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Petsky Deal Notes: DM M&A Volume Up 66% Year to Date

Mergers and acquisitions volume in direct marketing increased 66 percent for the first nine months of 2005, according to a report being released tomorrow by investment bank Petsky Prunier LLC.

The Marketing Services & Technology and Multichannel Marketer Deal Notes recorded 351 mergers and acquisitions among marketing services, marketing technology and multichannel marketer companies through September with a total volume of $38.5 billion. The median DM transaction was $18.5 million, up 85 percent from last year.

Factors cited for the surge in activity include strong demand for new media channels by established media companies, which is pushing the size of deals and the number of transactions. Also, Internet marketing services are seen as essential to leading advertisers in all sectors.

In the marketing services segment, there were 176 transactions with a total value of $11.8 billion, a 50 percent gain over last year. The median deal size climbed from $10 million to $15 million. Interactive advertising deals, including search, accounted for four of the top 10 transactions in this segment.

With Bigfoot Interactive's recent sale to Epsilon, the awareness of the critical nature of e-mail has caught new attention from strategic buyers and private equity groups. As a result, Petsky Prunier predicts more e-mail transactions will come, as evidenced by yesterday's news that Merkle will buy full-service e-mail marketing agency Quris.

Total deal volume for the marketing technology segment was estimated at $10.3 billion, up 60 percent from last year, mainly because of Oracle's $3.7 billion acquisition of Siebel Systems. Median deal size rose 80 percent to $18 million while the total number of transactions decreased 37 percent to 106.

The marketing software portion of the technology segment had the most transactions with 24. Other active areas were business intelligence/ERP with 22 deals and transaction processing with 19. The median size of private equity marketing software buyouts continued to grow, reaching $59.3 million, up from $17.5 million last year. Private equity buyouts in the period included Francisco Partners' $97 million acquisition of WebTrends and Golden Gate Private Equity's $22 million acquisition of Blue Martini Software.

Estimated deal volume for multichannel marketers during the first nine months of 2005 totaled $16.5 billion, an 85 percent gain over last year. This jump was driven by eBay's $4.1 billion acquisition of Skype Technologies.

The number of acquisitions involving marketers declined 32 percent to 69 while median deal size grew to $25.5 million. The interactive portion of the segment led marketer M&A activity with 30 transactions. The catalog portion also experienced robust activity with 26 deals.

Two sizable corporate divestitures also occurred in the third quarter: Cendant sold its marketing services division, a marketer of affinity programs in partnership with leading brands, to Apollo Advisors for $1.8 billion, and Sara Lee sold its direct selling unit to Tupperware for more than $500 million.

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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