Intuit (INTU -0.25%) just added another growth catalyst to its arsenal by acquiring email marketing company Mailchimp. In this segment of Backstage Pass, recorded on Dec. 17, 2021, Fool contributors Toby Bordelon, Jason Hall, Lou Whiteman, Travis Hoium, and Rachel Warren discuss what investors should know about this recent acquisition and what it means for the future of Intuit.
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Toby Bordelon: Intuit, we know what Intuit is or we think we know what Intuit is. Intuit is TurboTax, Intuit is QuickBooks, historically, that's what they were. They actually did another deal earlier this year, Credit Karma, which they acquired which is more of a consumer financial services, personal finance app.
Credit Karma was more consumer side, then they've taken Mailchimp, this is more on the small business side. Credit Karma works well with their TurboTax client base, Mailchimp works very well with their QuickBooks client base.
Mailchimp does email marketing platform, they have a focus on small businesses, they will help you build a website, they will do marketing, business, and data analytics, all that kind of stuff. You can see how they're hoping to take Mailchimp and pair it with their QuickBooks small business customers. You can take a look at this, this is from their Investor Day presentation, they have five bets accelerating growth.
This Mailchimp acquisition hits four and five, be the center of small business growth, disrupt the small business bid market. Just like the Credit Karma acquisition really hit three and to some extent two.
Two and three are your consumer side more, four and five are your small business side, and they've made some acquisitions to hit both of those, two big acquisitions. They're transforming their business.
The reason I put this acquisition on here, one, I think it's good, but two, it's transforming Intuit from more of that just we do TurboTax and QuickBooks, now we're more of a full service company for both consumers and small businesses. That's where they're going toward, that's where they're moving toward.
When you put this Mailchimp app alongside Credit Karma, you can see how they're building that out. This is not the same company it was 20 years ago. If you have in your head, "oh, Intuit TurboTax, that's what they do," take another look, especially with these acquisitions, very transformative.
$12 billion price on the deal for Mailchimp. They took on $4.7 billion they borrowed to help close this deal. It hasn't closed yet, they're targeting early next year. But keep your eye on that one.
Jason Hall: Every small business marketing professional in the United States knows all about Mailchimp. This is a very big one.
Lou Whiteman: Can I say, a full disclosure here, as a consumer, I loathe both these companies. [laughs] This is the company that is single-handedly responsible for making the tax code more complicated for millions of Americans, not able to file their taxes for free, merging with a company that's responsible for ruining my email.
If you go to Mailchimp's website, their first frequently asked question is why are all of my emails ending up in spam? That is their first question in their Frequently Asked Questions. I get the logic here, Toby, I think it probably works, but $12 billion, more than 12 times sales for a pretty mature company.
The thing that really makes me cringe about this is we know all of tech is inflated so you're using your inflated currency to buy inflated multiples. They spent half of this cash. As you say, they borrowed $5 billion dollars, $6 billion of this deal consideration is cash. If this was stock--
Hall: Lou, the money supply was increased like 30% over the past few years, so it's the same thing, right?
Whiteman: Well, that's true, we've inflated cash and inflated credit. I don't doubt this works out for them, but it's just a humbug and there will be goodwill written-off here. There is no way they get $12 billion.
Travis Hoium: My question about this is if you're the owners of Mailchimp, wasn't it like two people that owned the entire company?
Hall: Private business.
Whiteman: They say we'll take cash, thank you.
Hoium: Their employees didn't own anything and they financed it themselves too. If you're in that business, you know what the trends are for your business better than anybody else. I'm getting more emails than ever and I didn't sign up for any of this stuff. [laughs]
Whiteman: Thank you, Mailchimp.
Rachel Warren: Oh, that's why.
Hoium: It is Mailchimp, so if you're them, are you seeing the top and you're like, ripcord I'm out of here.
Hall: I'm going to tell you thinking about it that way, you are able to build a business that large without relying on external investors that you could sell for $12 billion. You know that tells to me? Incredible economics in that business, that's what it tells me.
Whiteman: Just wait until they figure out how to integrate Slack so we can have these Mailchimp messages coming into our Slack instead of email.
Hall: That's obviously is going to happen.
Bordelon: Awesome. We'll see how it works out. I'm optimistic, but they got some work to do. That, Lou, is one of my concerns about this, that's something I'm going to watch.