The list of independent list companies has just been reduced by one.
A big one.
Direct Media, once the largest list management-brokerage firm in the business, is being acquired by InfoUSA, following Walter Karl, Edith Roman, Rubin Response, Millard, Mokrynskidirect, American Church Lists and Jami. The deal is expected to close Jan. 31.
The DMI management team, including CEO Larry May and CFO Rick Sarli, will remain in place, according to Ed Mallin, president of InfoUSA’s Services Group. DMI founder Dave Florence will also play a part, he added.
This is Direct Media’s second try at being absorbed by a major information company. In 1996, it was acquired by Acxiom for a price believed to be $25 million in cash or the value of the same amount of Acxiom stock after three years, sources said. The final price went as high as $48 million when the stock almost doubled in value, the sources continued. DMI was repurchased in 2000 by management.
Mallin would not disclose the current purchase price, but it’s probably fair to guess that it’s in the $20-million to $25 million range. This is based on what InfoUSA paid for some of the other firms and the fact that the list business is not as robust as it was in the 1990’s.
InfoUSA paid $12.4 million for Millard Group, $12 million for Edith Roman and $6.6 million for Mokrynski. The latter included $4.8 million in “goodwill.”
Whatever the price for DMI, the money will be shared by several stakeholders, Direct Media being an employee-owned company.
Why will a merger work now when it didn’t work in the ’90s?
“We know their business,” Mallin said. “We work in it on a day-to-day basis. There’s no learning curve.”
May noted that “the cultures did not mesh” during the Acxiom period.
“They’re had a more modern ’90s outlook, with a broad base of employees trying to engage through total quality management,” he said. “We were more like a law firm, with a bunch of individuals in their fiefdoms, using shared resources. We may have missed opportunities together.”
What’s different now?
“It’s very clear to me that Ed represents a group of people who understand the business from the same perspective we do,” May said.
But why sell at all?
“The fundamentals of DMI are not broken in any way,” May answered. “This is a big opportunity to take to take a big leap into the e-commerce side of the business and have accessto compiled databases.”
The news is bound to rock an already worried list business. But some companies are not concerned.
“It’s a great thing for Dave (Florence,” said Donn Rappaport, ALC’s CEO. “He needed an exit strategy, and this provides him with one.”
Rappaport is not sure that these acquisitions are “producing a whole lot of value for the clients.”
But he added that Vin Gupta, CEO of InfoUSA, “clearly has a vision of where he’s going,” and that some companies have bought into it.
And for ALC? “Every time Vin buys another company, he takes another competitor off the field,” Rappaport added. “We’re happy to see it happen.”
Rappaport continued that ALC has gained new clients with every list acquisition by InfoUSA.
“It’s sad,” said Roy Schwedelson, who as founder of Worldata has competed against Direct Media for years. “It’s sad because the industry should be not consolidated into one company. It’s not good for the mailers, or for non-traditional companies starting out.”
On the flip side, this merger will give ” a lot of young firms a chance to grow,” Schwedelson continued. He claimed his firm has been called by “people from DMI going out on their own,” but did not offer names.
Mallin disputed that.
“That’s totally inaccurate,” he said. “All the key managers and staff are committed long-term to being part of Direct Media.”
He added that there are no plans to move the Direct Media office from its Greenwich, CT location.
Will there be back-office consolidation?
“At this point, it’s too early,” said Mallin. “We don’t envision anything dramatic. Hopefully, we can bring some efficiencies. We are not moving accounting to Omaha or anything like that. Each operating division has its own accounting, IT organization.
But outsiders wonder how the merger will play out. For example, how will InfoUSA handle the competition between Direct Media and Millard, Edith Roman and the other InfoUSA list brands?(Some, like Jami and Rubin, have been swallowed up by the others.) And what about client conflict?
“We can tell you categorically that we’ve worked through all those issues,” Mallin said. “Every one of those divisions has grown.”
And will Acxiom and other vendors be supplanted by InfoUSA, with its compiling, data processing and new media capabilities? Mallin’s group also includes Donnelley Marketing, Triplex and Yesmail.
“There’s no instant plan to rock the boat,” May said. “We want to make sure the clients get what they need.”
Finally, will Direct Media lose that special working environment it had?
“The culture of Direct Media is very entrepreneurial,” Mallin said. “We’re going to let them do what they do best, which is to let them be good consultants.”
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