Petsky Prunier: First Half Sets Record for M&A Activity

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A jump in the average value of merger and acquisition transactions in the first half of 2005 helped make the period one of the strongest on record for the direct marketing industry, investment bankers Petsky Prunier LLC said yesterday.


Direct marketing M&A activity in the first half totaled 216 transactions while dollar volume rose 30 percent to $18.3 billion in estimated transaction value, a half-year record, according to Petsky Prunier. Average transaction size was $84.7 million, up 63 percent from last year. Also, private equity groups accounted for 32 percent of M&A deals, up from 21 percent last year.


The New York-based company, which advises on mergers and acquisitions in the DM sector, publishes its Marketing Services & Technology and Multichannel Marketer Deal Notes twice a year.


Several factors are driving the trend toward increased activity, larger deals and a mood of assertiveness, according to the report, including the desire to add new products and/or services, as exemplified by 1-800-Flowers.com's $40 million acquisition of baked gifts company Cheryl & Co. Another factor is the need to add new customers, which drove E.W. Scripps' $560 million acquisition of shopping comparison engine Shopzilla.com. Wanting to branch into new channels and add capabilities along the value chain in order to better control the customer experience also contributed to the increased M&A activity.


On a segment basis, marketing services companies were involved in 115 transactions in the first half, with a total estimated value of $8.4 billion, a 62 percent gain over last year. Interactive advertising and related segments were the most active. Hellman & Friedman's $1.1 billion acquisition of DoubleClick was the second quarter's largest transaction. Other large deals included eBay's purchase of Shopping.com and Experian's $380 million buy of online lead generation company LowerMyBills.com.


Three of the four largest marketing services deals thus far have been search engines: Ask Jeeves, which was acquired by InterActiveCorp for $1.9 billion, the E.W. Scripps-Shopzilla deal and the eBay-Shopping.com deal.


Marketing technology companies were involved in 59 transactions with a total estimated value of $3.2 billion, an 18 percent gain over last year.


The marketing technology sector's largest deal in the second quarter was eFunds' $310 million acquisition of prepaid and stored-value products provider WildCard Systems. In addition, eFunds acquired National Check Protection Services and ClearCommerce during the first half, putting it on track to becoming a consolidated provider of account lifecycle solutions to the financial services and retail industries.


Transactions involving multichannel marketers in the first half numbered 42, or 19 percent of total DM transactions for the period. However, the multichannel marketer sector's total estimated $6.7 billion in deal value represented 37 percent of the DM industry's dollar volume. The average multichannel marketer deal size was $160 million, more than double the average of marketing services and marketing technology sector transactions.


The second quarter's largest multichannel marketer deal was Bain Capital's acquisition of public company School Specialty for $1.5 billion. Other notable deals included Sabre Holdings Corporations' purchase of Lastminute.com for $1.1 billion, BMG Direct's acquisition of Columbia House for $400 million, General Atlantic's purchase of Webloyalty.com for $250 million and the $188 million buyout of Potpourri Group by American Capital Strategies.


Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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