Holy Emoticons Batman! — Perion Network Acquires SweetPacks For $41M

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Perion Network is acquiring SweetIM (best known for its SweetPacks IM product) for a total of $41 million, with $2 million of that in shares and the rest in cash. SweetIM’s founders will get a guaranteed portion now of $32.5 million and $7.5 million later – based on performance. SweetPacks’ CEO Nadav Goshen joins Perion as its new Chief Operating Officer. SweetPacks’s SweetIM app that has become the byword in emoticons on Internet chat. You know – the kind of thing that teenagers love. The addictive chat app launched way back in 2005 but has since garnered over 100 million users globally.

Perion Network is best known for its IncrediMail and Smilebox products, which have had 150 million downloads and have an installed base of over 18 million. IncrediMail is a streamlined e-mail and Facebook application. Smilebox is a photo sharing product. The applications are monetized primarily through a toolbar which generates search and ad revenue.

Josef Mandelbaum, Perion’s CEO says the acquisition will “significantly increase” its revenues, double its profits and expands profit margins “enabling us to exceed $100 million in revenue in 2013.”

SweetPacks generated $29.7 million in revenues in the 12 month period ending September 30, 2012, with Adjusted EBITDA of $9.0 million, at a 30% margin. This is 89% higher than 2011 revenues of $15.7 million and almost double 2011, on an adjusted EBITDA of $4.5 million.

In consideration for the acquisition, Perion will make an initial payment of $10 million in cash and 1.99 million Perion shares. A second payment of $7.5 million in cash is due 12 months after closing. A third, conditional payment of $7.5 million in cash is due 18 months after closing, subject to certain milestones and achievements, bringing the total potential purchase price, as of close of business November 6, to $41 million.