Last year was a boom year for mergers and acquisitions with a record 550 transactions involving direct marketing companies. Marketing services companies and marketing technology firms attracted the most attention, followed by marketing companies.
More than $27 billion in mergers and acquisitions deals were completed in the DM sector 2004, according to Petsky Prunier LLC, a Wall Street investment-banking firm. Its annual report predicts this year more venture capital firms will be seeking to acquire and take DM companies public, by pursuing the types of deals that historically have been organized by buyout groups.
Direct marketing companies are increasingly being targeted for deals because nearly 300 private equity firms raised more than $136 billion in capital last year, on top of $69 billion raised the prior year, which by far exceeds supply of investment and buyout opportunities in the overall marketplace, according to the report.
The number of deals involving marketing services or marketing technology firms was 6% higher in 2004 than the prior year. There were 228 deals with marketing services firms valued at $8.8 billion and 197 deals with marketing technology firms valued at $7.4 billion. A total of 125 deals involved marketers valued at $11 billion were closed last year.
Excluding Google’s monumental public offering, there were more than $1 billion in public offerings involving direct marketing companies during 2004, with Cabela’s and Interline Brands deals being among the most notable.
The report characterized interactive agencies as a “red hot” sector with 48 transactions. Petsky Prunier predicted further growth in 2005 for private equity investments in agencies, as well as increased merger and acquisition activity, noting that online advertising is expected to grow up to 20% this year.
It said catalogs are a particularly attractive acquisition target for companies seeking to build an Internet marketing business, as well as being a means for acquiring fulfillment and distribution facilities.
Firms that provide data and data analytical services are the most sought after by strategic buyers and private equity investors, but activity is this sector is inhibited by the relatively small number of large firms to target for mergers or acquisitions, according to Petsky Prunier.
With four deals in 2004 Experian was the most active buyer of marketing technology companies in 2004. Generally the largest direct marketing deals involved business-to-business DM firms.
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