On Monday, Adobe Systems Inc. (ADBE) announced that it would acquire Magento, a cloud-based e-commerce service used by companies such as The Coca Cola Co. (KO), Warner Brothers Music, Canon Inc. and Nestle, in a deal worth $1.68 billion. The purchase should help the 35-year-old software giant add a key piece to its cloud-based platform with a digital commerce offering that integrates in both business-to-consumer (B2C) and business-to-business (B2B) contexts. (See also: Facebook Woes Could Be Shopify’s Downfall: Analyst.)
Adobe's acquisition of the Campbell, California-based company is intended to create an end-to-end system for designing digital ads, building e-commerce websites and other online customer experiences and completing transactions.
The software giant's new integration should help it compete more fiercely against cloud market pioneer Salesforce.com Inc. (CRM), the SaaS giant that offers marketing, sales and service offerings for enterprise clients. The San Francisco-based company made a similar push into the space with its acquisition of Demandware for over $2 billion in 2016. However, Salesforce, which generated revenue of over $8 billion in 2017 and is on a run rate to exceed $10 billion this year, has been less of a competitive threat to Magento, which has concentrated on small- to medium-size business customers as opposed to larger enterprise clients. The push into cloud-based commerce services would also position Adobe against Oracle Corp. (ORCL) and SAP SE (SAP) and work to diversify its portfolio by bolstering its Experience Cloud business, which has grown slower and generated less revenue than its creative software segment.
Magento, which sells software for web stores and helps merchants sell products through social media ads, supports over $155 million in gross merchandise volume. The decade-old company was purchased by eBay Inc. (EBAY) in 2011 for $180 million. In 2015, the company went private again with the help of Permira Funds, in a deal worth $200 million. The most recent deal marks an over-five-times return for private equity firm Permira and marks Photoshop software provider Adobe's third-largest acquisition ever.