sinch snaps up messagemedia for $1.3b to compete with twilio in business sms services

Sinch Expands Global Reach with MessageMedia Acquisition

Sinch, a Swedish provider of communication APIs for customer engagement, has announced the acquisition of MessageMedia. This strategic move aims to bolster Sinch’s competitive position against industry leader Twilio and accelerate its global expansion.

Deal Details and Financials

The acquisition is valued at $1.3 billion, consisting of $1.1 billion in cash and the remaining portion in shares. Based on current exchange rates and Sinch’s share price, the total transaction amounts to SEK10,745 million. The completion of this deal is anticipated during the second half of the current year.

A Response to Market Dynamics

This acquisition is particularly noteworthy given the recent activity of Sinch’s primary competitor. Just weeks prior, Twilio announced its own acquisition of ZipWhip, another significant player in the business SMS sector, for a sum of $850 million.

MessageMedia: A Key Strategic Addition

Headquartered in Melbourne, Australia, MessageMedia operates across New Zealand, the United States, and Europe. The company primarily serves the small and medium-sized business (SMB) market, offering a self-service platform for building and managing messaging services.

Customer Base and Growth

MessageMedia currently supports a customer base of approximately 60,000 businesses and processes over 5 billion messages annually. The company is experiencing substantial growth, particularly in the U.S. market, where it is onboarding 1,500 new customers each month.

Service Offerings Beyond SMS

In addition to SMS capabilities, MessageMedia provides technologies for creating MMS experiences and mobile landing pages. Furthermore, the company offers tools for integrating other features and an API gateway for developers.

Sinch’s Existing Scale and Client Portfolio

Sinch itself facilitates approximately 150 billion mobile customer engagements each year. Notably, eight of the ten largest technology companies globally are among Sinch’s clientele.

Funding and Acquisition Strategy

Sinch is publicly listed on the Swedish stock exchange, with a current market capitalization of $13.6 billion. This acquisition follows a recent $1.1 billion capital raise, largely backed by SoftBank, intended to fund further acquisitions.

Strategic Timing and Competitive Landscape

The timing of the MessageMedia acquisition raises questions about whether Sinch’s interest predated Twilio’s move for ZipWhip. The parallel acquisitions suggest a competitive response within the industry.

CEO Commentary on the Acquisition

Oscar Werner, CEO of Sinch, stated to TechCrunch that the acquisition will extend the benefits of advanced mobile customer engagement to every small business. He emphasized that businesses will no longer require substantial resources or specialized technical expertise to deliver exceptional customer experiences.

Sinch’s Aggressive Growth Through Acquisition

Sinch has been actively pursuing acquisitions to expand its business and capitalize on the increasing demand for mobile communication solutions. This strategy is driven by the surge in phone and internet usage, as well as the pursuit of economies of scale within the communications industry.

Industry Consolidation and Strategic Purchases

The communications sector is undergoing significant consolidation, with both Sinch and Twilio strategically acquiring smaller businesses to strengthen their market positions.

MessageMedia’s Financial Performance

MessageMedia is a financially robust acquisition target, projected to generate $151 million in profits for the year ending June 30th. This includes gross profits of $94 million and EBITDA of $51 million. Sinch itself also maintains profitability.

Previous Acquisitions by Sinch

Sinch’s recent acquisitions include Inteliquent for $1.14 billion, ACL in India for $70 million, and SAP’s digital interconnect business for $250 million.

The API Economy and MessageMedia’s Role

MessageMedia is a product of the growing API economy, similar to Twilio and Stripe. It simplifies complex services, allowing customers to integrate them into their digital operations through straightforward code.

Market Size and Growth Potential

The communications and messaging API market is estimated to be between $9 and $13 billion. The U.S. represents 30% of this market, with a projected global growth rate of 25-30% through 2024. SMBs are a key driver of this growth.

MessageMedia CEO’s Perspective

Paul Perrett, CEO of MessageMedia, highlighted the significant return on investment that mobile messaging delivers. He believes that serving smaller businesses presents a substantial opportunity, and that combining forces with Sinch will establish a global leader in the field.