NetSuite acquiring Durham-based Bronto Software for $200M

NetSuite, a California software company, will acquire Bronto Software for $200 million, ending the Durham startup’s 13-year-run in the emerging field of targeted marketing.

Founded in 2002, Bronto provides email marketing and related services to more than 1,400 customers, including the Durham Bulls, Lulu, Timex and Trek Bikes.

The marriage of the two companies highlights the rise of using technology to analyze and influence customer behavior as retailers seek to track existing customers and reach new ones. Even though it’s a money-losing venture, Bronto will help NetSuite expand its business by supplying Bronto’s customers for NetSuite’s products and vice-versa.

Bronto will continue to operate in Durham as an independent business unit of NetSuite, and its founders and leaders will continue to guide the company, executives with both companies assured.

Bronto has operated as a privately owned company with no venture capital support or other outside investors, said CEO Joe Colopy, and all Bronto employees have equity ownership options in the company.

“Everyone gets some form of payout,” Colopy said. “The intention is that everyone continue in this next chapter.”

The acquisition will not force layoffs at Bronto, said Andy Lloyd, NetSuite’s general manager for commerce products. Rather, Lloyd said he expects Bronto to double in size over the next two years.

“We’re not acquiring this company to find efficiencies,” Lloyd said. “It was a condition of this deal that the management team was coming along with it, and we have no plans to do any headcount reductions whatsoever.”

Bronto employs more than 250 people, including about 220 at its headquarters in Durham’s American Tobacco Campus; it also has offices in London, Sydney, New York and Los Angeles.

Publicly-traded NetSuite employs more than 3,500 people and provides cloud-based business management and analytics software. The company posted revenue of $556 million last year, a 34 percent increase over the previous year.

On Thursday, NetSuite reported first-quarter sales of $165.8 million, also a 34 percent increase over the previous year.

During the analyst call, NetSuite chief financial officer Ron Gill said Bronto’s standalone operating plan for 2015 generates operating losses. He said the Bronto acquisition is expected to add $40 million to $45 million in annual revenue in 2016 for NetSuite, but will reduce operating annual cashflow by $2 million to $3 million.

Colopy, now 44, founded Bronto at age 29, leaving his online marketing position at Red Hat, the Raleigh software developer. He said he worked out of his home without a paycheck for three years to get the company established.

NetSuite had been looking to expand its services to email marketing and related products for about a year, Lloyd said. The company approached Bronto about six months ago, and the deal is expected to close in the second quarter.

This story was originally published April 23, 2015 at 11:05 AM with the headline "NetSuite acquiring Durham-based Bronto Software for $200M."