When Google announced its intention to acquire DoubleClick six weeks ago, it sparked upheaval in the interactive marketing industry with aQuantive, Right Media, and 24/7 Real Media subsequently being gobbled up. Then two weeks ago, offline marketing powerhouses Acxiom and Epsilon’s parent company, ADS announced that they will both be acquired by private equity companies for sizable chunks of change. So what’s going on in the marketing and media arena? And, is there a link to between these ‘old’ and ‘new’ media company deals?
As private equity deals, the Acxiom and ADS acquisitions are pretty distinct from those of the interactive marketing companies. Private equity has become a business story in its own right during the past few years, partly because of the factors that have enabled such a slew of PE deals – cash is easy to come by, credit is cheap, interest rates are low, and balance sheets are clean and relatively debt-free.
For the target companies, there are also benefits to going private. It affords them the ability to focus and invest in longer term initiatives that might harm a quarterly public P&L. It also frees up considerable funds that public companies spend on ensuring Sarbanes-Oxley compliance and governance.
So, what might the expected impact be for customers of ADS and Acxiom?
In tandem with the acquisition announcement, Acxiom announced the restructure of their business into three divisions: Acxiom Services, Acxiom Information Products, and Acxiom Infrastructure Management. At first blush, this would appear to be a classic private equity move to ready each division for a sale or spin off. However, Acxiom insists that they intend to keep the business whole, and there are certainly synergies between the divisions.
So, if it’s not a break up move, what’s the strategy? According to Acxiom, the focus will be on investment, particularly in the areas of analytics. I’m not sure that the public market would have been unwilling to support such moves, but strategically Acxiom would certainly benefit from strengthening its analytics capabilities.
ADS, who declined our request to discuss their impending acquisition, operates as a holding company and its subsidiary companies run as independent entities. As such, breaking ADS up into several smaller businesses would be relatively easy for the company, and relatively pain-free for the respective customers of each business.
With regards to the Epsilon business specifically, Forrester has acknowledged a concern about Epsilon’s need to integrate its own respective business units – and in subsequent conversations with Epsilon, they have demonstrated that they are focused on doing so. I don’t suspect that Epsilon will unravel its component pieces, and being private would provide them even more air cover to homogenize their business units than they enjoyed under the public ADS umbrella.
At the end of the day, only time will tell whether the parts that make up Acxiom and Epsilon will remain together. DoubleClick once had a strategy to bring various parts of the marketing mix (online advertising, email, campaign management, database management, data, and marketing resource management) together and while the strategy was sound, they couldn’t make it work. If Acxiom and Epsilon do get broken up, would that mean that real integrated marketing gets pushed backward yet again?
At a strategic level the acquisitions that we’ve seen in the Database Marketing Service Provider space have made sense, but these firms have yet to successfully show that they can seamlessly pull together the parts and demonstrate that together they truly are worth more than the sum of their parts. In a few years time, we might be looking back at these private equity deals as the impetus that was required to create the first true integrated marketing service provider – that would be far more preferable to the alternative.