Twilio (NYSE:TWLO) announced on Monday that it would acquire cloud-based Segment -- a start-up that helps businesses move customer information between apps while better protecting and controlling the data -- in a $3.2 billion all-stock deal. The boards of directors of both companies have approved the deal, which is expected to close in the fourth quarter.

Investors recognized the potential synergies of the combination, bidding Twilio's shares up more than 5%, as of this writing, following the announcement.

Hand of man typing text on mobile smartphone with chat icon appearing above phone.

Image source: Getty Images.

Segment's customer data platform helps businesses collect, clean up, and better control customer data, and the acquisition pushes Twilio further into the realm of customer engagement services. By controlling the collection of data, Segment helps companies better connect with, and have more meaningful interactions with, their clients. Twilio said the combination would provide a single view of customer data across various channels, providing a seamless, more effective engagement. 

The move is the next step in Twilio's evolution. The company first provided businesses with the building blocks to integrate a wide range of communication tools into their customer-facing apps, including text alerts from your ridesharing app, an automated email confirming a recent purchase, or a notification from a restaurant that your table is ready.

Over the past several years, Twilio has slowly expanded those services to include marketing, customer service, and customer authentication and identification. There's already a way to integrate Segment with Twilio to help automate the processing of marketing and other data, which is a favorite among customers of both companies. 

The move also significant expands Twilio's total addressable market (TAM). Before the acquisition, management estimated Twilio's market opportunity at $62 billion, but with the addition of Segment, the company is forecasting a TAM at $79 billion. Twilio also believes there's a significant opportunity to cross-sell products to its newly expanded customer base.

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