Our investments focus on digital expertise, data and technology to strengthen our teams and promote innovation and the offer of new services. The strengthening of our agencies and the development of strategic partnerships and initiatives with major Internet players enables Publicis Groupe to anticipate the changes and evolution of communication industries towards digital technologies. The aim is to offer the most innovative solutions to our clients, in phase with the rapid changes in consumer behavior and technologies.
One of the key events in 2019 was the Epsilon acquisition, the biggest deal (in terms of size), in the Groupe’s history. There were also a number of other small-scale acquisitions and disposals during the year, helping to accelerate the Groupe’s tilt towards strategic core assets.
On February 14, 2019 Publicis Groupe announced that, following a sale process in 2018, the Groupe entities that own Proximedia had entered into exclusive negotiations with Ycor for the sale of all of Proximedia. With operations in France, Belgium, the Netherlands and Spain, Proximedia provides digital services to SMEs, small enterprises, small shops and craftsmen for their online presence and promotion. As at December 31, 2018, Proximedia had 575 employees, including 231 in France, 311 in the Benelux and 33 in Spain. Publicis Groupe completed the disposal in the first half of 2019.
On April 14, 2019, Publicis Groupe announced that it had entered into an agreement with Alliance Data Systems Corporation to acquire Epsilon. Epsilon is a technology and platform company focusing on maximizing the value of its clients’ data. In 2018, Epsilon generated net revenue of USD 1.9 billion(1) of which 97% from the United States; the Company employed approximately 9,000 people, including 3,700 data scientists and 2,000 engineers based in Bangalore.
Epsilon’s expertise ranges across the entire consumer data lifecycle. It allows client raw data to be structured and enhanced, and activate large-scale, personalized, multi-channel campaigns.
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 accelerated 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.(2)
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 the 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. Since its inception in 1999, Rauxa has recorded average double-digit annual growth with net revenue of around USD 70 million in 2018. It employs more than 300 people in 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 in the United States and is managed by its founder Jill Gwaltney and its Chairwoman and Chief Executive Officer Gina Smith. Both report to David Penski, COO of Publicis Media US and Chairman of Publicis Media Exchange (PMX), and Tim Jones, Regional CEO Americas of 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.
(1) As per Publicis Groupe accounting principles.
(2) 2018 reported Epsilon EBITDA (operating margin before depreciation and amortization) adjusted for standalone carve-out costs of euro 21 million, share-based compensation charge of euro 30 million to align with Publicis’ accounting policy, euro 60 million of run-rate cost reductions being implemented at Epsilon and before any potential cost synergies derived from this transaction. €/$ conversion at the 2018 average exchange rate of 1.18.
