Adobe Systems (ADBE) is once more using M&A to both expand its addressable market and protect its flank from deep-pocketed rivals.
By spending $1.68 billion to acquire e-commerce software firm Magento, Adobe is going after not only Shopify (SHOP) , whose shares slumped on news of the deal, but also the commerce software platforms of firms such as Salesforce.com (CRM) , Oracle (ORCL) and SAP (SAP) . These firms already have products that compete against offerings within Adobe's Experience Cloud platform, which features a variety of marketing, advertising and customer analytics offerings.
Buying Magento gives Adobe another arrow in its quiver as it battles the likes of Salesforce and Oracle for large enterprise deals. Remarks made during a conference call suggested Adobe is more keen on helping Magento, whose sales have skewed towards mid-sized businesses, expand in the enterprise than having Magento go after small businesses, which account for a large portion of Shopify's revenue.
Between the Magento deal and its large investments in Experience Cloud, Adobe is making an aggressive push to profit from trends such as e-commerce growth, online ad growth and the growing IT spending clout of chief marketing officers (CMOs). It wouldn't be surprising if that push yielded additional acquisitions in time.