Contact: Scott Denne
Amid similar moves by its peers, Alliance Data Systems makes the biggest leap from marketing data to marketing software in its $2.3bn acquisition of Conversant. Like other offline marketing data service providers, Alliance sees a move into digital marketing as the only real way to grow its offline marketing data business.
Alliance is handing over 7% of its stock (worth $1.2bn) as well as shelling out $1.1bn in cash to get its hands on Conversant; despite that, the stock is up 2% on the news. That’s as much a reflection of Conversant’s financial metrics – the target has better margins than Alliance’s Epsilon and will boost the EBITDA margins of that unit (which will be home to Conversant) from about 22% to above 25%.
At a multiple of 3.7x trailing revenue, the transaction is on the high end of valuations for ad-tech firms – again, reflecting Conversant’s unusually high profit margins in that sector – but lower than the 10x and beyond paid (in smaller deals) by Alliance’s peers Acxiom and Neustar.
This isn’t Alliance Data’s first move into digital marketing: it picked up a handful of email marketing businesses last decade and again in 2011 and 2012 when it bought a pair of digital marketing agencies – Aspen Marketing Services and Hyper Marketing – for a combined $820m. The company has also dabbled in other areas of digital marketing and ad tech, but has found little success beyond email and has remained a services-heavy business.
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.