Estimize Launches Mergerize, Crowdsourcing for M&A

Applying the crowdsourcing method to mergers and acquisitions, Mergerize looks to bring value to traders, quants, investment bankers, corporations and the virtual rumor mill.

What do companies such as Open Table, Yahoo, Grubhub.com, Tableux and Pebble, have in common? They are all potential M&A targets, according to Mergerize, a new offspring from Estimize.

Today, Estimize, the crowdsourced earnings estimate service, launched Mergerize, using crowdsourcing for predicting which companies are the top mergers and acquisitions targets. Currently, the site’s data set has 45 targets, 40 acquirers and an average price of $6.26 billion.

This is the next step in Estimize’s vision to build out a corporate actions platform into many other types of events, such as IPOs, spin-offs, and FDA approvals, according to Leigh Drogen, CEO and founder of Estimize who announced the launch of Mergerize in a blog on the startup’s web site.

“When I founded Estimize the broad vision was to crowdsource forward looking financial expectations for many different data sets,” wrote Drogen in the blog, “Who Will be the Next WhatsApp? Estimize launches M&A.”

Now, expanding beyond EPS and earnings estimates, Drogen is applying the crowdsourcing methodology to bring improve transparency to other “orthogonal” (a.k.a: intersecting) areas of finance with forward-looking expectations.

Who's going to be the next WhatsApp? We launched Mergerize today to find out! https://t.co/vElM0ROWxb $FB

— Estimize (@Estimize) March 26, 2014

Founded in June 2011, Estimize has grown to 4,000 contributors, 25,000 registered users, coverage on over 1,000 stocks this quarter, and produces more than 17,000 estimates made in the last three months. While it may have started of as an experiment, Estimize’s has said that it is accurate than Wall Street’s benchmark for estimate data (Thomson Reuters’ IBES) about 65 percent of the time. It recently received validation from several peer review research papers. Last week, Deutsche Bank Quant Research published a paper stating, that the value-added in the Estimize dataset was due to the “wisdom of crowds” effect as more predictions give way to greater accuracy. “As the Estimize coverage increases, the forecast accuracy relative to IBES also increases. EPS estimates for stocks with greater than 20 analysts covering them in Estimize are more accurate 2/3 of the time,” wrote the DB analysts.

Drogen believes that Mergerize can be extremely useful for many different people throughout the financial ecosystem, citing event-driven traders looking to put on risk, quants who need to mitigate risk around these events, corporate development groups at large companies that are scouting for acquisitions and trying to understand the market sentiment toward these companies. “Investment bankers looking to pitch ideas and everyone else who enjoys pontificating on who may be their favorite startup” would also find value in the site, he suggested.

Mergerize from Estimize brings crowdsourcing to M&A deals

For instance, there are many corporate investor relations executives on Estimize from $100 billion companies. “I can see a day in the not too distant future where corporate strategy executives come to Mergerize to see which companies the crowd believes they should buy and at what price the crowd believes they should buy them at,” wrote Drogen in the blog. Recently, Drogen took his team for the second year in a row to Costa Rica for an offsite of work and fun, which he recommends to other startups. “I wanted the team to put down Estimize.com for a week and focus on something fresh, using some different technology and solving different problems. In less than a week the team cranked out the MVP of Mergerize,” he wrote.

Estimize is also launching the M&A crowdsourcing site amidst a boom in tech M&A deals not seen since the dot.com era. The dollar volume of technology deals is up 90 percent to $65.2 billion, according to Thomson Reuters data in the New York Times. Yesterday, Facebook announced the $2 billion acquisition of Oculus VR, a maker of virtual reality headsets.

To obtain the data set, Estimize has included the list of startup and private companies found on Crunchbase, as well as about 4,800 publically traded U.S. equities. Similar to Estimize, contributors enter the predictions for M&A deals into Mergerize.

With the focus around Google’s push into wearable technology, Facebook could look to acquire Pebble, a market of wearable watch apps that is working with Android operating system, for $600 million in the next 12 months. One contributor predicted that Oracle would acquire Red Hat within two years, “in order to get market quota in the application server business, wrote a contributor.

While the merger and acquisitions market is prone to rumors and predictions, Drogen addressed this in his blog. “I think it will be all of the above, and we’re going to see in a few months how the data correlates to events and price movements for these companies,” he wrote. It will take some time to see if the data is predictive of transactions, but Drogen said it could be a self-fulfilling prophecy.

In fact, Estimize has landed on the list of M&A targets – with 3 potential acquirers, six predictions and average price of $263 million. One contributor predicted that Bloomberg will acquire Estimize for $275 million by March of 2015 for “on the strength of Estimize’s analytics layer and proprietary data.”

Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio