This is a thoughtful reflection specifically as we enter 2025 where M&A is projected to accelerate. The 4th case that I’ve seen for M&A is a financial operator one, where the Aquirer is positioning itself through acquisitions for an acquisition. I’ve seen this with CEOs that were CFOs previously. An example is OpenTable. We acquired companies at a clip of monthly, making OpenTable seem to have capabilities from community photo generation, to mobile payments to data science. As a product operator at the time, most of these acquisitions did not make congruency or functionality sense, and were not on anyone’s roadmaps to integrate deeply. However, what was actually happening was that OpenTable was getting groomed for a financial acquisition by the Priceline group that delivered a doubling of the stock value. So the strategy worked.
Yeah that makes sense. It appears to be adding scale, scope, or capabilities, but is really doing so more superficially to create a better story for exit.
We run a furniture aggregator operating in the CEE,, which generates money through CPC model, and despite it being not a marketplace, I believe that most of the points are relatable.
When considering some M&As in the space, I have always wondered where would the actual value creation come from. On the OPEX side, as you mention, it's quite obvious. If you consolidate two aggregators, which operate on the same markets, you do not need to have two management teams, two product teams, two sales teams, etc. So basically you can run two companies with one team instead of two. It's the same as with marketplaces
But on the topline / gross profit side the value creation, at least for me, is more elusive. Are you going to save on the PPC on e.g.; Google or Meta if you just keep one brand, and retire the second brand / company? Maybe for a short time, in theory the price lvl of the PPC should fall as now there is only one company bidding. But eventually, others will probably bid up the auctions and the prices will stabilize at the same level.
If you retire one brand, and keep the stronger one, what will happen? Would you have higher pricing power towards the clients? Would you be able to bring more traffic to your website? Or increase conversions? How?
Most marketplaces that rely on Google keep the brands so they rank #1 and #2 organically, lessening the need for Adwords, and so they can coordinate their Adwords bid to reduce CPC prices. Expedia and Booking are examples of this where each own 5+ travel brands. There is a theory around more singular brand mindshare if you merge. More wood behind one brand arrow, but that can be hard to measure. SO you really have to understand where your growth leverage is coming from: better economics, better conversion, better SEO performance, a more well recognized brand and guide your integration strategy accordingly. Generally higher frequency products will merge brands and lower frequency products (like travel marketplaces that rely on Google) keep brands separate. You can also merge the functions, but not the brands to save on costs. Match Group does this with a lot of their dating apps.
It is interesting that food delivery, despite being higher frequency, has adopted the travel strategy of multiple brands. Uber has kept Postmates. Doordash kept Caviar and Wolt. This probably indicates how important SEO rankings are app store rankings are for that market OR something about brand segmentation and how localized brand awareness is. But for something like Continental Airlines and United, keeping separate doesn't make sense because there is much more of a margin concern with running two brands.
This is a thoughtful reflection specifically as we enter 2025 where M&A is projected to accelerate. The 4th case that I’ve seen for M&A is a financial operator one, where the Aquirer is positioning itself through acquisitions for an acquisition. I’ve seen this with CEOs that were CFOs previously. An example is OpenTable. We acquired companies at a clip of monthly, making OpenTable seem to have capabilities from community photo generation, to mobile payments to data science. As a product operator at the time, most of these acquisitions did not make congruency or functionality sense, and were not on anyone’s roadmaps to integrate deeply. However, what was actually happening was that OpenTable was getting groomed for a financial acquisition by the Priceline group that delivered a doubling of the stock value. So the strategy worked.
Yeah that makes sense. It appears to be adding scale, scope, or capabilities, but is really doing so more superficially to create a better story for exit.
Hi Casey,
We run a furniture aggregator operating in the CEE,, which generates money through CPC model, and despite it being not a marketplace, I believe that most of the points are relatable.
When considering some M&As in the space, I have always wondered where would the actual value creation come from. On the OPEX side, as you mention, it's quite obvious. If you consolidate two aggregators, which operate on the same markets, you do not need to have two management teams, two product teams, two sales teams, etc. So basically you can run two companies with one team instead of two. It's the same as with marketplaces
But on the topline / gross profit side the value creation, at least for me, is more elusive. Are you going to save on the PPC on e.g.; Google or Meta if you just keep one brand, and retire the second brand / company? Maybe for a short time, in theory the price lvl of the PPC should fall as now there is only one company bidding. But eventually, others will probably bid up the auctions and the prices will stabilize at the same level.
If you retire one brand, and keep the stronger one, what will happen? Would you have higher pricing power towards the clients? Would you be able to bring more traffic to your website? Or increase conversions? How?
Anyways, interesting post!
Best,
Adam
Most marketplaces that rely on Google keep the brands so they rank #1 and #2 organically, lessening the need for Adwords, and so they can coordinate their Adwords bid to reduce CPC prices. Expedia and Booking are examples of this where each own 5+ travel brands. There is a theory around more singular brand mindshare if you merge. More wood behind one brand arrow, but that can be hard to measure. SO you really have to understand where your growth leverage is coming from: better economics, better conversion, better SEO performance, a more well recognized brand and guide your integration strategy accordingly. Generally higher frequency products will merge brands and lower frequency products (like travel marketplaces that rely on Google) keep brands separate. You can also merge the functions, but not the brands to save on costs. Match Group does this with a lot of their dating apps.
It is interesting that food delivery, despite being higher frequency, has adopted the travel strategy of multiple brands. Uber has kept Postmates. Doordash kept Caviar and Wolt. This probably indicates how important SEO rankings are app store rankings are for that market OR something about brand segmentation and how localized brand awareness is. But for something like Continental Airlines and United, keeping separate doesn't make sense because there is much more of a margin concern with running two brands.