After several months of negotiations, and discussions with other potential suitors, 39-year old firm Direct Media will become the latest company to come under the umbrella of Omaha-based direct marketing giant, InfoUSA.
Direct Media CEO Larry May said, “[Our companies have] worked together a lot over the years, and the general topic that we might find ourselves working together as a team has been going for many years. The discussion became serious a few months ago.”
As part of the deal, whose terms were undisclosed, Direct Media will sit under the InfoUSA Services Group division, headed up by division president Ed Mallin. All of Direct Media’s operations and staff will still report to May, while May himself reports to Mallin. While May will not have a board seat or be officially involved with other units within the division, Mallin said there will be an executive committee within his group, “where we share ideas, common goals and needs, and thoughts on innovation, technology, and where the industry is going.”
Other companies in the division include Catalog Vision, Donnelley Marketing, Edith Roman Associates, Millard Group, Triplex, Walter Karl and Yesmail.
Because Direct Media is an employee-owned company, May said “dozens” of staffers will benefit financially from the acquisition.
“As a result of our employee-owned status,” he added, “we had a lot of people involved in the decision-making process, from up and down in the company, including operations folks.” Direct Media currently has around 250 employees.
Once the conversations with InfoUSA had become serious, May continued, Direct Media then opened discussions with several other potential acquisition partners.
“We felt we owed it to members of the board here and stockholders to take a good look at this offer, and others,” he explained. “But there was no question about it, this was the most attractive — not only from a benefit perspective to the shareholders and options holders, but also because [InfoUSA] is a great business.”
Mallin insisted that the Direct Media brand name would “obviously stay.” The company will also remain in its Greenwich, CT headquarters. According to Mallin and InfoUSA chairman and CEO Vin Gupta, no staff reductions are planned.
Part of the attraction, apart from Direct Media’s longstanding name and reputation, was its diverse client base. The company has expertise in b-to-b, consumer catalogs and consumer publications, as well as continuity mailers and fundraising. Clients include Hearst Magazines, American Heart Association, Omaha Steaks and Staples.
Gupta acknowledged the value of the Direct Media brand. “Direct Media is the most prestigious brand in the DM industry. [With] a blue-chip customer base, they bring us a lot which we didn’t have before,” he said.
Direct Media’s strong heritage in the industry is exactly what has some direct marketers surprised by the move.
The news “shocked me,” said Jim Zuckermandel, president of Zed Marketing Group Inc. “Direct Media is one of the long-time pillars in the industry and I felt that it was very self-reliant.” However, he continued, “the industry as a whole is soft,” which could certainly takes it toll on a company as large as Direct Media.
Zuckermandel cautioned that he has no inside knowledge of why the company decided to sell. He also pointed out that with recent cost increases in postage and paper, many companies aren’t prospecting as heavily as they were a year or two ago.
“When that happens,” Zuckermandel said, “large companies like Direct Media, which have an extensive brokerage and management base, have to ask if they can keep everybody busy enough to justify the total employment that they have.”
The deal is the first significant one in the list business for 2008, and Gupta indicates that it will not be the last. In the press release announcing the Direct Media deal, he said, “This acquisition continues our strategy of consolidating the direct marketing industry.”
Mallin added, “I’ve seen a fair amount [of M&A activity] over the past couple of years, not only in our industry but also in the consumer catalog space and publishing.
I don’t know where the economy is taking us – that will have some impact. My take is, where it makes sense, there will be strategic acquisitions going on still in the industry.”
Other recent steps by InfoUSA reflect moves to build its presence internationally and in the area of research. In the third quarter, InfoUSA completed the acquisition of NWC Research in Australia and Guideline Inc., a provider of custom business and market research and analysis.
Gupta told DMNews, “With all of these acquisitions, we are able to serve [the acquiredcompanies’] customers in a much better way. [This is] a win-win for these companies, their customers and us.”
Mallin is mindful of critics of consolidation, and said, “As you well know, InfoUSA has acquired many companies over the past 10 years. I think we’ve gotten pretty good at it. I know we’re very experienced in how to bring companies in, we allow them to retain their culture, the fabric of their company, what’s best about them, and find a way to integrate what we do really well.”
An inevitable byproduct of M&A activity in this space is the issue of client conflict. May said this was an issue his company and its new parent were addressing with clients — and one that his company had already dealt with as an independent.
“Even within our own corporation,” he said, “we have that issue all the time, with many clients who are competitors to each other. It’s always a matter of us carefully protecting all the proprietary information that relates to our accounts, even when it’s not directly competitive; gaining trust from our clients that we’d never compromise the private information we have; and ensuring we have the systems to always maintain confidentiality.”