Merger Mania

Posted on by Chief Marketer Staff

NEW YORK – Mergers, acquisitions, and buyouts in the direct marketing industry grew 99 percent during the first quarter of 1998 over same period last year, according to a study from Gruppo, Levey & Capell, Inc., a direct marketing investment firm.

In the quarter’s biggest deal, UK-based Great Universal Stores acquired Metromail, the Lombard, IL-based computer services and data-base marketer after a tough bidding war with Omaha-based American Business Information. The price was $845 million. In another transaction, Dayton Hudson boosted its direct marketing and electronic commerce capabilities with the $120 million purchase of gift and apparel cataloger Rivertown Trading Co. in March.

“The trends that drove DM strategic transactions to record levels in 1997 – namely consolidation and electronic commerce – accelerated in the first quarter of 1998,” says GLC senior vp Harry Chevan. “High stock valuations will drive acquisitions by public companies.” Chevan also says the consolidation of the catalog, agency, telemarketing, and computer services segments of the $1.2 trillion DM industry would continue “as companies try to build brand names in fragmented markets.”

In the first quarter joint ventures and strategic alliances surged 85 percent from last year’s levels, to 120 transactions, up from 65 in the first three months of last year. Deals involving electronic marketers, search engines, content aggregations, and online services continued to drive the activity.

Web-based music marketer CDnow, for example, formed alliances with CBS News Media, Love@AOL, and GeoCities to become those sites’ exclusive online music store.

In March Software.net agreed to pay America Online $21 million over three years to become the exclusive seller of software that can be downloaded directly from AOL.

Electronic commerce also fueled public offerings, which increased 75 percent for the quarter to 14 percent, up from 8 percent in the first quarter of last year.

The new venture category was the only strategic transaction category to decrease dropping 25 percent in the first quarter to 88 launches from 118 for the same period in 1997.

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