PACE QUICKENS IN DIRECT MARKETING ACQUISITION BINGE: DATABASE WORK SEEN AS HOT AREA BY LARGE AGENCY ORGANIZATIONS

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Like a heated game of Risk, the acquisitions game continues among agency holding companies and their direct-marketing holdings. As in the board game, the winner gets to rule the world-or at least the relationship-marketing arena.

Over the past two weeks, at a rate of almost one a day, Interpublic Group of Cos. units McCann Relationship Marketing and Draft Worldwide announced four separate acquisitions each; WPP Group paid cash for 20% of Brierley & Partners, which specializes in loyalty marketing; True North Communications' Foote, Cone & Belding bought CM Partners, a relationship-marketing agency, and plans to merge it with Impact Direct; and Interpublic's Ammirati Puris Lintas bought Columbian Advertising, a direct-marketing shop now called APL/Columbian.

MORE BUYERS THAN SELLERS

While demand remains strong, the supply of acquisition candidates is dwindling. Few mid-size independent direct agencies remain.

"There's far more demand than there are attractive properties," said Jack Clarke, senior VP-business services analyst at PaineWebber.

The short list that crops up again and again includes Direct Partners, a Los Angeles-based direct shop; Devon Direct Marketing & Advertising, Berwyn, Pa., which reported $36.6 million in 1997 revenues; Lieber Levett Koenig Farese Babcock, New York, a relationship-marketing agency with about $15 million in revenues; Miller/Huber Relationship Marketing, San Francisco, with about $20 million in revenues; and Targetbase Marketing, a Dallas-based database company with $41.9 million in 1997 revenues.

London-based WPP is said to be negotiating a deal with Miller/Huber to beef up J. Walter Thompson USA's ThompsonConnect on the West Coast (AA, Jan. 11).

As in the general agency business, executives in direct marketing said that economics is a big driver in the fast pace of purchases.

"If you're a publicly held company trading at 25 times earnings, and you can go buy a company for six to eight times earnings, it's a no-brainer," said Bob Lieber, chairman of Lieber Levett.

Marketers are demanding a more accountable means of selling products than image ads. With proliferation of choices and channels of information for consumers, there has been increasing interest by agencies in harnessing information and consumer data in meaningful ways.

TRYING TO FILL GAPS

The result is that agency organizations are scrambling to fill the gaps in their capabilities in order to offer every expertise and one-stop shopping to clients, especially database capabilities and analysis.

Organizations are also looking to add interactive expertise.

"Clients will look for partners who can execute a complex, information-driven, media-neutral communication program that will take advantage of what we know about consumers and their future behavior," said G. Steven Dapper, president-CEO of Hawkeye Communications, New York.

ABILITY TO INTEGRATE QUESTIONED

Some industry observers are skeptical about how well agencies can integrate these new acquisitions.

"It's a compelling theory to be able to provide all things to all people, and the truth is it's very hard to do it [all] equally well," said Claire Gruppo, president of Gruppo, Levey & Co., an investment banker specializing in direct marketing.

Ms. Gruppo cited a dismal statistic she says is common knowledge-that 70% of all acquisitions fail.

Mr. Dapper, former president-CEO of Rapp Collins Worldwide, remains confident. Hawkeye, formed in December to build a marketing-services holding company, already has extended two separate acquisition offers now in the due diligence phase.

He declined to name what agencies those are, but his goal is to build an

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