Publicis to acquire US data firm Epsilon in $4.4 billion deal

Publicis Groupe, a global leader in marketing and communication, on Sunday announced the signing of an agreement with Alliance Data Systems Corporation, under which Publicis will acquire Alliance Data’s Epsilon business, in a deal worth $4.40 billion (including tax), to expand Publicis’ digital business and North American footprint.

The management board and the supervisory board of Publicis Groupe have unanimously approved the transaction considering it a one-time opportunity to seize,  given the evolution of the industry and the implying transformation of marketing solutions, the company stated in a release. 
Epsilon is a unique technology and platforms company with unparalleled data assets built over years. The $3.95 billion (net of tax) acquisition of Epsilon will propel Publicis as a leader of data-driven personalised experiences at scale and lead to shareholder value creation, the company stated.
Publicis said it expected Epsilon to boost its headline earning per share by around 12.5 per cent.
“Epsilon is the ideal accelerator for Publicis’ strategy,” Publicis chairman and CEO Arthur Sadoun said on a conference call.
“Our clients are facing increasing pressure from the rise in consumer expectations, the mainstreaming of direct-to-consumer brands and new data regulations. The only response is to deliver personalised experiences at scale. They have to transform to meet this new market imperative,” Sadoun said. 
“With the acquisition of Epsilon, Publicis Groupe is bringing the necessary technology, expertise and the talent to complement our offer in creativity, media and business transformation, and help our clients leapfrog their competition and grow profitably,” he added.
While in 2018 Publicis demonstrated its successful business partnership model with a string of new businesses, he said, the acquisition of Epsilon will accelerate the implementation of Publicis’ strategy to become the preferred transformation partner for its clients.
Publicis expects the acquisition of Epsilon to transform itself into a data-led digital platform, with very compelling financial terms and delivering double-digit accretion of headline EPS and free cash flow from Year 1 (2020). 
“I’m pleased to say today’s announcement represents a trifecta win for Alliance Data, Epsilon and Publicis Groupe. The announcement of this transaction represents the culmination of an extensive assessment of strategic options for our Epsilon business. With this transaction, we have found what we believe to be the right home for Epsilon’s technology, data assets and associates,” Edward J Heffernan, Alliance Data Systems’ president and CEO, said. 
Headquartered in the US, Epsilon is a unique technology and platform company focusing on maximising the value of its clients’ data. In 2018, Epsilon generated $1.9 billion of net revenue, 97 per cent of it coming from the United States. Epsilon employs approximately 9,000 employees, including 3,700 data scientists and 2,000 Bangalore-based technology delivery experts. 
Epsilon has gained the trust of at least seven out of the 10 largest US companies across various sectors, including auto, retail, financial services, CPG and media. In addition, its top 50 clients have an average tenure of 14 years and have generated an 8 per cent yearly growth on average over the last two years, demonstrating the significant client benefits delivered by Epsilon.
Epsilon has built its assets in technology, data and platforms at an impressive scale. Its loyalty software serves 600 million accounts, it has more than 250 million unique consumers identified in the US, and its proprietary platforms Conversant handle 1 billion updates every 5 minutes allowing to further improve messaging based on consumer insights on a real time basis. 
Epsilon has developed extremely strong artificial intelligence capabilities allowing consumer behavior predictions 
“We are thrilled to join the Publicis Groupe family. During extensive discussions with the Publicis leadership team during the recent review process, we found powerful common ground, including shared values and a strong vision for the future of data-driven, digital-first marketing,” Bryan Kennedy, CEO of Epsilon, said.
Publicis and other traditional advertisers, such as WPP, Omnicom and Interpublic face losing ground to new technology and software giants.
The traditional advertisers are having to cope with increasing competition from the likes of Facebook, Alphabet’s Google and digital marketing specialists that track and target individual clients via their smartphones, while navigating tougher data-protection laws.