Petsky Prunier: Marketing Industry M&A Up in Q2

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A new report from investment bank Petsky Prunier said merger and acquisition activity in the marketing industry remained strong in the second quarter, growing at a modest, but consistent pace from the comparable period last year.

Marketing service, marketing technology and multichannel marketer firms closed 116 transactions worth $9.7 billion during April through June months, according to the report. The number of deals was up 5 percent versus the year-ago period, though dollar volume was flat.

The marketing services sector again was the strongest segment, generating 67 deals valued at $4.9 billion. This included firms offering strategic and creative agency services, database management, campaign execution, customer service and fulfillment.

While there was a major drop in the number of deals in the marketing technology area - 21 in the past quarter versus 30 in the year-ago period - the deal value was more than double, to $2.6 billion, from $1 billion in 2005.

By contrast, the multichannel marketer sector registered an increase in deals from 18 in the second quarter of 2005 to 28 in the same period this year. But total deal value plummeted 46 percent to $2.2 billion.

Petsky Prunier outlined several macro trends that shaped the transactional environment in the second quarter.

First, the customer experience is moving online, impacting loyalty and retention efforts. The sale of United Airlines' for $56 million to United Online and Sallie Mae's purchase of loyalty program Upromise is evidence of this trend.

Next, competitive intensity for larger deals has increased. Financial buyers with deep pockets are competing and winning their bid for properties against strategic players, Petsky Prunier said. Quadrangle Group and Thomas H. Lee Partners' $3.3 billion purchase of West Corp. and The Carlyle Group's $1 billion acquisition of Oriental Trading Company is proof of this trend.

Third, the bank sees demand for unique interactive applications is increasing as marketers seek better cross-channel functionality. Microsoft Corp.'s acquisition of Motion Bridge and Gannett's purchase of a minority stake in 4INFO are proof of the activity in the mobile search space. In the online gaming segment, Microsoft acquired Massive and Viacom bought Xfire.

Finally, direct marketing agencies are seeking more data solutions with the acquisition of analytics platforms. The goal is to boost their customer profiling, segmentation and statistical modeling offerings. For example, Catalyst Direct recently bought Equient from General Dynamics.    


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