Morgan Confirms DMI-ALC Merger Talks
Acxiom company leader Charles Morgan confirmed yesterday that his firm is negotiating with American List Counsel to create a new list giant consisting of Direct Media and ALC.
The two firms signed a non-binding letter of intent recently, he said. But the negotiations are still at the “discussion point,” and there has not yet been any due diligence, he added.
The long-term plan would be for Acxiom to retain an equity stake in the new company, and to have a strategic alliance with it, as opposed to a straight cash purchase of DMI by ALC. Acxiom’s share “would likely not be a controlling interest but a significant stake,” Morgan said.
“It’s very far from a done deal,” added Dave Florence, founder and chairman of DMI. “Conceptually, I’d be in favor of it. But the distance between [what’s occurring] conceptually and factually could be a long ways.”
Asked why Acxiom would unload DMI, Morgan called it an opportunity for additional business for Acxiom through access to ALC’s customer base.
“Part of the discussion with [ALC president] Donn Rappaport is that he can help us use the Acxiom Data Network to improve the quality of list products that DMI and ALC handle,” Morgan added.
Still unanswered was the question of whether ALC would now be a candidate for an initial public offering. Donn Rappaport, chairman of American List Counsel, was unavailable for comment.
An entity comprising ALC and DMI “would certainly give ALC critical mass,” said Michael Petstky, CEO of direct marketing strategic consultant the Winterberry Group LLC, New York. As a pure list management/brokerage company, ALC and DMI are the two biggest out there. “So, you have significant market share,” he said.
Something else ALC would have in its favor is its recently launched interactive division, ALC of New England, which “adds the Internet component that so many IPOs are looking for today,” Pesky adds.
“However, list broker and management is such a relationship-driven business, it would certainly look a lot stronger if it had a strong service bureau component or an analytic component to go with it,” he said, referring to Acxiom’s previously announced plans to phase out its SmartBase database product.
In March, Morgan told DIRECT editors that Acxiom had not done a good job of leveraging the Direct Media asset.
List professionals reached for comment before Morgan’s confirmation yesterday made no secret of the fact that they felt “bigger is not necessarily better,” as Adrea Rubin, CEO, Adrea Rubin Marketing & Management Inc., NY, told DIRECT Newsline.
“The list industry is based on relationships and quality of service and it’s been my experience that the bigger the company, the less good service there is,” added Leslie Rodgers, president and CEO of LR Direct Ltd.
A merger would certainly create confusion for clients, Rubin argued.
“They are going to have to figure out how they are going to combine those two companies,” she said. “Clients are going to have to decide who they are going to use. So there could be fallout for other list companies.”
That fallout could also mean a gain for those other list companies. “I think it really gives us great opportunity to bring in accounts and talent into [our] organization,” said Lonnie Mandel, chairman, the SpeciaLists Ltd., Weehawken, NJ, adding that other list companies will also reach for that opportunity.
What does the merger development say about the list industry? “I think what it says is, if you don’t understand the list business and respect it, you shouldn’t get in it,” Mandel said, referring to Axciom’s $25 million purchase of DMI in 1996.
“I suspect Acxiom wants to go back to what it does best and that’s not necessarily the list business,” Rodgers added.
Worldata’s Roy Schwedelson said it was “phenomenal” that Acxiom didn’t take the “largest information broker in the U.S. and make a go of it.” But “as a competitor, I look forward to the good fight.”
