Carat Interactive to buy independent Freestyle

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Aegis Group's Carat Interactive this week is poised to close a deal to acquire Freestyle Interactive, one of the last independent digital agencies in San Francisco.

Freestyle's 30 employees will join 20 Carat Interactive staffers, making Carat's San Francisco office its biggest. The terms of the cash and earn-out deal were not disclosed.

A dot-com-era star known for its tech expertise, Freestyle began transitioning into a full-service interactive-marketing shop three years ago. The acquisition comes as the agency recently scored three key account wins that include Electronic Arts, the video game publishing giant for which it becomes interactive agency of record; Macy's West fashion business; and online acquisition for Palm, business previously handled by AKQA, San Francisco. Carat Interactive currently works on Palm's database business, as well as TiVo and Sybase. While billings for the new wins were not disclosed, Freestyle executives said they are on track to achieve $22 million in revenue in 2003. Carat International had $45.9 million in worldwide revenue in 2002, $24.9 million of which was in the U.S., according to Ad Age data.

beyond media

The EA win, however, may force Freestyle to resign Microsoft Corp.'s Xbox and PC Games business; EA and Microsoft are competitors. The agency also counts Showtime Networks, Ophoto and Microsoft's Business Solutions Group among its clients.

Carat executives said the Freestyle acquisition will extend Carat Interactive's reputation beyond media-making it known as a full-service interactive agency.

"We're bullish on the whole digital-marketing space," said David Verklin, CEO, Carat North America "More and more clients are looking for an on- and offline solution."

The Freestyle acquisition marks Carat Interactive's third such move in little more than two years-it scooped up Vizium, a Boston-based e-mail marketing and online customer-relationship-management company in 2000 and Lot 21, San Francisco, in 2001. The latest deal marks the end of the Lot 21 and Freestyle names-both become Carat Interactive.

Lot 21 added both creative and media heft to Carat. "Where the creative begins and the media begins is a very blurry line," Mr. Verklin said, adding, "When an Adidas basketball player dribbles over the Yahoo! page, is that media or creative? They're inexorably intertwined."

Industry consolidation has left independent digital shops that survived the dot-com crash ripe for the picking. "We wanted to get to Freestyle before someone else did and we want to grow quickly in this space," said Sarah Fay, president-Carat Interactive.

Freestyle's management team remains on board with founder-CEO Karim Sanjabi becoming exec VP-creative and technology and Toby Gabriner, president-chief operating officer, becoming exec VP-managing director, Carat Interactive, San Francisco; Mr. Gabriner will also head creative services for Carat Interactive nationally.

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