Are M&As in the List Biz Good for Mailers? Panel Squares Off
The recent surge in company mergers and acquisitions within the list and database industry has spurred constant debate. Some believe these acquisitions will help strengthen the industry with better, more powerful resources available to clients. Others fear they’ll lessen the core quality needed to serve catalogers and other customers — service.
At last week’s DMA List Day in New York, a panel of list industry leaders — John Healey, president/CEO of PRIMIS; Ed Mallin, president of infoUSA Services Group; and Lonnie Mandel, president/CEO of Specialists Marketing — attempted to shed some light on the recent developments, primarily infoUSA’s flurry of acquisitions over the past several years.
The most attention naturally went to infoUSA, which has racked up 36 acquisitions since 1990. Most recently, the Omaha, Neb.-based company merged two of its most prized acquisitions, Mokrynskidirect and the Millard Group. But Mandel mentioned two acquisition deals that Specialists Marketing has completed, but won’t reveal for up to a month and a half.
The session’s moderator, Bruce Biegel, senior managing director of the investment banking firm Winterberry Group, pointed to the downside of list M&A activity, noting that only one in five acquisition deals adds shareholder value. But the panelists pointed to other key factors.
“There’s not enough cash flow created to invest in the business,” Mallin says. “As part of larger firms, they can get equity, secure staff and be more relevant. And they’re challenged in the industry to be relevant.” Mandel adds “the smaller, boutique companies are having a hard time being profitable.”
The panel says that the types of list firms targeted by larger ones for acquisition are those with top talent and solid, stable clients. Healey says PRIMIS seeks list firms for acquisition that want to work with a handful of players, building up assets to match weaknesses. InfoUSA seeks companies that can deliver profitable balance sheets and have the vision and technology for growth, Mallin says.