DoubleClick said yesterday that it will be acquired by San Francisco-based private equity firm Hellman & Friedman for $1.1 billion.
JMI Equity, a San Diego-based venture capital firm, also will invest in the company, but that amount was not disclosed. The purchase is expected to help DoubleClick, once the leading buyer of online ads for other companies, expand both its online advertising and DataSolutions businesses. Once the transaction is complete, the company becomes a private firm.
Hellman & Friedman plans to break the company into two separate business units and install a new board to oversee both businesses, DoubleClick CEO Kevin Ryan said in a conference call yesterday.
David Rosenblatt will continue to oversee the TechSolutions division as its CEO, and Brian Rainey will continue to lead the DataSolutions division. After the deal closes, Ryan will step down to “pursue other opportunities.”
“This transaction will allow us to continue to be more focused on providing industry-leading data marketing services to our customers,” Rainey said.
At the ad:tech05 San Francisco show, Geoff Ramsey, CEO of eMarketer Inc., New York, said yesterday DoubleClick’s sale was expected given the state of the online ad market. EMarketer projects online advertising will grow 33.7 percent this year to $12.7 billion.
“I’m not surprised in the least,” he said. “There’s going to be a lot of this kind of activity. The big fish are going to eat the smaller fish.
“I think we’re going to see a lot of merger and acquisitions activity from folks like Google and Yahoo,” he said. “The same things happened with the [advertising] agencies. They got bigger and bigger, and a few holding companies own everything.”
But DoubleClick’s sale raises a question: How can online advertising firms retain their independence if even a major player like DoubleClick is forced to sell? Ramsey takes a more sanguine view.
“I think the good news for the Internet industry is that there’s enough room for growth and creativity from smaller firms that will continue to come out of the woodwork,” he said.
DoubleClick has seen its top position in the Internet advertising market drop as more businesses use keyword search ads to sell products online. The company's stock once traded at more than $130 a share, but fell on hard times after the Internet bubble burst five years ago and reported steep losses for three years.
However, DoubleClick's sales rose 11 percent last year with the help of its Abacus Alliance cooperate database division and several acquisitions. The company reported a first-quarter loss of $917,000 because of fees associated with the company's review of its strategic options.
Launched in 1990, Abacus remains the industry's largest with 1,600 business-to-consumer participants in the country, though its competitors have steadily grown. DoubleClick paid $1 billion for Abacus in 1999. A few months later, it got into hot water with privacy advocates over plans to merge offline behavior with user activity it collects from Web sites using its technology.
Though DoubleClick has not said how the acquisition will affect employees, company spokeswoman Jenny Connorton said certain functions “may require restructuring.” However, she added, “prior to the close of the deal, we do not anticipate any significant restructuring at this time.”
The transaction has been approved by DoubleClick's board of directors and is expected to be completed in the third quarter.
Mary Meeker, a speaker at yesterday's ad:tech05 conference, said she doesn't know what DoubleClick's game plan is for the next few years, but she thinks smaller companies are the ones to watch to develop next-generation online ad technology.
“You'll see private equity groups become more and more active,” Meeker, managing director at Morgan Stanley and head of Internet software research, told DM News. You'll see more of this happen.”