Menlo Sees Threefold Return from PowerReviews Sale
Bazaarvoice this morning completed its acquisition of rival PowerReviews in a $168.2 million transaction that creates a powerful social commerce company focused on product reviews.
One investor to benefit is Menlo Ventures, which says it logged a 3x return on its investment.
“It’s nice to get an exit,” says John Jarve, a Menlo managing director and a PowerReviews board member. “Tripling your money feels good.”
Jarve says the deal has been a long time in the making. The two companies held merger discussions prior to Bazaarvoice’s IPO in February. Now a duopoly in the product reviews space has merged into a single dominant entity.
The deal is a combination of $31 million in cash and 6.4 million shares of Bazaarvoice stock. It also assumes vested and unvested options will add up to the right to purchase an additional 1.6 million shares.
For Menlo, which invested $18 million over three rounds beginning in 2005, the payout is about $55 million, for a 3x return. The firm holds its Bazaarvoice shares under a lock-up obligation, and Jarve seems in no hurry to sell. “We intend to hold it for some time. We believe this will be a successful combination going forward.”
Along with Menlo, Four Rivers Group, Draper Richards, Tenaya Capital and the Woodside Fund invested in the company over seed, early stage and expansion rounds, according to data from Thomson Reuters, publisher of this blog. The San Francisco startup has raised a total of $42.3 million of capital, according to Thomson Reuters.
The deal is a sign that consolidation is heating up in the social commerce space. Earlier this month, Salesforce.com agreed to purchase Buddy Media and last month Oracle said it would scoop up Virtue.
The explanation for the activity appears to be that the companies are thriving. In June, Bazaarvoice, which is larger than PowerReviews, said its fiscal fourth quarter revenue grew 63% to $31.4 million and active customers rose 38%. The company’s shares at $17.05 hold a nice gain over their IPO price of $12.
Jarve declined to discuss PowerReviews revenue but said the acquisition took place at a “significant multiple.” And he added the deal would benefit Menlo Ventures IX, a $1.5 billion 2001 fund that is expected to return a profit beyond invested capital.
Like many startups, PowerReviews’ development was not a straight line. The company did a pivot to figure out how to better monetize product reviews.
But then, that seems par for the course.
Photo courtesy of Shutterstock.
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