Publicis Dives Deeper Into Data With $4.4 Billion Epsilon Acquisition

News marks holding company's largest-ever deal

Publicis reportedly outbid Advent International.
Joel Saget/AFP/Getty Images

This morning, Publicis Groupe announced that it has agreed to acquire data intelligence company Epsilon for an estimated $4.4 billion.

The news marks the largest deal in the holding group’s 93-year history, confirming earlier reports as well as Publicis’ own April 1 statement regarding talks with Epsilon parent company Alliance Data Systems Corporation.

It also provides yet another example of the advertising industry’s increasing reliance on consumer data, most recently illustrated by rival IPG’s decision to buy database marketing firm Acxiom for $2.3 billion last July.

Like most of its competitors, Publicis has struggled financially in recent years, missing revenue goals for the fourth quarter of 2018 and suffering its largest single-day stock price decline since Sept. 11, 2001 as a result. The holding company’s management and supervisory boards unanimously approved the deal, describing it as “a one-time opportunity to seize, given the evolution of the industry and the implying transformation of marketing solutions.”

Publicis reportedly beat out a rival bid from Goldman Sachs and global private equity firm Advent International. The final agreement includes a “net purchase price of $3.95 billion” and total cash consideration of $4.4 billion, which is considerably lower than previous estimates that ran as high as $5 billion.

A Goldman Sachs spokesperson declined to comment.

“Our clients are facing increasing pressure from the rise in consumer expectations, the mainstreaming of direct-to-consumer brands and new data regulations. The only response is to deliver personalized experiences at scale. They have to transform to meet this new market imperative,” read a statement from CEO Arthur Sadoun. “With the acquisition of Epsilon, Publicis Groupe is bringing the necessary technology, expertise and the talent to complement our offer in creativity, media and business transformation, and help our clients leapfrog their competition and grow profitably.”

Sadoun said the deal will help speed Publicis Groupe’s ongoing pivot towards digital and data-based marketing services and “help us grow faster by offering an even more end-to-end solution to our clients.”

“The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business,” added Alliance CEO Edward J. Heffernan. “Publicis Groupe will be the ideal cultural and strategic fit for Epsilon and its Conversant business, and will help drive Publicis Groupe’s own transformation in today’s data-driven digital world.”

As part of the agreement, Publicis will also develop a “strategic partnership” with the remaining elements of Alliance Data’s business, which include divisions dedicated to loyalty marketing and card services.

News of the deal coincides with Publicis Groupe’s first quarter revenue results, which saw a 1.7% increase in reported revenue and a 1.6% drop in organic that is “in line with expectations.” During February’s Q4 call, Sadoun told investors to expect a “bumpy” Q1 due to late-2018 “client attrition.”

The CEO addressed the Epsilon acquisition in the Q1 announcement, stating that it will make Publicis Groupe “stronger, with a balanced revenue mix across diversified expertise.”

Other recent major acquisitions, including those of consulting firm Sapient and digital network Razorfish, have proven problematic for Publicis. In February 2017, the company announced a $1.58 billion write-down on the former property that led to an annual loss.

“Publicis have more than enough pieces to build a beautiful jigsaw,” said Greg Paull, founder and principal of international consultancy R3. “The biggest challenge will be the internal talent to build it.”

Irving, Texas-based Epsilon, which was founded in 1969, currently employs approximately 8,000 at 70 offices around the world.

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