Marketing firm buys Triangle's iContact

Co-founder says buyer Vocus plans to maintain presence in Morrisville and focus on growth.

dranii@newsobserver.comFebruary 29, 2012 

Email marketing company iContact, one of the Triangle's fastest-growing technology companies, has been acquired by a publicly traded Maryland company in a deal valued at $169 million.

IContact co-founder and CEO Ryan Allis said that joining forces with Vocus, a provider of cloud-based marketing and public relations software, will enable the combined business to create "the leading cloud-based marketing platform for small and midsized business."

Allis said Vocus plans to maintain the iContact brand and its presence in Morrisville - facets of the deal which he said were crucial for both him and co-founder Aaron Houghton.

Allis said that he didn't know whether there would be any layoffs among iContact's 250 employees but that the focus of the business is growth.

"We're going to need our staff to help us achieve this ambitious vision," said Allis, who is 27.

IContact, which was privately held, didn't disclose updated revenue figures. But Allis said in the fall that the business was on track to reach $50 million to $55 million in revenue for 2011, up from $39 million in 2010.

The company's software enables small and midsized businesses and other organizations to create, send and track their email messages. Last fall, iContact added new social networking capabilities so its customers can post messages via Facebook and Twitter and measure how those messages resonate with their target audiences.

Allis said iContact hadn't been up for sale and was working toward eventually going public. But after meeting Vocus CEO Rick Rudman last month, he decided that combining two companies with similar cultures and visions was the right way to go. Vocus had about 750 employees before acquiring iContact.

Allis said that although iContact's software will continue to be sold as a stand-alone product, Vocus also plans to integrate it into its marketing suite. The marketing suite is used by companies to reach and influence customers online via social networks and through the media.

The terms of the deal include $91 million in cash, $9 million in Vocus common stock and $79 million in preferred stock. The net value is $169 million because Vocus is obtaining $10 million in cash with the acquisition.

Allis and Houghton declined to disclose their ownership stake in iContact or how much they will receive as part of the sale. But they did say they are donating $1.2 million to create a foundation that will provide scholarships for children of iContact employees over the next 30 years.

Allis said that all of iContact's employees had stock options, and that each will receive a minimum payout of at least $5,000.

With the sale, Allis is now president of the iContact unit of Vocus. Houghton, 30, who was the company's executive chairman, said he is "moving on and working on a new startup in downtown Durham." He said he wasn't ready to discuss details.

IContact was founded in 2003 by Allis and Houghton while they were students at UNC-Chapel Hill. The company was self-funded early on, but in recent years raised more than $50 million in venture financing. Among its investors was the Triangle-based Idea Fund Partners.

"We were aware from our early meetings with those guys that they were the smartest guys in the room," said John Cambier, managing partner at Idea Fund. "We're looking forward to backing either of them again."

The company has worked hard to cultivate an esprit de corps among its employees with perks such as Bagel Mondays and free monthly massages. Last year, iContact turned its employees loose on decorating its Morrisville offices, giving each of 16 teams of employees a $2,000 budget and carte blanche. (The employees can't take credit, however, for the circular slide that connects two floors.)

IContact also has had a socially responsible bent. It contributes 1 percent of its payroll to local nonprofits and gives employees 2-1/2 days off each year for volunteer work.

Allis said that Vocus has a similar culture and he hopes that iContact will retain its perks. IContact also is maintaining its charitable ways for now, but the goal is to develop an integrated corporate social responsibility program for all of Vocus.

Vocus released its fourth-quarter and year-end financial results Tuesday. The company generated $114.9 million in revenue for all of 2011, up 19 percent. It posted a loss for the year of $14.6 million, versus a $3.7 million loss a year earlier.

On Tuesday, before the deal was announced, Vocus shares closed at $22.55, down 32 cents. That compares with a 52-week low of less than $16 and a 52-week high of $33.70.

Ranii: 919-829-4877

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