- Epsilon is a unique technology and platforms company with unparalleled data assets built over years.
- The addition of Epsilon will propel Publicis as a leader of data-driven personalized experiences at scale.
- Compelling transaction terms leading to shareholder value creation:
- Net purchase price of $3.95 billion after tax step-up, implying an 8.2x 2018 Adjusted EBITDA multiple (1)
- Double-digit accretion to both headline EPS and FCF per share (2) from 2020.
Publicis Groupe announced it has entered into an agreement with Alliance Data Systems Corporation (NYSE: ADS) under which Publicis Groupe will acquire Alliance Data’s Epsilon business for a net purchase price of $3.95 billion after tax step-up (total cash consideration of $4.40bn) and build a strategic partnership with Alliance Data remaining business. This acquisition will accelerate the implementation of Publicis’ strategy to become the preferred transformation partner for its clients
The Directoire (Management Board) and the Conseil de Surveillance (Supervisory Board) of Publicis Groupe have unanimously approved this transaction considering it a one-time opportunity to seize, given the evolution of the industry and the implying transformation of marketing solutions.
Epsilon: a technology leader maximizing the value of its clients’ data at scale
Headquartered in the US, Epsilon is a unique technology and platform company focusing on maximizing the value of its clients’ data. In 2018, Epsilon generated $1.9 billion of net revenue (3), 97% in the United States. Epsilon employs approximately 9,000 employees, including 3,700 data scientists and 2,000 Bangalore-based technology delivery experts
Epsilon’s expertise spans across the entire data lifecycle from client’s first-party raw data to personalized marketing campaigns, using technology, data and platforms to
- Onboard client first-party data using Epsilon’s proprietary software suite (CRM, email and loyalty programs) to create a clean, normalized and organized data set
- Enrich client’s first-party data with Epsilon proprietary data assets (demographic and contact, behavioral and transactional, online and offline data)
- Build unique ID customer profiles based on enriched data and Artificial Intelligence for segmentation and analytics
- Activate data to deliver personalized multichannel campaigns at scale with measurement and real-time optimization
Epsilon’s success is evidenced by the endorsement of its blue chip clients:
- Epsilon has gained the trust of at least 7 out of the 10 largest US companies across various sectors including Auto, Retail, Financial Services, CPG and Media
- In addition, its top 50 clients have an average tenure of 14 years and have generated an 8% yearly growth on average over the last two years, demonstrating the significant client benefits delivered by Epsilon.
Epsilon has built its assets in technology, data and platforms at an impressive scale. For example, its loyalty software serves 600 million accounts, it has more than 250 million unique consumers identified in the US, and its proprietary platforms Conversant handle 1 billion updates every 5 minutes allowing to further improve messaging based on consumer insights on a real time basis. Epsilon has developed extremely strong artificial intelligence capabilities allowing consumer behavior predictions. In a world where data privacy is paramount, Epsilon remains at the forefront of consumer privacy, cybersecurity and risk management compliance matters
An acceleration of Publicis strategy to become the preferred partner to clients in their transformation
In today’s fast changing environment, clients are shifting their investments towards data/technology-driven marketing solutions which allow them to foster customer engagement, support growth and reduce costs.
Publicis has set a clear ambition to combine creativity, data and technology to address its clients’ needs and become a leader in marketing and business transformation. This model has been gaining momentum as exemplified by Publicis Groupe’s #1 position in New Business ranking in 2018 and the growth of its “Game Changers”.
Today, the acquisition of Epsilon is a one-time opportunity to accelerate the implementation of Publicis’ strategy to deliver personalized experience at scale. With Epsilon at the core, Publicis will become the first player to offer a unique end-to-end services to its clients. It will result in enhanced growth of its existing businesses while opening up new opportunities in an enlarged $1.5 trillon industry
Epsilon will fuel the entire Publicis organization, complementing its existing Solutions and boosting its Game Changers:
- On the creative side, Epsilon assets will bring customer insights to improve ideation and build more relevant campaigns. By powering the Dynamic Creative Engine, Publicis will go one step further to adapt to real time context of customers (who they are, what they do, what they buy)
- On the media side, the connection between Epsilon’s data sets and Publicis Media’s billions of touchpoints will provide superior intelligence to build consumer IDs, segment audiences and maximize media buying ROI by accurately measuring and optimizing campaigns in real time
- On the Digital Business Transformation side, Epsilon will allow Publicis to deliver deep proprietary customer insights to further optimize clients’ business model
Conversely, Epsilon’s potential will be fully unlocked within Publicis Groupe, thanks to well identified value creation levers. In particular, Epsilon will benefit from Publicis’ client portfolio and global reach to expand further in the U.S. and overseas. Publicis also intends to replicate the success of Epsilon’s unique Auto platform to other verticals (such as Health, Financial Services, Telecommunications, Retail)
Compelling transaction terms with attractive shareholder value creation
Under the terms of the agreed transaction, Publicis Groupe will acquire Epsilon for a cash consideration of $4.40 billion, representing a net purchase price of $3.95 billion after deducting the benefit of acquisition-related tax step-up. This implies an 8.2x multiple, based on a 2018 Adjusted EBITDA (1) of $485m
The transaction will be double digit accretive to Publicis’ headline EPS and Free Cash Flow per share (2) from year one (2020). As an illustration, based on 2018 Pro-Forma figures, headline EPS accretion would equal +12.5% (4) and FCF accretion +18.3% (5), excluding any transaction-related synergies
Publicis remains committed to its 45% dividend payout ratio and will put on hold its share repurchase program in the context of this acquisition . The transaction will be fully financed with debt and cash on hand, maintaining a financial profile in line with current BBB+ / Baa2 ratings, with full deleveraging four years after completion of the transaction
The transaction remains subject to customary approvals and is expected to close in Q3 2019
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