Epsilon’s success is evidenced by the endorsement of its blue-chip clients: Epsilon has gained the trust of at least seven out of the ten 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% yearly growth on average over the last two years.
This acquisition will accelerate the implementation of Publicis’ strategy to become the preferred transformation partner for its clients.
Under the terms of the agreement, Publicis Groupe acquired Epsilon in a USD 4.4 billion deal, representing a net purchase price of USD 3.95 billion, after deducting the benefit of acquisition-related tax impacts. This gives an 8.2x multiple, based on a 2018 adjusted EBITDA of USD 485 million(1).
The deal was funded through Publicis Groupe’s successful euro 2.25 billion bond issued on June 5, 2019 in three tranches, a medium-term loan and USD 650 million in available cash.
The transaction was finalized on July 1, 2019, the date of first consolidation of Epsilon’s results. Consolidation was largely completed by end-December 2019. Epsilon is positioned at the core of the Groupe providing the expertise in gathering, enriching and leveraging first-party data to permeate all Groupe businesses. Epsilon’s advertising activities were merged into Leo Burnett, and the Groupe opted to conduct a strategic review of CJ Affiliate to explore various possibilities for generating value.
On August 19, 2019, Publicis Groupe announced its acquisition of Rauxa, an independent,
full-service marketing agency. Rauxa has become part of Publicis Media, the Publicis Groupe media Solution Hub. Founded in 1999, it has averaged double-digit growth each year, with net revenue of around USD 70 million in 2018 and more than 300 employees spanning New York, Los Angeles, San Francisco, Seattle, Orange County and Dallas. Rauxa’s clients include Verizon, Samsung, Alaska Airlines, Vans, Celgene and 20 other leading client brands. Rauxa operates as a Publicis Media agency brand in the United States, and continues to be led by its founder Jill Gwaltney, and its President and Chief Executive Officer Gina Smith, reporting to David Penski, COO of Publicis Media US and Chairman of Publicis Media Exchange (PMX), and Tim Jones, Regional CEO Americas for Publicis Media. Rauxa will work closely alongside Publicis Media’s digital agencies (Moxie, MRY and Digitas), driving deeper communications touchpoints across strategy, CRM and personalized creative.
Total acquisition costs for entities integrated during 2019 (gross payments, before acquired cash) came to euro 4,076 million. In addition, euro 123 million was paid out in earn-outs and euro 40 million to buy-out non-controlling interests.
The Epsilon acquisition led to suspending the share buyback program announced in early 2019, as the Groupe’s priority shifted to deleveraging. The Groupe did not buyback any of its own shares in 2019, except for those shares bought under the liquidity contract.
During 2020, marked by Covid-19, the number of acquisitions was limited. The Groupe completed the disposal of Matomy Media Group (a company consolidated under the equity method), in which it held 24.9%.
The consideration paid (excluding cash and cash equivalents acquired) during 2020 for the integrated entities totaled euro 146 million, including USD 134 million in earn-out payments. In addition, euro 10 million were disbursed for the payment of non-controlling interests.
There are no significant investments or divestments underway.
Publicis Groupe will continue its investments to provide proposals and solutions to its clients faced with numerous challenges (consumer behavior, multiplication of communication channels, increasing weight of omni-channel commerce, emergence of new players from digital technologies). Thus, all future investments will aim to improve our offering, combining our creative, media, data and technological expertise.
Moreover, as at December 31, 2020 the Groupe also had commitments of euro 241 million under earn-out clauses and euro 24 million for non-controlling interest buyouts, a total of euro 265 million, of which euro 101 million is due in less than one year.
(1) Based on 2018 EBITDA (operating margin before depreciation and amortization) published by Epsilon adjusted for separation costs for 21 million euros, a charge for Stock Based Compensation of 30 million euros in line with Publicis accounting principles, the favorable impact of € 60 million in cost reduction being implemented at Epsilon and before any cost synergies resulting from this transaction. €/$ conversion at the 2018 average exchange rate of 1.18.
