Retail Armageddon Creates Major Opportunity for Technology

The gradual digitization of the retail industry comes as no surprise to anyone as consumers
increasingly choose to make their purchases online rather than in physical brick-and- mortar
locations. The shift however seems to have picked up its pace. Our friends at Fung Global Retail
& Technology observed 3,296 announced major US store closings through April 28 this year,
which represents an astounding 97% increase year over year.

Retailers that were slow in playing catch up had to bear the brunt of this change of pace as they
were forced to close stores to cut losses and attempt to reconfigure their sales channels to the
online space. Retailers are more focused than ever on developing a holistic omni-channel
presence to keep up with and adapt to the transition. This strategy tries to provide a seamless
shopping experience in brick-and- mortar stores and through a variety of digital channels (HBR).
A major facet of this approach involves data on consumers and the necessary technology to gain
insights, improve interactions, and better connect brands with consumers. This month, at
Pharus, we saw several deals in the consumer-focused tech space. We expect to see more
acquisitions going forward given the appetite for technology and tech-enabled services that help
businesses compete in both the physical and digital retail environments.

The most notable transaction occurred on April 10, when Harland Clarke agreed to acquire
RetailMeNot, an Austin-based online coupon site that connects consumers with retailers. The
transaction values RetailMeNot at $467.74M, 1.67x Revenue, and 15.04x EBITDA. The
transaction will complement Harland’s most recent acquisition of Valassis, a direct mailer
company. It provides Valassis with a new global digital channel to distribute Harland’s client’s
offers for targeted costumer advertising.

On April 4, Yelp (NYSE:YELP) acquired Turnstyle Analytics, a Wi-Fi marketing company that’s
changing the way businesses use Wi-Fi to connect with their customers. The all-cash deal values
Turnstyle Analytics at $20.60M. The acquisition will enhance Yelp’s position as a leading
customer acquisition provider for local businesses.

On April 27, Invigor Group, a leading information technology and digital solutions company,
acquired Sprooki, a location-based marketing & commerce system. The transaction values
Sprooki at $7.45M. The strategic acquisition will enhance Invigor’s data analytics capabilities and
loyalty solutions to its clients.