EBay Inc. completed its $786 million markdown of its Magento and GSI Commerce acquisitions after just four years with the spinoff of Magento Commerce and three other businesses—marketing solutions, customer relationship management, and enterprise operations and technology services.
A consortium of buyers led by the Permira Funds, a London-based private equity investment group, and Sterling Partners, a Chicago-based private equity firm, acquired eBay Enterprise for $925 million—61% less than what it paid for just GSI Commerce in 2012.
Permira this week spun off the assets into Magento Commerce and eBay Enterprise Marketing Solutions.
178 of the top 1000 online retailers in North America use the free Community edition or the Enterprise version of the Magento e-commerce platform, according to Internet Retailer’s Top500Guide.com.
Magento Commerce CEO Mark Lavelle says though Magento grew revenue fivefold while owned by eBay, the new owner is behind the company’s continued growth and rollout of its 2.0 upgrade this month. “We get the focus, the capital and the sponsorship we need to become a successful, independent company again,” he says.
Magento is profitable and 30% of its Enterprise clients use the platform to sell to other businesses, Lavelle says. The company will double down on its marketing, emphasizing that it offers open-source software that lets e-retailers own their applications, place the solution in their own network or in a public or private cloud, and upgrade or add custom solutions and third-party extensions at any time, he says.
Phil Guinand, a principal with Permira, says the private-equity group will invest hundreds of millions of dollars over the next few years into Magento. “We’re not going to manage a business solely for an exit outcome,” he tells Internet Retailer, citing Permira’s investments in the growth of brands such as Ancestry.com, Legalzoom.com, Doc Martens and Hugo Boss (No. 304 in the Internet Retailer 2015 Top 500 Guide).
The spinoff frees Magento of the politics of being associated with PayPal, clarifies its strategy and injects fresh capital into research and development, he says. “In some ways, it’s long overdue. Ebay had a questionable, back-and-forth strategy that caused a bit of disruption for Magento. Now, Magento is unique in the market as an independent player. That will resonate well with the market,” Sheldon says.
Gartner research director Penny Gillespie says customers using Magento have typically expressed higher-than-average satisfaction on performance and cost of ownership, based on Gartner’s market research.
The biggest challenge will be for Magento to move to the 2.0 version while ensuring that older extensions get updated and are available to customers, she says.
At the newly separate eBay Enterprise Marketing Solutions, CEO Michael Jones says he intends to expand the affiliate-marketing business to a model in which online retailers pay affiliates or marketers only when they drive sales to the retailers.
Jones, who co-founded affiliate-marketing company Pepperjam Network, says eBay Enterprise Marketing Solutions faces plenty of rivals, including LinkShare and Commission Junction in the affiliate-marketing category, as well as iProspect and 360i in search marketing. But eBay Enterprise Marketing Solutions is among only a few outlets where a retailer pays only when referred traffic results in a sale, he says.
Of the other two spinoffs, Sterling Partners said it had acquired the former eBay Enterprise services division and will combine it with eBay’s former competitor, Atlanta-based Innotrac Corp., to create an omnichannel commerce provider. The new company, which doesn’t yet have a name, will operate 27 distribution centers and six customer-service sites throughout North America and Europe, and offer platforms in omnichannel software, payments, order management, fraud solutions and ship-from-store solutions, says company President Tobias Hartmann.
“We’ll become the largest independent player—we think we are three to four times bigger than the next-largest rival—in omnichannel commerce, direct-to-consumer logistics and operations,” Hartmann says.
Zeta Interactive, a data-driven marketing firm co-founded by former Apple and Pepsi-Cola CEO John Sculley, on Monday announced it had acquired eBay Enterprises’ customer relationship management division. No terms of the deals were announced.