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Latest acquisition deals show there's money to be made in data

By Andrew Moss

February 15, 2013 | 8 min read

Following our brief encounter with zombies last week, it’s back to business as usual, with lots of M&A activity in that liveliest of marketing services sectors, data.

As we predicted last year, data outfits, or agencies with strong data analytics capability, would be the most keenly-sought properties among savvy acquirers, and so it is proving.

The biggest of the deals over the past fortnight has seen UBM, the London-based B2B publishing and events specialist, selling its data services business to private equity fund manager Electra Partners.

The sale – for a consideration of £160m including a £40m vendor loan note – is of course subject to approval and comes at the end of a six-month UBM strategic review begun last year.

The data business, called Delta, represents the bulk of UBM’s business in this sector and includes its Health, Technology and IP, Trade & Transport, and Paper units. In 2011, these businesses generated revenue of £190m and adjusted operating profit of £27.7m. In 2012, they accounted for revenue of £179.3m and adjusted operating profit of £27.4m and as at 30 June 2012 the businesses had gross assets of £295.5m. So this, if it pans out as planned, is likely to be one of the very biggest M&A deals of the year.

UBM will get around £100m in cash and simplifies its business so that it can concentrate on what it’s best at – events, marketing services and business communications like PR Newswire. Electra gets a robust business with real prospects and which operates across five continents, including Asia. Even better, UBM will be a Delta customer.

Another UK company, Sevenoaks-based Logit Research, has also been spending. Logit, a small but ambitious company specialising in the consultative side of market research, has just acquired 45 per cent of a partnership called Big Data Investors. This particular company specialises in software for “Correlated Component Regression Analysis” (CCRA), a method of creating models and predictions from very large amounts of data.

One of the most common goals of survey research is to identify those aspects of a brand or product that most strongly relate to overall consumer satisfaction with that brand or product.

In principle this sounds pretty simple, if rather technical. But the fact that there are almost as many opinions about how to perform this analysis as there are people who perform it means that it’s not. One of the key issues surrounding this type of analysis, often called “key drivers analysis,” is the fact that many of the attributes on which respondents rate a brand are highly interrelated (or multi co-linear) – meaning that a change in one item produces a change in other items. As market research becomes more sophisticated and complex, keeping track of these changes and related elements, and thus modeling and predictions based on them, becomes more difficult.

CCRA is seen by many as an answer to this problem. Leaving aside the technicalities, it essentially helps make sense of statistics. As the quantitative and fieldwork side of research becomes more commodified, so the consultative and qualitative side (and the insights and stories this latter approach provides) becomes more important. The software will, I think, be in increasing demand from research agencies – especially the smaller and medium sized ones, which cannot afford to build proprietary tools – as clients demand more accurate modeling and greater levels of insight. Although not strictly a marketing services company in itself, Logit is the kind of company that will become more important to agencies in a digital, data-driven world.

Next, you may recall that last year, we wrote in The Drum about Experian offloading much of its price comparison business (including PriceGrabber and LowerMyBills) in order to concentrate on its core information services business. Last month it started to do just this when it acquired Pacific Micromarketing, a leading Australasian data analytics business.

Pacific offers customers access to in-depth consumer data and insights through a range of software products and services, including the acclaimed Mosaic platform. Its customer segmentation tools are, apparently, particularly well thought of.

The acquisition is a further step in Experian’s oft-stated strategy to “provide high value data-driven digital marketing services.” Pacific’s suite of products – as well as its experienced workforce of 27 - will be integrated with Experian’s existing digital offerings to complement and strengthen the latter’s range of services including enhanced consumer segmentation, analysis and multichannel marketing capabilities – the kind of stuff that’s hugely in demand from brands and their agencies.

Organisations are increasingly looking to gain a “single customer view” of how consumers engage with their brands on and offline and determine the most effective way to communicate, and this acquisition means that Experian can move towards a full-service offering: a fascinating development that’s well worth keeping an eye on.

Finally, I wanted to again mention our old friends Aegis. The group’s proposed takeover by Dentsu has been delayed yet again 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.

Finally, prompted in part by UK agency Bite Digital’s acquisition of the affiliate marketer eAZe Media last week, I wanted to touch on an area that will be hugely and positively affected by the twin drives towards a mobile and data-driven world: performance marketing (PM), of which activities like affiliate marketing, pay-per-click and so on are the most familiar examples.

PM, where clients pay for the results of activity (as opposed to just for the work itself), is I think one of the most promising –at least in terms of growth opportunities – forms of digital marketing, but it’s increasingly looking like an idea whose time has really come come. For clients, it’s fantastic – imagine running TV ad campaigns and only having to pay when a sale resulted from each airing of the ad. Of course this has never been possible – until now.

Digital and data analytics allow brands to monitor, in real time if need be, just how effective a campaign is. This is why I think over he next couple of years PM will become really big – expanding digital ad budgets and options, new screens (mobiles, tablets, smart TVs) and platforms, big data, and industry and technological convergence will all help push PM centre stage.

Total online ad revenue jumped $9.3 billion in 2012 to a record $26.3bn, according to industry estimates. The consistent rise in digital advertising expenditures, and the trends we see in mobile – with tablets leading the way – along with increasingly accurate data (and the human and technological expertise with which to interpret it), means that more global advertisers and agencies will move to performance-based advertising.

PM is an area being explored in more depth elsewhere in the Drum but it’s an area I suspect we’ll be returning to again and again as 2013 progresses.

Andrew Moss is a partner at Green Square, corporate finance advisors to the media and marketing sector.

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