Value of direct marketing M&A deals up 30% in first half

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Direct marketing industry mergers and acquisitions activity for the first half of this year totaled an estimated $18.3 billion, up 30% from the first half of 2004, according to Petsky Prunier Investment Bankers' "Marketing Services & Technology and Multichannel Marketer Deal Notes" released Aug. 30.

The total deal value in last year's first half was a combined $14.3 billion. Despite the increase in deal value overall, there were fewer transactions in this year's first half-216, compared with 275 in the year-earlier period.

Interactive advertising and related segments-such as agencies and search engine marketing-was the most active sector, accounting for 43 of 115 marketing service sector transactions, according to Petsky Prunier.

The findings are in line with Jordan, Edmiston Group's first-half analysis, which showed marketing and interactive services deals were up 149.9%. Jordan, Edmiston, also an investment banker, released its findings at the end of June.

"Things are good in the marketplace," said Adam Gross, VP-marketing at Jordan, Edmiston. "Buyers and sellers seem to be able to get together on valuations right now. Companies are growing. From the financial buyer's perspective, they are looking for their money to work. You really are seeing good activity in the market."

The trend among direct marketing companies continues to move toward gathering more products and services to provide clients with one-stop shopping.

"The most significant trend among marketing service and marketing technology companies is in order to provide solutions to customers who are aggressively pursuing database marketing to build revenue and long-term customer relationships, the service and technology providers need to offer a full suite of products and services," said Mike Petsky, principal of Petsky Prunier. "A company that provides only one key offering can no longer survive."

Petsky said all signs point to increased M&A activity for a host of reasons, includ ing privacy legislation.

"There are many secular trends that will help drive this activity," he said. "For example, among marketing data owners, we foresee significant consolidation as smaller players will be limited in their ability to monitor increased privacy legislation, nor will they be in a position to staff the legal assistance required to stay ahead of legislation," he said. "Over the next year, numerous marketing data companies will be acquired by large data providers."

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