The persistent rumors were true, Intuit (NASDAQ: INTU) has confirmed that it is buying email marketing leader, Mailchimp, for a staggering $12 billion in cash and stock. The deal will bring the popular email firm under Intuit’s corporate umbrella, but what does it mean for the stock?
The transaction news came as a little bit of a surprise as Intuit has not made any moves into the email marketing space previously. Instead, Intuit is known for its popular TurboTax software, its acquisition of Credit Karma, and its Mint buy too. Therefore, some shareholders might be asking why is a financial service company buying a marketing tool? And more importantly, why is it spending 10% of its market capitalization on the deal?
Why is Intuit buying Mailchimp?
The answer is simple, it wants to boost its offering to its clients. Intuit has two pillars for its strategy to do this, or what it likes to call its two Big Bets. These initiatives are based on its plan to “become the center of small business growth; and to disrupt the small business midmarket.”
As its QuickBooks service is highly respected in the small and medium-sized businesses (SMB) space, it can use this leverage to sell other products to these smaller corporations. Mailchimp is a perfect example of a tool that every SMB can use because it allows them to easily market their products and services to their audience to drive sales. There are very few companies who would not benefit from this easy-to-use tool so Intuit now has the opportunity to create package deals of financial and marketing products.
Should I buy Intuit shares now?
Intuit shares were little changed after it confirmed the deal yesterday. However, the news might have already been priced into Intuit’s stock as whispers of the deal have been circulating on Wall Street for a while now.
While mergers and acquisitions can be positive news for a stock, it’s important that they are not used with the sole intention of buying new customers. In this case, it looks like Intuit is making a brave move by acquiring a company in a completely different space. Bravery can be good, and if Mailchimp can offer value to its customers, the expensive buy might pay off. Mailchimp might bolster its packages of services to SMBs and help it become the ultimate financial and marketing services provider to these smaller corporations.
If we see a boost in Intuit’s customer numbers in its next earnings release, the company will likely confirm if the Mailchimp buy had a role to play in it. So, this is when shareholders will know if the buy paid off. If you believe that merging financial and marketing services together will help SMBs, now might be a good time to invest in Intuit.
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Content Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.