French advertising giant, Publicis, is finalizing its deal to pay about $4.4 billion to Alliance Data Systems Corporation’s (ADS) Epsilon business to boost its digital marketing strategies and to help clients better personalize their advertising.
According to the terms of the deal, Publicis would acquire ADS’s Epsilon business for a net purchase price of $3.95 billion after a tax step-up, with a total cash consideration of $4.4 billion. Publicis would continue to form a strategic partnership with Alliance Data’s remaining business.
The deal is in response to huge growth of the digital advertising industry in recent times, as well as increasing dominance of players like Facebook (FB) and Google (GOOG, GOOGL). With digital ad spending in U.S. expected to surpass traditional ad spending for the first time in 2019, by 2023, digital ad spending is expected to account for more than two-thirds of all media spending.
In light of these market imperatives, the deal is crucial as it gives Publicis access to Epsilon’s data capabilities. With more than 250 million unique U.S. customers identified in Epsilon’s database, Publicis believes that it can integrate this data with its own assets to build a robust client profile.
The deal is not unprecedented as previously major ad holding companies like Interpublic Group of Cos. and Dentsu Aegis Network have also insourced data from providers. Interpublic Group of Cos. acquired Acxiom’s Marketing Solutions for $2.3 billion last summer, while Dentsu Aegis Network bought a majority stake in data marketing company Merkle in 2016. In today’s digital advertising market, such data insourcing also helps grapple with the privacy issues attached to customer data sourcing.