Cloud Stocks Sinch and Twilio Soar, Sparking Acquisition Spree

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Cinch, a cloud software company that helps companies connect with customers online, inked a $1.9 billion deal to acquire US-based PathWire.

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The sector grew during the pandemic, as retailers wanted to connect with customers rather than in person. San Francisco-based Twilio is valued at $55.3 billion, nearly quadruple its level at the start of 2020. Sweden’s Cinch, which counts AT&T. Inc.,

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Toyota Motor Corporation

and Nestle Nespresso SA among its customers, is equivalent to about $14 billion, which is almost eight times as much over the same period.

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On Thursday, Cinch announced a $1.9 billion cash-and-stock deal to acquire privately held PathWire, bolstering an offering of cloud-based email services that companies use to market their products. uses. The San Antonio-based company’s customers include ride-hailing service Lyft. is included Inc.

and the German logistics operator DHL International GmbH.

It follows Cinch’s February agreement to buy Chicago-based Intellicent for $1.1 billion and then to MessageMedia in June for $1.3 billion.

“If we want to win on the global scene, which is our stated goal, we need to win in America,” said Thomas Heath, Cinch’s chief strategy officer. “The message is the greatest [communications] Channels and Voice are the second largest in that market, and we’ve made acquisitions to be the leader in both.”

According to Dealogic, Twilio has struck at least nine deals since its listing in 2016. Its biggest agreement was a $3.2 billion agreement last year for Segment, a software provider that helps businesses track and manage customer data.

So far, investors have loved the deal frenzy, hoping that consolidation means an increase in market share. Shares of Cinch rose 5% when the Pathwire deal was announced. And the stock is up 28% so far this year, beating its US rival.

A big winner has been SoftBank Group Corporation

, which holds about 9% stake in Cinch. The shares have gained nearly 63% since making their initial investment in November 2020.

But the share prices of Twilio and Cinch also faced headwinds amid widespread selling in tech stocks. Shares of both companies fell in September. There is also a question whether they can withstand the increased competition.

software giant microsoft Corporation

This year entered the communication platform-as-a-service market. Vonage Holdings Listed in New York Corporation

There is another competitor.

And smaller rivals are leading the way. In November Croatia-based Infobip Ltd., a portfolio company of private-equity firm One Equity Partners, signed a $300 million deal to acquire OpenMarket to expand into the US Amsterdam-based Messagebird BV in April, in a private-equity investment. Raised $1 billion. Expand in that market.

“Twilio’s stock is not a primary focus of the company or the leadership team,” a Twilio spokesperson said.

Cinch trades at a discount to his rival. Daniel Zurberg, a technology analyst at Handelsbanken Capital Markets, said the stock trades at about 16 times its enterprise value for an estimated gross profit by 2022 projections. The analyst said Twilio trades at about 28x.

“If Cinch can continue its acquisitions without fail and continue its growth, we may see the stock close.” [valuation] gap,” said Mr. Zurberg.

Ben Dummett [email protected] . Feather

.

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