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Adobe to Buy Video-Ad Company TubeMogul in $540 Million Deal

Adobe Systems has agreed to acquire TubeMogul, a video-advertising platform provider and one of the industry’s largest pure-play ad tech companies, for $540 million net of debt and cash.

TubeMogul lets advertisers and agencies plan and buy video advertising across desktops, mobile, streaming devices and TVs. Adobe said the acquisition of TubeMogul will create “the first end-to-end independent advertising and data management solution” spanning TV and digital platforms.

TubeMogul CEO Brett Wilson will continue to lead the TubeMogul team as part of Adobe’s Digital Marketing business. Adobe expects the deal to close during the first quarter of its 2017 fiscal year, which ends in late February or early March. The company said it anticipates the TubeMogul acquisition to be neutral to Adobe’s non-GAAP earnings for fiscal year 2017.

“We view the transaction positively for Adobe, as it represents a significant expansion of efforts to blur lines between ad tech and marketing tech,” Pivotal Research analyst Brian Wieser wrote in a research note.

He added that Google is far and away TubeMogul’s biggest competitor. “Heightened levels of competition between Adobe and Google — which is expanding further into marketing technology to supplement its ad-tech business — is an important aspect of this transaction for investors to monitor,” Wieser wrote.

If a competing bid emerges for TubeMogul, it would be from an enterprise-software vendor rather than an internet or ad tech player, according to BMO Capital Markets analyst Daniel Salmon. “We expect (TubeMogul) likes landing where it won’t have conflicts of interest being owned by an ad seller,” he wrote in a note to clients. Salmon noted that wouldn’t be the case for Facebook, Google or Verizon, which has picked up various demand-side advertising systems via AOL and stands to gain more ad-tech capabilities with Yahoo.

The deal has implied multiples of 2.3 times TubeMogul’s 2017 gross profit and 1.6 times gross
revenue, which “correctly values TUBE as a category leader,” according to Salmon.

For full-year 2015, TubeMogul posted revenue of $180.7 million and a net loss of $13.7 million. For the nine months ended Sept. 30, 2016, the company reported $153.6 million in sales and a net loss of $24.5 million.

Adobe said it will combine TubeMogul’s video advertising platform with Adobe Marketing Cloud to give customers access to first-party data and measurement capabilities. “With the acquisition of TubeMogul, Adobe will give customers a ‘one-stop shop’ for video advertising, providing even more strategic value for our Adobe Marketing Cloud customers,” Brad Rencher, Adobe’s executive VP and GM of digital marketing, said in announcing the deal.

Adobe and TubeMogul joint customers include Allstate, Johnson & Johnson, Kraft, Liberty Mutual, L’Oréal, Nickelodeon and Southwest Airlines.

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