August 17, 2015
Adidas recently acquired Runtastic for $240M in what is a big exit for the company and European exit valuations. What is particularly interesting about this acquisition is considering it’s a local transaction (acquirer and target are from DACH), numbers are a outlier, thus making the acquisition akin to one done by a US firm. But perhaps there is a caveat. Axel Springer owned 50.1% in the company making the sale a negotiation between three entities –two large German companies and a startup.
When one of the Runtastic guys came to ChalkRow’s VC panel in Berlin last year, we didn’t realize there was a $240M underdog sitting in the room. Probably at that stage, they weren’t worth that much. After all, the target price is dependent on what the buyer is willing to pay.
That changed earlier this year when UnderArmour set the minimum and maximum target price. After acquiring MapMyFitness and its 20M users for $150M in 2013, paying a premium of $7.5 per user, the company went on another shopping spree in February 2015. The company jointly acquired MyFitnessPal for $475 and its 80M users ($5.9 per user) and Endomondo for $80M and its 20M users ($4 per user). When Under Armour’s CEO, Kevin Plank, was probed about strategy after the inaugural purchase, he said, “At the end of the day, the math is pretty simple, the more active someone is, the more likely they are to buy athletic apparel and footwear”. And in case you are wondering the emphasis on user numbers, Plank reinforces that it’s a community play in this statement. “As we started working with Thurston (MapMyFitness CEO) and his team in Austin, it only reinforced our belief that the value is in the community – especially one where the user is not just looking at their friend’s pictures – which is providing you with data that empowers you to come back to them with an informed point of view to help improve their health and fitness.”
While Runtastic had 70 million users, it’s hard to imagine that UnderArmour didn’t approach them earlier. But perhaps the terms weren’t right or it was a lack of cultural fit at the time. But the landscape is about to change since the release of the Apple Watch, which has an array of fitness tracking features and integrations. At $3.4 per user, Runtastic sold for less than MyFitnessPal and Endomondo, however for a local DACH transaction and considering the big competitive threats, it’s a homerun for the company
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