Social media has had a tremendously positive impact on eCommerce. Popular social media sites such as Facebook, LinkedIn, Twitter, and Instagram have become go-to places for customers to learn about and buy products and services. Social media also gives businesses better insights into customers, their characteristics, and buying patterns. All of this has led to an explosive growth in the use of social media as a marketing tool by companies.
As attractive as social media is for businesses, it presents a problem for smaller companies. How do they compete against much larger companies that invest millions, if not billions, of dollars on social media marketing? That's where Social 5 comes in. Social5 is social media marketing company that offers small-to-medium size businesses (SMBs) affordable social marketing solutions that help them compete against larger competitors. Their services include graphical design, content creation, social media advertising, blogs, analytics, reputation management, and a scalable content-distribution platform that leverages artificial intelligence.
A small but successful company, Social5 has more than 2000 customers in over 50 vertical markets, ranging from financial-to-medical, real estate-to-insurance, technology-to-automotive, and more. However, their revenue for the last few years was flat. To grow their company further, Social5 executives realized they needed a partner and so they approached Corum to help find one.
That search resulted in the recent successful sale of the company to Pluribus Technologies, a company that specializes in acquiring and enhancing small, profitable B2B software companies. But to make that sale happen, Social 5 took advantage of Corum's unique hiatus option, which enables clients to take a pause in the M&A process and then return to the market at a later time when conditions are more favorable for a sale. Corum is the only investment banker that offers a hiatus option as part of its M&A process. Social5 also used the time away from the market to make improvements that would increase their attractiveness to prospective buyers.
Initially approaching Corum
Social5 initially approached Corum in 2019. According to Corum Senior Vice President Mark Blundell who later came on as Corum’s point person on the deal, “Social5 was looking for an acquirer who could facilitate them selling to a lot of small-to-medium size businesses. They were looking for someone to help them grow their business quickly. Significant growth over a short period is an important goal for that kind of business."
With Corum’s assistance, Social5 came close to a deal. But a deal didn’t quite happen. Blundell said that a major stumbling block was timing. 2019 was the year the COVID-19 pandemic started and buyers were not very receptive to acquiring companies such as Social5 that were small and had revenues that were flat.
Another stumbling block was the difficulty in the Social5 signup process. Customers needed a lot of handholding from Social5 team members to provide the information needed about their company at signup. Feedback from prospective buyers was clear: Social5 needed to automate significant portions of the signup process.
Going on hiatus
Knowing that the timing wasn’t right for a deal, Social5 decided to take advantage of Corum's hiatus option. They could then return to the market at a more favorable time for making a deal. The time out of the M&A market would also give the company the opportunity to automate their signup process.
According to Blundell, “During the COVID period the market came down significantly. But early in 2021, we all thought that it was time to go back to the market." With Social5’s return to the market, Corum made a more pinpointed search for prospective buyers. Blundell recalled, “We decided that we needed to refine our buyers list to get people who might want to buy Social5 as a buy and hold from an accumulator. Our primary focus was to find companies whose customers have small-to-medium businesses because Social5 would be worth more to them and they would be worth more to Social5.”
Using Corum’s extensive resources that include the largest database of companies in the industry, with over 11 million entries, Corum’s researchers provided a tailored list of companies and Private Investment firms that serve small-to-medium size businesses. That target list enabled Blundell and the Corum team to contact more than 100 companies. One of those companies was Pluribus Technologies, which made a formal offer. But Blundell noted that Social5 received a number of other formal offers and additional indications of interest as well.
Pluribus Technologies was particularly attractive to Social5 because it had a number of subsidiary companies that sell to small and medium size businesses. Blundell saw the opportunities for both companies like this: "Pluribus could bring Social5 into its family of companies and incent those companies to cross-sell each other's products. That is an advantage to Social5 because the other companies in the group are in touch with exactly the kind of companies that Social5 needed to reach. It's also an advantage to the companies owned by Pluribus because they would now have additional products to sell including their own. In other words, there were cross-selling opportunities on both sides of the deal."
The value of going on hiatus
Taking a hiatus is a good opportunity to wait for better conditions if the timing is not right for a deal. It also gives sellers the time to address issues that stand in the way of a good offer. The COVID pandemic negatively impacted the M&A market at a time when Social5 was initially looking to make a deal. Going on hiatus, enabled it to wait for the M&A market to rebound. Social5 also took advantage of the time away from the market to improve their product, and in doing that, make the company more attractive to buyers.
Going on hiatus worked for Social5. With its recent acquisition by Pluribus Technologies, Social5 has a bright future. As Blundell sees it, “Social5 is now well positioned for the next phase of their growth.”