Partners at Green Square, Corporate Finance Advisors to the media and marketing sector, cast their eyes over the latest industry deals and look ahead to the next tranche of acquisitions.
A notable trend on the mergers and acquisitions scene over the past year or so has been the acquisition of marketing agencies (or at least entities which could be said to be at least partially engaged in one of the disciplines of marketing) by companies not directly engaged in the business of marketing itself.
One example of this was newspaper and magazine distributor John Menzies’ buyout of Orbital Marketing Services – something we wrote about in The Drum late last year.
Last week, Cardtronics UK, the country’s largest independent ATM operator, acquired i-Design for a cash sum thought to be around £8.5m. This, on first reading, sounds like an odd buy, but i-Design, despite its name, isn’t really a design agency – it describes itself as “the world-leading provider of customer engagement software and interface design solutions for the self-service channel”. In English, it’s a specialist tech, CRM and media agency.
The amount paid for i-Design (60p per share) represents a premium of some 160 per cent, but for the acquirer this is an eminently sensible deal. i-Design has three divisions: one supplies software for banking clients such as RBS, Santander and Nationwide; another provides multi-channel marketing consultancy (including CRM) for the likes of Travelex and Tesco Bank; while the third, atmAd, exploits the advertising opportunities available on and around cash machines.
Since Cardtronics, via its Bank Machine brand, operates some 4,100 state-of-the-art ATMs at high-traffic locations like rail stations, Spar, Ikea and Asda stores and motorway services stations, as well as on behalf of building societies, it all begins to make sense. As print has declined and TV becomes more fragmented, media agencies and their clients have over the years looked at new places to place marketing messages – taxis, bags, pizza boxes, even public lavatories – but one place that’s struck me as under-exploited is the cashpoint.
Think about it – the consumer is in a high state of awareness (nobody wants to get mugged when making a withdrawal in public!) and is, for a minute or so, unable to move very far. That makes him or her in an ideal physical and mental state in which to receive a message. Consumers would be especially receptive to ads and other marketing messages if it meant that any charges for withdrawing cash could be offset or subsidised (as increasingly seems to be happening in the US, where fees for withdrawing money from ATMs are much more common than they are here).
There are also multiple channels for getting messages to the consumer: ads on, or in the spaces around, the machine itself; on-screen; and on receipts and statements. The ATM is also a fantastic medium for direct marketing – because the machine “knows” who is using it, messages can be tailored to individuals. NCR, a maker of cash machines (so it obviously has a vested interest), says in its literature that ATM advertising is “65 per cent cheaper and 200 per cent more effective” than traditional direct mail.
And ATMs have very high footfall. According to research from Lenpenzo/Trends Today in 2012, the world’s 2.2 million ATMs are on average each visited 900 times a week, and each ATM user will visit a machine 7.4 times a month.
More pertinently to us here in Blighty, the Link network – to which virtually every one of the 66,000 cash machines in the UK is connected – says that last month alone, there were almost 240 million ATM transactions up and down the country; last year, total transactions (cash withdrawals, balance enquiries and rejected transactions) were a record-breaking 3.2 billion. That’s some audience. And the good thing about ATMs is that we know who’s visit, where, when, and how often – that’s the kind of data that advertisers would kill for. I’ve already above-mentioned personalised or highly-targeted messages. Since many of Cardtronics’ ATMs are located in retail environments, there are enormous opportunities for brands to push out timely messages. For example if a store ATM is located near a soft drinks fixture, beverage brands can engage existing or potential customers by advertising there.
Cardtronics probably had all of this in mind when negotiating with i-Design, particularly after the latter announced last September, that it had won a contract from Adsa to sell ad space across the supermarket giant’s 1,000-machine network. It’s a really exciting deal.
Finally, I wanted to make a quick diversion and again mention our old friends Aegis. The group’s proposed $4.9bn takeover by Dentsu has been delayed yet again – this time to 28 March - thanks to talks with China dragging on, but that hasn’t stopped [Aegis CEO] Jerry Buhlmann continuing on his own acquisition trail.
Just last week the group announced that it had acquired a majority stake in its affiliate in Bogotá, Carat Colombia. Aegis will have the option in five years time to acquire the remaining shareholding.
The opportunities for growth in Latin America are great – second only to China by my reckoning - and Carat Colombia (with its history of servicing global clients in the region, such as General Motors and Coca-Cola) is well positioned in the market to harness this growth, so this is a terrific deal; the shareholders seem to agree, as the Aegis stock price rose slightly on the deal.
Andrew Moss is a partner at Green Square, corporate finance advisors to the media and marketing sector.
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