Flush with Goldman''s funds, iCrossing acquires Proxicom

01 August 2007

Just days after announcing it had received $62 million in new venture funding, interactive online marketing agency iCrossing Inc has more than doubled in size overnight by acquiring web development agency Proxicom for an undisclosed sum. The merger, which increases iCrossing''s employees from 200 to 550, is in line with the company''s ambitious designs to become a top full-service digital agency. The two companies had been in talks for about three months prior to Monday''s announcement, said iCrossing President Don Scales.

Proxicom gives iCrossing access to an entirely new set of clients, as there is virtually no overlap between the two companies. Of particular value is Proxicom''s automotive vertical, which includes Chevron and Toyota. Du Pont is another key Proxicom client.

Although the terms of the deal were not released, chief executive Jeff Herzog indicated that some, but not all of the new funding was used in the deal. The seller was turnaround firm Gores Technology Group LLC of Los Angeles, which acquired Proxicom from Dimension Data Holdings plc in 2004. Dimension Data, in turn, had taken Proxicom private in a $448 million deal three years earlier, when web development firms attracted highly inflated valuations.

According to Herzog, iCrossing was already profitable when it took in the $62 million round, and has raised a total of $110 million, including $92 million last summer. Though iCrossing has never released revenue figures of its own, the company did not dispute a report published in April 2007 in Advertising Age pegging its 2006 revenue at $63 million. The same report estimated Proxicom''s revenue at $66 million, but gave it a slower growth rate. Herzog says that Proxicom is profitable too, and predicted that the merged entity would generate revenues in excess of $100 million this year.

"If you combine the numbers, we''re now the largest independent digital marketing agency in the world," Herzog said. The Scottsdale, Arizona-based iCrossing "will continue to be a predator and not prey" as it contemplates new acquisitions, both to bolster its technology capabilities and widen its geographic reach.

Most of Proxicom''s management team will remain intact, though the company''s CEO and CFO are Gores employees. Proxicom chief operating officer Blue Van Dyke will guide Proxicom through the integration process, with Herzog and Scales.