Why the IMImobile share price shot up 50% on Monday

The IMImobile (LSE:IMO) share price has gone beserk! On Monday 7 December the price of the AIM-listed cloud software company shot up an incredible 50%. So what exactly happened to see the London firm’s market cap skyrocket from £329m to £489m overnight?

On Friday, the IMImobile share price stood at 402.5p. But at the opening bell on Monday, it immediately rocketed to nearly 600p.

Cisco buys IMImobile

US telecoms giant Cisco swooped for IMImobile, confirmed by a company RNS to the London Stock Exchange on Monday morning. 

Cisco agreed to pay £543m for IMImobile. It means that anyone who has spotted the IMImobile share price and invested will be entitled to receive 595p in cash for their IMImobile shares.

Cisco said the reason why it decided to make the move is so it could get access to IMImobile’s  automated customer experience software.

The US giant praised IMImobile’s software package, saying it made it “easy for businesses to communicate with a customer in that customer’s channel of choice” as well as allowing it to manage interactions “across the entire customer journey“.

That’s all very well and good. But why would a $187bn market cap behemoth like Cisco have a  minnow like IMImobile on its radar? 

Growth challenge

When companies grow to the size of Cisco, or Google, or Apple, it’s very hard for them to generate growth and improve their share price organically. So they turn to the business tradition of using their massive reserves to buy out the competition instead.

Legendary General Electric CEO Jack Welch said it best back in 2009. “If you’ve got the cash, go out and buy or bury your competition…Steal their employees. Steal their R&D people. Bury them.”

It’s a dog-eat-dog world out there. And companies are competing not only on the quality of their products, but also on the “interactive” experience they can offer their customers, Cisco said. 

So taking over the competition in the form of IMImobile instead of having to reverse-engineer their product? It keeps Cisco as the market leader in its field.

IMIMobile share price now 

Even if the IMImobile team would prefer to stay independent and build their own products, it’s very difficult for a publicly-listed company to ignore a massive cash offer. Especially as the 595p per share bid comes at a level 51.6% higher than the share price the day before Cisco made the approach.

When the company originally joined AIM in 2014, the IMImobile share price was just 120p. 

When a takeover like this happens, it can mean a huge payday for long-term shareholders. Suddenly the £5,000, £10,000 or £50,000 they have invested over a number of years jumps up by 50%.

So for more adventurous investors, it can be worth looking outside traditional FTSE 100 or FTSE 250 companies.

What to look for 

It’s a huge result for IMImobile shareholders today. So as a long-term investor, it’s often worth considering which businesses might be a target for larger companies. Well-regarded AIM-listed firms like Gamma Communications and Team17 could be worth a look, in my opinion.

Companies I would be looking for include innovative smaller firms with trademarked or patented intellectual property that the bigger fish in the pond cannot easily copy.