Publicis Groupe acquires Epsilon for $ 4.4 billion

Clarification: A previous title in this story described the transaction as a $ 3.95 billion transaction. Under the terms, Publicis will acquire Epsilon for a cash consideration of $ 4.4 billion with a net purchase price of $ 3.95 billion after "net of the benefit from the increase in income tax expense. acquisitions, "he said.

Publicis Groupe is acquiring giant data marketing company Epsilon under a $ 4.4 billion contract, the holding company said. The transaction is expected to close in the third quarter.

"With the acquisition of Epsilon, Publicis Group brings the technology, expertise, and talent necessary to complement our offering of creativity, media and business transformation, and help our customers achieve better results." to overcome their competition and grow profitably, "said Arthur Sadoun, President and CEO of Publicis Groupe In a statement, he added that this agreement would help Publicis to" offer large-scale personalized experiences "to its customers.

Under the terms of the Publicis agreement, the holding company will acquire Epsilon for a cash consideration of $ 4.4 billion, representing a net purchase price of $ 3.95 billion " after deducting the profit from the increase in taxes related to acquisitions, "according to the statement.

The sale of Epsilon is the largest agency transaction of the year, close to the $ 4.9 billion Aegis Group acquisition by Dentsu Inc. in 2013 (the largest ever acquisition by a company and WPP's 2000 purchase of Young & Rubicam. (WPP announced a $ 4.7 billion transaction at Y & R, but the final value of the shares in this transaction Amounted to $ 4.37 billion.) Nevertheless, a takeover by Publicis will not change the top of the agency's corporate rankings. Publicis will remain the third largest agency in the world, behind WPP and the Omnicom group.

According to Ad Age Datacenter, Epsilon, which has been owned by Alliance Data Systems (Irving, Texas) since 2004, is ranked 13th in the world for advertising agencies. In a statement released Sunday, Publicis said Epsilon 's net business figure rose to $ 1.9 billion in 2018, of which 97% came from the United States. Epsilon employs 9,000 people, including 3,700 computer scientists.

Epsilon's loyalty software serves 600 million accounts and "has more than 250 million unique consumers identified in the United States, and its proprietary platforms, Conversant, handle 1 billion updates every 5 minutes, that can further improve real-time messaging. " according to Publicis' statement.

The agreement on email marketing and data marketing comes after Alliance Data said last November that it was "exploring strategic alternatives for its Epsilon business," including "a potential sale of the business." . Other parties interested in Epsilon included Goldman Sachs.

Bryan Kennedy, CEO of Epsilon, said in a statement: "In extensive discussions with the Publicis management team during the recent review process, we found a strong middle ground, including shared values ​​and a strong vision of the future of digital technology, based on data, first marketing. "

The Publicis contract follows the Interpublic Group of Cos. & # 39; October acquisition of another data company, Acxiom, for $ 2.3 billion.

The transaction comes as Publicis faces changes in the advertising market in the face of declining traditional advertising, digital developments, customer pressure on costs, and competition concerns from consulting firms.

The current landscape of industry leaders places a premium on proprietary data assets, which are significantly more accurate than third-party data and enable marketers to create personalized, targeted advertising that often spurs higher conversions.

The acquisition provides Publicis with an arsenal of tools that could help it courting marketers, as Epsilon has a wealth of leading data resources – something Publicis previously lacked.

"Publicis is committed to this acquisition for data and identity resolution," said Jay Pattisall, an analyst at Forrester. "Publicis previously used third-party data sources, but Epsilon brings an exclusive set of proprietary data segments and identity resolution."

Pattisall believes that Publicis will integrate Epsilon into existing solutions, underlining the company's motto: "Power of One", rather than creating two separate businesses – "Publicis Epsilon". Such integrations bode well for the holding company, he suggests.

For example: Conversant, Epsilon's advertising marketing automation business, would serve a multimedia agency like Starcom. Publicis Spine, which manages the type of data that Epsilon brings to the table, is another obvious and more attractive solution, says Pattisall.

"There are a lot of different data sets, so you can enable audiences on all channels," he adds. "It's the purpose behind these engines, and Publicis now has an in-house identity resolution capability that can overlap with what it already has."

Overall, Epsilon earns money through its data management offering, loyalty platform and, to a certain extent, Conversant, an advertising technology company specializing in digital media. marketing automation.

However, the biggest asset for a company like Publicis is probably Epsilon's ability to match different consumer data – e-mail addresses and IP addresses, for example – to create different consumer segments that marketers use to both for better targeting and for creation.

Alliance Data bought Epsilon for $ 314.5 million in October 2004 and developed Epsilon through acquisitions.

On April 1, the day Publicis confirmed that it was in talks to buy Epsilon, its shares fell to 45.12 euros, its lowest price since 2012. Publicis shares closed on April 12 in Paris at 47.19 euros. , up 0.9%. Alliance Data shares closed on April 12 at $ 180.93, up 3.0%.

Contributors: Bradley Johnson, E.J. Schultz

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