Situation Analysis

Intuit’s Business Overview

Boasting a market cap of just under $200 billion, Intuit is a leading fintech software company specializing in accounting and tax preparation. They offer B2B services, including Quickbooks (accounting and bookkeeping software), Turbotax (do-it-yourself tax prep software), Pro Connect (tax prep software for professional accountants), and Mailchimp (email marketing platform). Their B2C services include Credit Karma (credit and financial management) and Mint (budget tracking). To better manage the business, Intuits divides its business operations into four business units: Small Business and Self-Employed (SBSE), Consumer, Credit Karma, and Proconnect. 49% of their total revenue comes from the SBSE segment, focusing on delivering financial and business management services, such as QuickBooks, to the targeting customers SMBs. 37% of their revenues come from the Consumer segment, which offers individuals financial planning services, such as TurboTax and Mint. For the rest of the revenue, 9% is from Credit Karma, and 5% is from ProConnect. Overall, Intuit demonstrates robust financial well-being according to our ratio analysis (Exhibit 1). Intuit also has a promising growth with a 20% growth of EBITDA and a 12.9% net income growth last year. 

Definition of Winning for Intuit

Intuit’s primary mission is to “power prosperity” for individuals, SMBs, and accounting professionals. Intuit envisions itself to create the “One Intuit” ecosystem as the ultimate platform that meets each customer’s personal and business financial needs at their fingertips. For Intuit, winning is about getting more SMBs to use Intuit to grow their business and individuals to manage their finance. Intuit builds its success on its core competencies (Exhibit 3), which establish a strong foundation of trust between Intuit and its customers. To win over more individual customers, Intuit has already decided where to compete with its acquisitions of Credit Karma and Mailchimp. The only question left for discussion is how to win, which we will discuss in our strategic recommendations.

Acquisition of Credit Karma – Expanding within B2C Personal Finance Industry

According to Porter’s Five Forces (Exhibit 2), which impacts the industry’s profitability, Intuit faces intense competition in the B2C personal finance space from companies such as NerdWallet and YNAB. Even though Mint has the competitive advantage of having the most significant number of active users among its competitors, there is still a potent threat of competitors that could potentially erode Intuit’s profits in Mint. Therefore, to compete against the rivalry in the personal finance industry, Intuit horizontally integrated Credit Karma in 2020 to offer more than just budgeting. By acquiring Credit Karma, not only can Intuit expand its customer base to individuals who seek a personalized recommendation for credit score management, but it also can Intuit lower the threat of Porter’s Five Forces. However, just owning two prominent players in the personal finance industry might not be enough for Intuit to create enough value to cover the cost of $8.1 billion. To fully realize the potential value of Credit Karma, Intuit needs to integrate credit Karma into its B2C services fully.

Acquisition of Mailchimp – Diversifying B2B Services to Online Marketing Business

While Intuit positions itself as a dominant near-monopoly in the B2B fintech software space, its growth in the SBSE segment has declined since 2019. Finding difficulties to grow their most profitable business segment, Intuit decided to compete in a new place other than accounting and tax prep. Therefore, Intuit repositions itself to an “end-to-end customer growth platform” targeting more SMBs. Through the buyout of Mailchimp, the “all-in-one” marketing automation platform for growing SMBs, Intuit hopes to increase the retention rate of its existing SMB customers by providing them the email marketing and customer relationship management (CRM) tool, which can help them grow their business. Furthermore, Intuit aims to reach Mailchimp’s global customer base of 13 million users, of which 2.4 million are monthly active users, and 800,000 are paid customers. However, just like the acquisition of Credit Karma, the buyout of Mailchimp might not add enough value to cover Intuit’s $12 billion costs of entry if Mailchimp is not fully integrated into the SBSE segment to create synergies. Therefore, in the following strategic recommendations, we will address how to unlock the hidden values and create sustainable competitive advantages from Intuit’s M&A deals.

Strategic Recommendations

1 – Focus on B2C Internal Integration to Reinforce Core Competencies

Considering Intuit had done over $20 billion on M&A deals, we suggest that Intuit pauses pursuing inorganic growth and instead focuses on integrating its new acquisitions into its core businesses. Given the nature of a B2C service, Intuit should integrate Credit Karma into the Customer segment for the personal finance industry instead of leaving it in an independent business unit. By merging Mint and Credit Karma under the same system, in which each customer can enjoy tracking budget and credit score with one account, Intuit can reduce the costs of maintaining both operating systems and enhance the user experience. In this way, Intuit would be able to reinforce its “customer-focus” core competency (Exhibit 3) that helps increase customer satisfaction and attract more users. The more users they attract, the more revenues they can generate to reinvest in improving the user experience. These recurring events would naturally form a virtuous cycle (Exhibit 4 ) that enables Intuit to reinforce its core competencies. With more robust core competencies, Intuit will penetrate the B2C personal finance market with their joint business of Mint and Credit Karma.

2 – Merge B2B Services to Develop Network Effects

We recommend that Intuit combine the operating systems of its B2B service offerings, QuickBooks and Mailchimp, and offer one subscription for all. The integration of Mailchimp into QuickBooks will help Intuit realize the cost synergies by reducing the costs for developing AI automation and increasing the efficiency of data collecting for small businesses. Moreover, as bundling subscription plans would facilitate the cross-selling of Mailchimp’s service to Quickbooks’ clients and vise versa, Intuit can unlock the revenue synergies from the increase in recurring revenues. A joint subscription could also improve user-friendliness, one of Intuit’s core competencies, as all services Intuit offers to SMEs would be packaged in one neat subscription. Furthermore, as the integration of Quickbook and Mailchimp helps SMBs increase their customers with the customized marketing campaign, SMBs would use both services more frequently and create more data for Intuit to improve the analytics and services for SMBs. With more comprehensive insights into their targeting customers, SMBs will have more efficient marketing that saves their money and grow their businesses. As more SMBs join and use more frequently, Intuit will increase its economic scale, enabling Intuit to provide better services at lower costs and create network effects (Exhibit 5). Creating barriers to exit for existing users and barriers to entry for new competitors, the network effects would provide economic moats for Intuit to maintain its dominant position in the B2B fintech software market.

Conclusion

In conclusion, to win over more customers to become the ultimate platform for individuals, small businesses, and professional accountants to manage their business and personal finance, Intuit has decided to further compete in the credit management market and online marketing industry through the acquisitions of Credit Karma and Mailchimp. To realize the synergies and create sustainable competitive advantages from these two M&A deals, Intuit needs to fully integrate Credit Karma and Mailchimp into their existing core businesses to increase their core competencies. Merging Mint and Credit Karma would create a virtuous cycle that reinforces Intuit’s core competencies and help Intuit penetrate the personal finance software market. The successful integration of Mailchimp and QuickBooks will help Intuit unlock the cost and revenue synergies from the $12 billion deal and create network effects that secure Intuit’s dominance in the B2B fintech software industry.

We believe that Intuit is currently uniquely positioned in overlooked industries. Hence it does not have to worry that much about significant competition. Whereas, if Intuit were to attempt penetrating currently “hot” markets like buy now pay later or P2P payments, they might struggle to beat out firms like Square (soon to be called Block) and Affirm. Therefore, we believe that the best investment of their time and equity is penetrating the B2C personal finance software industry and the B2B platform for SMBs to grow and manage their businesses simultaneously.