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Publicis To Buy Epsilon For $4.4 Billion

Publicis To Buy Epsilon

In Publicis Groupe SA’s biggest takeover yet, they have agreed to acquire Alliance Data’s Epsilon marketing unit, propelling the French advertising firm beyond a weakening conventional ad business. This acquisition tops the $4.18 billion that was paid for tech consulting firm Sapient back in 2014.

Publicis, the world’s third-ranked advertiser, has decided to pay $4.4 billion for the acquisition of Epsilon further expanding its digital business and North American footprint. This acquisition will bolster their efforts in adapting to this fast-changing market that is increasingly being driven by online client data.

According to a statement released by Publicis, the addition of Epsilon will propel Publicis to become the leader of data-driven personalized experiences at scale. Epsilon brings with them a data trove of more than 160 million individual clients and has generated revenue of $1.9 billion last year, almost entirely in the United States.

Epsilon has 4 main attractions:

  • Data Management: Anticipate consumer purchasing patterns by leveraging pools of user data
  • Identity Resolution:  Track web users across different devices through the use of digital tools which make it easier for an advertiser to target ads more effectively
  • Loyalty Program Management: Run loyalty programs for firms like Dell Technologies Inc., BP Plc and Walgreens Boots Alliance Inc.
  • Creative Agency: Develop new campaigns for the unit closest to the classic advertising business

Arthur Sadoun explained that clients face huge challenges in this data and digital-first world. More online data-mining expertise will be brought to Publicis which will help clients target shoppers more effectively and help reduce reliance on conventional advertising, which is deteriorating as consumers have begun to reject newspapers and traditional TV.

Publicis, in a statement, mentioned that their first-quarter revenue increased 1.7% from the previous year to $2.4 billion. Client attrition in the US was alleviated by good customer retention, allowing the company to witness higher organic growth in 2019 compared to the previous year.

Investors started wondering if Publicis will be able to absorb such a big acquisition and due to which its shares fell the moment it was named as a potential bidder. Publicis reassuringly said that the acquisition will be fully financed by debt and cash on hand, due to which they will be suspending its share buyback programme, so as to stick to its 45% dividend payout ratio pledge.

Arthur Sadoun clarified that this deal will not be having an impact on the 8000 headcounts of their company. Epsilon has 9000 employees which include 3700 data experts and 2000 engineers that are based in India.

Morgan Stanley and Liberum analysts highlighted the Epsilon deal benefits in research notes which explain how Epsilon gives Publicis more consumer data but remarked on the traditional advertising sales decline for the company in the first quarter.

About Publicis

Founded in 1926, the Publicis Groupe is an interactive communication services provider that is ranked as the world’s fourth largest communications group, the world’s second largest media counsel and buying group and is also a global leader in digital and healthcare communications.

About Epsilon

Since being founded in 1969, a leader in creating connections between people and brands, Epsilon has become an all-encompassing global marketing company. They find, acquire and retain customers for brands around the World.

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