More Mergers Expected in New Year
Two companies got a head start this month. Onex Corp., Toronto, bought LCS Industries, Clifton, NJ, (see story, below) for $97.25 million. At information services provider Acxiom Corp., Conway, AR, company leader Charles Morgan alluded to three deals in the works involving companies with combined revenues of $25 million to $30 million last week, but at press time none had been finalized.
Morgan said his company is far along in the integration process with database services firm May & Speh, which it acquired in June in a stock swap valued between $600 million and $700 million. He said he expects the process to be completed by April. Acxiom also bought Computer Graphics, Phoenix, a service bureau that serves financial clients, for $25 million, and Morgan said he is in the market for companies that can support the growth of that vertical industry and healthcare.
"We continue to look for acquisition opportunities that bring us data content, consultative capability and additional industry expertise," he said.
Harte-Hanks, San Antonio, also will let an industry-specific focus guide its acquisition strategy. Chief financial officer Jacques Kerrest said the firm will look to expand its presence in the pharmaceutical and hi-tech markets and the telecommunications and utility sectors represent emerging business opportunities.
The database and direct marketing services provider, which maintains a healthy cash reserve on its balance sheet from the sale of its newspaper operations, made three small acquisitions in 1998 -- Cornerstone Integrated Services, Printing Management Systems Inc. and Spectral Resources -- but is eyeing more significant targets going forward.
"We have looked at a number -- but for some reason, we decided to pass," Kerrest said. "We're still looking for some larger acquisitions, especially on the database and response management side of the business."
InfoUSA, formerly American Business Information, could remember 1998 for the big fish that got away -- Metromail -- but chairman/CEO Vin Gupta said he is happy with the purchases of list firms Walter Karl and JAMI Marketing, which have added content and additional distribution channels to the company's database properties.
InfoUSA, Omaha, NE, was on the losing end of a bidding war with GUS, Manchester, England, that eventually bid up the asking price for Metromail to $845 million, or $34.50 per share. From its initial discussions with GUS subsidiary Experian in late January, the Metromail deal took three months to complete and involved formal interest from six companies and inquiries from scores of others.
Bear Stearns analyst Alexia Quadrani said Metromail was one of the first pure play direct marketing companies to go out at such a premium and predicted even more activity to come in 1999.
"There is definitely a premium for scale and being able to be a full-service provider," Quadrani said. "It's timely and difficult to build up a database and content [on your own] so it makes a lot of sense to be acquisitive."
Quadrani said acquisition targets still exist in the areas of data content and database management and predicts Acxiom will be one of the most active players.
Gupta said the value of data content on the consumer side is dropping because none of it is really proprietary but business-to-business databases remain a commodity item. He plans to focus on acquisitions in the list and data provider sectors that are closest to his firm's core competency and indicated that infoUSA will engage in deals that make sense at the right price and stay away from aggressive bids like the one for Metromail.
Cendant, the biggest DM consolidator in terms of gross dollars, was hampered this year by accounting fraud in the membership division of the former CUC International, and CEO Henry Silverman has dumped the firm's acquisition strategy but still completed a $1.3 billion purchase of UK-based National Parking Corp.
In the wake of the accounting problems, Cendant, Parsippany, NJ, has been forced to undo most of its announced deals, including the $3.1 billion purchase of American Bankers Insurance.