Aegis Buys Velocity Sports in Deal That Could Hit $26 Million

Citing an interest in taking its sponsorship and lifestyle marketing specialty abroad, Velocity Sports and Entertainment LLC said it would be acquired by London-based agency holding company Aegis. Aegis will acquire 100% of Velocity shares, which are held by a core group of five principals and founders, in a deal that is expected to complete before the end of December 2004.

Velocity’s principals (l. to r.) Dave Grant, Alex Nieroth, Mike Reisman and Harlan Stone. Not Pictured: Bob Wilhelmy

Publicly held Aegis said that the purchase called for $9 million up front, with a three-year earn out that could cap at $26 million, for a total of $35 million.

“The status quo isn’t enough. In order to grow, we wanted access to capital so we can do some new and exciting things, both in the U.S. and overseas,” said Mike Reisman, one of the four partners who founded Velocity in Wilton, CT, in 1999. “We’ve always had inquiries from interested buyers, since the day we opened. About six months ago, we started answering the calls.”

Ranked fifth in the 2004 PROMO 100, Velocity has seen solid revenue growth in recent years, from $5.4 million in 2001, to $9.8 million in 2003. Reisman said 2004 revenues will come in at $14 million. Velocity is global AOR for pharmaceutical giant Eli Lilly, as well as AOR for ConAgra Foods. It has five U.S. offices located in Wilton, Atlanta, Chicago, San Francisco and Washington, DC, and a U.K. operation based in London.

“[Velocity] has been well positioned to support the shift to targeted marketing, and we feel good about the match with Aegis because its approach is media-neutral,” Reisman said. “Like Velocity, Aegis believes in helping brands spend money where the consumers are.” He cited the recent win by Aegis’ Carat group, to which Procter & Gamble moved a substantial share of its communication planning.

Aegis CEO Doug Flynn said the deal is part of a longer-term strategic plan to diversify the communications channels it manages.

“The acquisition of Velocity is consistent with our strategy of investing in the development of strong global networks,” he said. “Sponsorship has become a key communication medium and a vital part of the communications planning mix. We were very impressed with the vision of Velocity and are keen to develop this part of the business into a true international capability.”

Aegis holds four agency “brands”: Carat and Vizeum (media), PosterScope (outdoor) and Isobar (digital). Velocity, which will retain its name and roles for all five principals, will be its fifth international agency brand. Aegis also owns marketing mix modeler MMA and market research database Market Facts, which are part of its Synovate operations.