in the U.S. market, where MessageMedia is adding 1,500 new customers each month. Alongside SMS, it also provides tech for companies to build MMS experiences and mobile landing pages, and it also provides them with tools to integrate other features as well as an API gateway.
Sinch itself says it handles some 150 billion mobile customer engagements for its customers annually, and it has eight of the 10 biggest tech companies as customers.
Sinch is publicly traded in Sweden and currently has a market cap of $13.6 billion, and the deal comes just weeks after the company announced that it would be raising $1.1 billion for more acquisitions, with a big chunk of the money coming from SoftBank, one of its major backers.
Given the size of this deal announced today, now we know which deal Sinch had in mind. It would be interesting to know whether Sinch’s move to buy MessageMedia predated Twilio’s for ZipWhip, which definitely does not feel like a coincidence.
“Sinch powers mobile customer engagement for some of the largest brands and technology platforms in the world. With the acquisition of MessageMedia, Sinch will now be able to bring the benefits of enhanced mobile customer engagement to every small business on the planet,” CEO Oscar Werner said to TechCrunch. “No longer will you need the deep pockets of an enterprise or the technical skills of an engineer to deliver first-class customer experiences.”
Sinch has been on a fast pace of buying up companies in recent times to scale up its existing business, tapping not just into the huge surge of people using phones and the internet to communicate in these pandemic-stricken times, but also to bulk up and have more economies of scale in the communications industry, essentially a business built on aggregating incremental revenues.
That fact has led to a lot of consolidation, with Twilio also buying up strategic, smaller businesses in quick order.
In this regard, MessageMedia is a strong buy for Sinch because it’s generating strong cash. MessageMedia is expected to make $151 million in profits for the year ending June 30, with gross profits of $94 million and EBITDA of $51 million, Sinch said. Sinch itself is also profitable.
Sinch’s other deals have included Inteliquent for $1.14 billion, ACL in India for $70 million and SAP’s digital interconnect business for $250 million.
For its part, MessageMedia very much plays into and is a product of the same API economy that has lifted the likes of Twilio, Stripe and many others built on the premise of knitting together very complex services, which customers can then use by way of simple lines of code that they integrate into their own digital operations, be it websites, apps, or internal systems.
Communications, and specifically messaging API-based systems are estimated to be a $9-13 billion market, Sinch said, with the U.S. accounting for 30% of that, and the global market projected to grow between 25-30% until 2024. SMBs, who might lack the resources to build such tools from the ground up, are a big part of that activity.
“Mobile messaging delivers tremendous ROI but smaller businesses often lack tools that cater to their specific needs,” said Paul Perrett, MessageMedia CEO, in a statement. “Serving these customers presents a tremendous opportunity, and with Sinch we can build a global leader in our field.”
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Sinch, a Swedish customer engagement giant, raises $1.1B, SoftBank and Temasek participating
Sinch — a Twilio competitor based out of Sweden that provides a suite of services to companies to build communications and specifically “customer engagement” into their services by way of APIs — has been on a steady funding and acquisitions march in the last several months to scale its business, and today comes the latest development on that front.
The company has announced that it has raised another $1.1 billion in a direct share issue, with significant chunks of that funding coming from Temasek and SoftBank, in order to continue building its business.
Specifically, the company — which is traded on the Swedish stock exchange Nasdaq Stockhom and currently has a market cap of around $11 billion — said that it was making a new share issue of 7,232,077 shares at SEK 1,300 per share, raising approximately SEK 9.4 billion (equivalent to around $1.1 billion at current rates).
Sinch said that investors buying the shares included “selected Swedish and international investors of institutional character,” highlighting that Temasek and SB Management (a direct subsidiary of SoftBank Group Corp.) would respectively take SEK 2,085 million and 0.7 million shares. This works out to a $252 million investment for Temasek, and $110 million for SoftBank.
SoftBank last December took a $690 million stake in Sinch (when it was valued at $8.2 billion). That was just ahead of the company scooping up Inteliquent in the U.S. in January for $1.14 billion to move a little closer to Twilio’s home turf.
Sinch is not saying much more beyond the announcement of the share issue for now, except that the raise was made to shore up its financial position ahead of more M&A activity.
“Sinch has an active M&A-agenda and a track record of successful acquisitions, making [it] well placed to drive continued consolidation of the messaging and [communications platform as a service, CPaaS] market,” it said in a short statement. “Furthermore, the increased financial flexibility that the directed new share issue entails further strengthens the Company’s position as a relevant and competitive buyer.”
The company is profitable and active in more than 40 markets, and CEO Oscar Werner said in Sinch’s most recent earnings report that in the last quarter alone that its communications APIs — which work across channels like SMS, WhatsApp, Facebook Messenger, chatbots, voice and video — handled 40 billion mobile messages.
Notably, its strategy has a strong foothold in the U.S. because of the Inteliquent acquisition. It will be interesting to see how and if it continues to consolidate to build up market share in that part of the world, or whether it focuses elsewhere, given the heft of two very strong Asian investors now in its stable.
“Becoming a leader in the U.S. voice market is key to establish Sinch as the leading global cloud communications platform,” said Werner in January.
While Sinch has focused much of its business, as has Twilio, around an API-based model focused on communications services, its acquisition of Inteliquent also gave it access to a large, legacy Infrastructure-as-a-Service (IaaS) product set, aimed at telcos to provide off-net call termination (when a call is handed off from one carrier to another) and toll-free numbers.
Tellingly, when Sinch acquired Inteliquent, the two divisions each accounted for roughly half of its total business, but the CPaaS business is growing at twice the rate of IaaS, which points to how Sinch views the future for itself, too.
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Sinch announces Conversation API to bring together multiple messaging tools
As communicating with customers across the world grows ever more challenging due to multiple channels, tools and networking providers, companies are looking for a way to simplify it all. Sinch, a company that makes communications APIs, announced a new tool this morning called the Conversation API designed to make it easier to interact with customers across the planet using multiple messaging products.
Sinch chief product officer Vikram Khandpur says that business is being conducted in different messaging channels such as SMS, WhatsApp or Viber depending on location, and businesses have to be able to communicate with their customers wherever they happen to be from a technology and geographic standpoint. What’s more, this need has become even more pronounced during a pandemic when online communication has become paramount.
Khandpur says that up until now, Sinch has concentrated on optimizing the SMS experience for actions like customer acquisition, customer engagement, delivery notifications and customer support. Now the company wants to take that next step into richer omni-channel messaging.
The idea is to provide a set of tools to help marketing teams communicate across these multiple channels by walking them through the processes required by each player. “By writing to our API, what we can provide is that we can get our customers on all these platforms if they are not already on these platforms,” he said.
He uses WhatsApp as an example because it has a very defined process for brands to work with it. “On WhatsApp, there is this concept of creating these pre-approved templates, and they need to be reviewed, curated and finally approved by the WhatsApp team. We help them with that process, and then do the same with other channels and platforms, so we take that complexity away from the brand,” Khandpur explained.
He adds, “By giving us that message once, we take care of all of [the different tools] behind the scenes transcoding when needed. So if you give us a very rich message with images and videos, WhatsApp may want to render it in a certain way, but then Viber renders that in a different way, and we take care of that.
Examples of transcoding across messaging channels. Image Credits: Sinch
Marketers can use the Conversation API to define parameters like using WhatsApp first in India, but if the targeted customer doesn’t open WhatsApp, then fall back to SMS.
The company has made four acquisitions in the last year, including ACL Mobile in India and SAP’s Interconnect Messaging business, to enhance its presence across the world.
Sinch, which competes with Twilio in the communications API space, may be one of the most successful companies you never heard of, generating more than $500 million in revenue last year while processing over 110 billion messages.
The company launched in Sweden in 2008 and has never taken a dime of venture capital, yet has been profitable since the early days. In fact, it’s publicly traded on the NASDAQ Exchange in Stockholm and will be reporting earnings next week.
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Sinch to buy India’s ACL Mobile for $70 million
Sinch said on Monday it has agreed to buy Indian firm ACL Mobile for £56 million (roughly $70 million) in what is the fourth acquisition deal the Swedish mobile voice and messaging firm has entered into at the height of a global pandemic.
The Swedish firm said acquiring ACL Mobile will enable it to leverage the Indian firm’s connections with local mobile operators in the world’s second largest internet market, as well as in Malaysia and UAE, to expand its end-to-end connectivity without working with a third-party firm.
Twenty-year-old ACL Mobile, which has headquarters in Delhi, Dubai and Kuala Lumpur, enables businesses to interact with their customers through SMS, email, WhatsApp and other channels. In a press statement, the Indian firm said it serves more than 500 enterprise customers, including Flipkart, OLX, MakeMyTrip, HDFC Bank and ICICI Bank.
“With ACL we gain critical scale in the world’s second-largest mobile market. We gain customers, expertise and technology and we further strengthen our global messaging product for discerning businesses with global needs,” said Sinch chief executive Oscar Werner.
The Indian firm, which employs 288 people, reported gross profits of $14.2 million on sales of about $65 million in the financial year that ended in March. During the same period, ACL Mobile claims it delivered 47 billion messages on behalf of its enterprise customers.
“Although the long-term growth outlook is favorable, lower commercial activity in India due to the COVID-19 pandemic means that the near-term growth outlook is less predictable,” Sinch said of ACL Mobile’s future outlook.
ACL Mobile is the fourth acquisition Sinch has unveiled since March this year. Last month the company said it was buying SAP’s Digital Interconnect for $250 million. In March, it announced deals to buy Wavy and Chatlayer.
Sinch, founded in 2008, employs more than 700 people in over 40 locations worldwide and is increasingly expanding to more markets. Last month it said acquiring SAP’s Digital Interconnect will help it expand in the U.S. market. The company says it is profitable.
“Together with Sinch we are scaling up to become one of the leading global players in our industry. I’m excited about this next chapter and the many new opportunities that we can pursue together,” said Sanjay K Goyal, founder and chief executive of ACL Mobile.
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Sinch acquires SAP’s Digital Interconnect messaging business for $250M
M&A activity has generally slowed down in the weeks since the novel coronavirus took a grip on the world, but there have been some pockets of activity in the tech industry when the price is right or when the divestment/acquisition just makes sense.
The world of messaging brings us the latest development in that theme: SAP, the CRM and enterprise software giant, is selling its Digital Interconnect messaging business to Sinch, a Swedish cloud voice, video and messaging company.
Sinch said it is paying €225 million (around $250 million) on a cash and debt-free basis for the business, which has 1,500 enterprise customers that use it for various messaging services, such as the now-popular option of running “omnichannel” conversations with customers over SMS, push, email, WhatsApp, WeChat and Viber; and messaging technology for carriers.
The deal will give Sinch, based in Sweden, a foothold in the US market — the Digital Interconnect business is headquartered in Silicon Valley — and access to a trove of customers using the kind of messaging technology that Sinch develops and sells.
The significance here is that messaging continues to be a very popular and high-volume, but low-margin (or even no-margin in some cases), business. So it makes sense for Sinch to pursue a bigger strategy for more economy of scale, a trend that I think will continue to play out. As a case in point: Sinch has been on an acquisition spree in the last month, and other deals have included Latin American messaging provider Wavy ($119 million, announced March 26), and ChatLayer ($6 million, announced April 20).
“With SAP Digital Interconnect now becoming a part of Sinch, we build on our scale, focus and capabilities to truly redefine how businesses engage with their customers, throughout the world,” comments Oscar Werner, Sinch CEO, in a statement. “The transaction strengthens our direct connectivity globally. Plus, it enables us to expand and accelerate a range of business-critical services to mobile operators, including products for person-to-person messaging, reporting and analytics.”
The news caps off nearly a month of speculation that SAP was gearing up for a sale of the legacy unit as part of a bigger strategy to focus more squarely on its CRM and newer enterprise IT services. It comes amid a particularly challenging economic environment, and that’s before considering all the IT, security and other challenges companies were facing even before COVID-19. SAP also has other fish to fry. It acquired Qualtrics in November 2018 for $8 billion, spearheading a stronger move into employee and customer experience, surveys and research; and other SAP exits this year have included shuttering travel business Hipmunk, which was part of Concur (another acquisition made by SAP), back in January.
Between then and now SAP has also seen a very notable personnel change. Its co-CEO Jennifer Morgan stepped away from the company by mutual agreement with the board, leaving Christian Klein as sole CEO (the two had been in the co-CEO roles for only six months). At the time, the company said that the abrupt change — a mere 10 days between late-Friday announcement and departure — was in response to “the current environment [which] requires companies to take swift, determined action which is best supported by a very clear leadership structure.”
It would appear that this sale is an example of the kind of swift and determined action that the board was hoping to see.
SAP’s messaging unit has been around in one form or another for years. It became a part of SAP in 2010 as part of its acquisition of Sybase, but even before that Sybase acquired Mobile 365, which had developed the messaging technology that ultimately became SAP Digital Interconnect, back in 2006.
At the time, the messaging business was the primary part of Mobile 365, and Sybase paid $417 million for that company. In that regard, it might look like SAP is now selling it for a loss, although you could also argue that 15+ year-old technology in the fast-moving world of messaging would have depreciated at this point.
The business itself is very typical of messaging: huge volumes but not huge revenues.
In 2019, SAP said that the enterprise messaging business processed 18 billion messages, while its carrier services processed 292 billion carrier messages. The Bloomberg report that broke the news about the intent to sell the division said that it made $50 million in EBITDA and $250 million in revenue last year. But actually this is small relatively speaking: SAP altogether had revenues of nearly $30 billion in the same period. In other words, it’s an okay business but not really core to SAP and where it’s going.
On the other hand, it’s a better fit for Sinch. The company originally spun out from low-cost IP calling company Rebtel, was then acquired by publicly-traded CLX, which subsequently rebranded as Sinch. It is a much smaller company than SAP — market cap of about $3.1 billion (30.82 billion Swedish krona), versus SAP’s market cap of $139 billion — but is squarely focused on messaging services similar to those that the former SAP division offers.
“SAP Digital Interconnect is a leader in its area showing profitable growth and reaching 99 percent of the world’s mobile subscribers. Looking at Sinch’s innovation and investment strategy in the area of cloud communication platforms, we welcome them as the new owner of SDI. Sinch is perfectly positioned to unleash further growth potential we
M&A continues on in the wider European region even while so much else has slowed down or stopped in the current market. This deal follows on the heels of Intel acquiring Israel’s Moovit for $900 million this week, and Avira in Germany getting acquired by Investcorp at a $180 million valuation several weeks ago.
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Sinch Goes Global With SMS API For Developers
Sinch, the newly spun out Rebtel company, has launched its SMS API globally, offering the ability for developers to add SMS integration to their app or website in 105 different countries across the globe. The product was initially developed under the Rebtel umbrella before Sinch took $12 million in funding to spin out the business this May. Since then, the company has test launched the SMS… Read More
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