Epsilon to buy Abacus for $435M

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Integrated marketing services provider Epsilon will further strengthen its database marketing credentials in the retail space with plans to pay $435 million in cash for Abacus, a DoubleClick property that was last sold in 1999 for $1 billion.

The deal gives Epsilon access to Abacus' consumer and business cooperative databases with transaction information, analytics services and custom marketing database design and management. More than 1,500 catalogers, retailers and e-commerce players, including Patagonia, Sur La Table and Brookstone, use Abacus products and services.

"From Epsilon's perspective, we're very deep in the financial services, insurance and travel sectors, except retail," said Epsilon CEO Michael Iaccarino from Dallas. "It gives us a data product in retail."

The deal is expected to close in 30 days with government approval.

The acquisition also helps in other areas, Mr. Iaccarino said. Abacus brings with it marketers focused on catalogs and retailers in addition to boosting its practice in those fields.

"It just augments our overall data strategy and gives us another source data product," Mr. Iaccarino said. "And essentially my strategy is to go out and acquire the source data products/elements as opposed to licensing them from other people.

"For example, we acquired the New Mover file when we bought CPC in June/July," he said, "and we recently integrated into Epsilon the ICOM survey data."

Epsilon bought CPC over the summer for $70 million, around the same time it picked Point Pleasant, NJ, agency Big Designs for a small, undisclosed amount.

This is Epsilon's second purchase from DoubleClick, which itself was bought last year by San Francisco private equity group Hellman & Friedman for $1.1 billion. Epsilon in April bought DoubleClick's DART e-mail solution for $90 million.

DoubleClick is now left with only its ad serving business. Mr. Iaccarino wouldn't be specific if he was interested in acquiring that as well.

"We'll continue to look at unique data companies and then also just good businesses and also possibly strategic type of consulting businesses," he said.

Abacus will operate as a business under the Epsilon brand, keeping its 525 employees across offices in Lafayette, CO; Schaumburg, IL; and Britain. Its British presence will strengthen Epsilon's standing in European retail database marketing.

"What Abacus can help us build is a product called Channel View, which helps marketers understand which are the most effective channels driving acquisition," Mr. Iaccarino said. "And I'd say that's really the latest challenge, which is really channel optimization. The Web is really changing things.

"We're channel-agnostic," he said. "We're building data and technology solutions that really are channel-agnostic, that are flexible to meet the changing needs of our clients."

Epsilon is part of Alliance Data Systems Corp., a provider of transaction, credit, loyalty and marketing services. The 8,000-employee Dallas company owns the Air Miles coalition loyalty program and manages more than 105 million consumer relationships for clients.

Epsilon offers services like strategic consulting, creative, data, database and loyalty technology, e-mail, analytics and direct marketing distribution programs. The company recently bought the e-mail firm Bigfoot Interactive and later renamed it Epsilon Interactive. It claims 700 brands as clients.

The Abacus acquisition and others that may follow are keeping in mind Epsilon's clients' needs relating to customer acquisition and retention. And it's in line with current trends.

"One of the unique challenges is to help our clients to continually find new customers and once they have the customers, sell them more stuff, upsell and cross-sell," Mr. Iaccarino said. "And so that's always been a challenge.

"Really what our clients are looking for is channel optimization - what are the real channels driving new customer acquisition: is it the Web, is it a media ad, is it a Google search?" he said.

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