Another Big Year of DM Deals
THOUGH IT MAY surprise no one, 1998 was a boom year for direct marketing strategic deals. There were 1,846 transactions valued at $29.4 billion, according to Gruppo, Levey & Co.’s annual DM Strategic Transaction Index.
What accounts for the 28% increase over the year before? Overall strength in the stock market and an abundance of private equity dollars, Gruppo, Levey reports. Another factor was the meeting of direct marketing and the Internet.
“Direct marketing companies are particularly well suited to online retailing, with the necessary fulfillment capabilities, customer service centers and information systems already in place to support Internet growth,” said Claire Gruppo, president of New York-based Gruppo, Levey, in a statement.
The Deals Here’s a rundown of the types of deals that were made during the eighth straight year of double-digit growth:
* Acquisitions-The largest category, it grew by 28% to reach 602 transactions last year.
* Strategic alliances-The second-largest strategic transaction category, it grew 88% to 499 deals, compared with 265 in 1997.
* Equity investments-The fastest-growing category, it rose by 102% to total 178 transactions, compared with 88 in 1997.
Why the mad rush? “More and more companies view acquiring DM expertise as the key to creating successful electronic commerce businesses,” said Gruppo.
* Initial public offerings-They made a dramatic comeback late in 1998, boosted by Internet IPOs from such companies as TheGlobe.com, eBay Inc. and Xoom.com Inc. Direct marketing IPOs grew by 72% over last year to reach 31 new stock offerings.
* New ventures-The one category to actually decline, this dropped from over 400 to under 400.
And here’s some good news: DM bankruptcies and company closings declined 13% to 35.
The largest acquisition of the year was Office Depot Inc.’s purchase of business-to-business cataloger Viking Office Products Inc. for $2.9 billion in August. Cendant Corp. had the second largest-$1.6 billion for National Parking Corp., a direct marketer of travel services. The top 15 acquisitions for the year were valued at $12.9 billion.
The most acquisitive company was Internet services provider iXL Enterprises, according to Gruppo, Levey.
It completed 12 purchases during the year. Fingerhut Cos. Inc., itself acquired by Federated Department Stores last month, picked up Arizona Mail Order Co. Inc. and bought stakes in PC Flowers & Gifts Inc., The Zone Network and FreeShop International.
Snyder Communications Inc. made nine acquisitions, among them its $120 million purchase of Arnold Communications Inc.
