Venture capital firm Lighthouse Holdings, Chicago, has raised more than $100 million and soon will have access to an additional $300 million to pay for acquisitions of direct, database, ethnic and other marketing communications companies that it will merge into an integrated marketing services provider.
Lighthouse, which has the backing of Chicago private equity firms Frontenac Company and GTCR Golder Rauner LLC, made its first purchase Oct. 7 of International Sports Marketing from Allin Communications Corp., Pittsburgh, for an undisclosed amount. ISM has annual revenues of $3 million. Lighthouse has signed letters of agreement with four more companies, including one involved in direct marketing, and expects to close on two next month and the remainder by the end of the year.
Lighthouse is evaluating marketing companies that serve segments with the highest growth potential. According to Lighthouse chairman Terence Graunke, the fragmented marketing communications industry is growing at nearly twice the rate of traditional general advertising. Its original goal was to make $50 million worth of acquisitions in its first year, but a falling stock market has created additional opportunities.
“This is a better situation for us to acquire right now,” said Amy LaBan, vice president of marketing/strategic relations at Lighthouse. “We want to move quickly on this.”
Prime targets are companies with solid management and recognized brand names that can serve as platforms in a larger overall group without losing their identity. Lighthouse intends to build a group that can be the one source of marketing for Fortune 500 companies. Lighthouse will go after mostly private firms with annual revenues between $10 and $40 million but LaBan admitted that there are not many such firms available, especially in the direct and database marketing areas.
Lighthouse built a consolidated interactive business, Eagle River Interactive, which it sold to advertising giant Omnicom Group in 1997. Graunke founded the integrated marketing agency U.S. Communications, which also was sold to Omnicom and eventually became part of Rapp Collins Worldwide. He also served as head of the Focus Agency, a division of DDB Needham.