Alliance Data Acquires Equifax’s DM Services Operations

Alliance Data Systems Corp. will acquire the Direct Marketing Services unit of Equifax for $117 million. Once the acquisition is made final, the new unit will operate under Alliance Data’s Epsilon Targeting and Marketing Technology group.

The acquisition brings to Epsilon new data resources and deeper penetration into the telecommunications and financial services industries; new clients; additional database development and hosting, business demographic information, consumer demographic and lifestyle information, and analytics and delivery optimization capabilities, as well as roughly 200 employees. After the sale, Equifax will employ around 6,400 individuals globally.

According to financial documents filed with the Securities and Exchange Commission, the Direct Marketing services unit contributed $84.3 million to Equifax’s coffers during 2009. That’s down from $94.1 million in 2008 and $108.2 million in 2007. The Direct Marketing Services unit carried a goodwill balance of $64 million.

“Revenue declined primarily due to reduced mailing volumes for existing customers reflecting the slowdown in retail sales and the marketing campaigns of many retailers, as well as changes to a contract with a large marketing services reseller,” according to a note accompanying these figures in the company’s SEC filing.

But revenue is only part of the equation. Through its purchase, Alliance Data strengthens its positions against other companies that compete in the demographics information space, such as Acxiom Corp., Harte-Hanks, and InfoGroup. Additionally, the unit’s analytics tools compete with those offered by Fair Isaac Corp., according to the financial filings.

At Equifax, the Direct Marketing Services unit had been part of the U.S. Consumer Information Solutions operations, which also encompass Equifax’s credit data and credit decision technology solutions, mortgage reporting and settlement solutions, and consumer financial marketing services. The Alliance Data deal does not include any of the U.S. Consumer Information Solutions aside from the direct marketing unit.

The sale marks a turnaround in Equifax’s recent bent toward acquisitions. Equifax purchased IXI Corp., a consumer wealth and asset data firm, in late 2009 for $124 million and Rapid Reporting Verification Co., an IRS tax transcript and social security number authentication firm, for $72.5 million. In 2007 it acquired TALX, a payroll automation and human resources business unit, for $288.1 million in cash and $177.6 million in debt assumption.