Buyers are willing to pay more this year for marketing services, marketing technology and multi-channel marketer companies, including retailers, than they were last year, according to a market index from investment bankers Petsky Prunier LLC. And e-commerce retailers and catalogers lead the list, Petsky Prunier reports.
Buyers paid $9 billion for 128 companies in the first quarter with no increase in the number of deals but a 14% increase in the value, says Petsky Prunier’s review of Q1 transactions. The increase in value “indicates the growing value that both strategic and financial buyers are vesting in the industry,” the company said.
The most deals came in what Petsky Prunier called “the multi-channel marketer segment,” which consists of catalog, e-commerce and other integrated marketing companies. That segment generated 28 deals at $3.8 billion in total value. While the number of transactions increased by only two from the same period last year, aggregate value grew by a full $2.2 billion – representing a 238% jump from Q1 ‘05 levels, the company reports. “Growth in the multi-channel marketer segment was so strong, in fact, that it offset relatively constant results in the marketing services and technology sectors,” Petsky Prunier reports. “Those segments collectively generated 102 deals and $5.2 billion in value, little changed from the 100 deals and $6.3 billion witnessed during the first quarter of last year.”
Petsky Prunier attributed the continued strength in M&A; to relatively stable economic conditions as well as the growing availability of financing from venture capital, buyout and other private equity interests seeking to capitalize on emerging opportunities in the marketing industry.
Petsky Prunier also noted the following market conditions:
• “Technology-enabled marketing services drive value. Interactive technology providers are not the only service companies commanding interest from growth-focused investors; increasingly, strategic buyers are evaluating the technology platforms of companies in the marketing services segment as an indicator of differentiation, flexibility and capacity to adapt to changing market demand. Such a trend should continue as complex data applications grow more universal, requiring commensurate processing and analytics capabilities.
• “Emerging interactive sectors are driving fierce interest (established online sectors remain strong, too). Search and e-mail remain hot, but new interactive channels such as mobile technology and lead generation networks are growing in stature as buyers – especially financial investors looking to capitalize on the next big thing – search for the new marketing models that may one day define the industry in the United States. Enhanced technology and existing mobile marketing penetration in Europe and Asia, for example, have helped drive related M&A; multiples to stratospheric levels (as reflected in VeriSign’s $250 million acquisition of m-Qube).
• “Marketing data fuels the growing convergence between traditional media and marketing services. The familiar refrain of the last few years continues to ring true: as marketers continue to move spending from mass-oriented above-the-line media to below-the-line channels which generate measurable, impactful return on investment, data will continue to serve as the currency of new marketing models. As such, database management companies are becoming central players in a variety of transaction scenarios – both as hot targets for other service providers, and as platforms for new, integrated (i.e. full-service) marketing service plays.”
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