Deal Notes: Private Equity Players on the Prowl

According to Marketing Services & Technology and Multichannel Marketer Deal Notes, a service of New York-based investment bank Petsky Prunier, 42 transactions involving multichannel marketers took place during the first half of 2005.

Though only accounting for 19% of direct marketing transactions, the multichannel marketer sector’s total estimated $6.7 billion in deal value represented 37% of dollar volume. The average deal size was $160 million–more than double the average size of marketing services and marketing technology sector transactions.

But the major theme was the prominence of private equity buyers, which according to Deal Notes accounted for more than 43% of the deals in the first half of this year. In fact, six out of the 10 largest transactions in the first six months of 2005 involved private equity buyers.

What’s more, private equity firms are the sellers are well as the buyers. For example, Wand Partners sold multititle mailer Paragon Gift Holdings to investment group Reliant Equity Partners in March. Since many established and sizeable multichannel marketers are now owned by private equity groups–and nearly all of these groups will seek a liquidity event in the not-so-distant future–this trend will only continue.

Deal Notes also reveals that private equity players are taking public companies private, as evidenced by recent deals involving Neiman Marcus, Brookstone, and School Specialty. Often, management and majority shareholders believe public company valuations do not accurately reflect the true value of the company. Going private provides the opportunity to reorganize and refine strategy outside of the lights of public company scrutiny.