Seeking to beef up its Smarter Commerce initiative with cloud-based analytics, IBM Thursday moved to acquire San Mateo, Calif.-based DemandTec in a $440 million cash transaction.
IBM (NYSE:IBM) said it would pay $13.20 per share for DemandTec (NASAQ:DMAN), a roughly 55 percent premium over Wednesday’s closing price and five times DemandTec’s calendar 2011 sales.
DemandTec (NASDAQ:DMAN) brings cloud-based analytics software to the table, which IBM said will give it the ability to add cloud-based price, promotion and other merchandising and marketing analytics to its Smarter Commerce initiative. IBM said that will help its customers better define the best price points and product mix based on customer buying trends.
“IBM Smarter Commerce is redefining how brands buy, market, sell and service their customers in ways that their customers want,” said Craig Hayman, general manager of Industry Solutions at IBM. “Bringing science to the art of pricing and promotion is a big part of this strategy, and the combination of DemandTec and IBM will help marketing and sales executives in retail and other industries drive more revenue and increase profitability.”
DemandTec’s software gives IBM customers the ability to examine different consumer buying scenarios, both online and in-store. By following and analyzing buyer trends, retailers and vendors can predict how consumers will react to price changes.
IBM said that by using this information, a brand manager could adjust the marketing mix for a product to better drive sales in the grocery channel, for example. Or a merchant and supplier could use the technology to better understand how shopper segments differ from each other and together craft the best merchandising plan based on that information.
The deal is “consistent with IBM’s focus on value-added analytics,” said Brian Marshall, IT hardware and data networking analyst for International Strategy & Investment Group (ISI), who noted a similar synergy with past IBM acquisitions such as Q1 Labs, i2 and Netezza.
“We would expect that IBM’s broad channel and global customer footprint will help accelerate growth and make the deal accretive. As online and mobile commerce grow rapidly, we think this software asset will prove very strategic to IBM in helping customers identify and benefit from shopping trends,” Marshall said.
DemandTec has more than 350 employees and boasts more than 450 customers worldwide in retail, consumer products and other industries. In addition to San Mateo, it has offices in Minneapolis, London, Paris and Bangalore.
The deal is subject to DemandTec shareholder approval and regulatory clearances. IBM said it expects to close the transaction in the first quarter of 2012.