Publicis Groupe completes acquisition of Epsilon; deal valued at $3.95 bn

Publicis Groupe has completed the acquisition of data-driven marketing company, Epsilon, from Alliance Data Systems Corporation, at a net value of $3.95 billion after tax step- up, implying an 8.2 times adjusted EBITDA multiple. 

Based on pro-forma 2018 numbers, the transaction is 12.5 per cent accretive to headline EPS and 18.3 per cent to Free Cash Flow, excluding any transaction-related synergies. 

Commenting on the development, in a release issued Arthur Sadoun, Chairman and CEO, Publicis Groupe, stated, “We are very pleased to have finalised the closing of the Epsilon acquisition in record time, at a very compelling price, creating immediate value for our shareholders. This acquisition completes our sets of assets harmoniously, with data capabilities that are second to none, and propels the Groupe as the global leader of personalised experiences at scale.” 

He further said, “With the addition of Epsilon’s capabilities in data to our existing creative, media and technology firepower, we have all the necessary assets and talent to help our clients leapfrog their competition and grow profitably, in a data-led, digital-first world.” 

The focus in the next months will be to successfully execute the integration while implementing the Power of One model with their clients. 

Integration 

Since the signing was first announced, many meetings between the Publicis Groupe and Epsilon teams have taken place, laying the foundations of the integration, based on three key principles:

Epsilon will be at the core of Publicis Groupe 

Epsilon will become the unique data-tech platform of Publicis Groupe, to deliver personalisation at scale. Its expertise in on-boarding, enriching and activating clients’ first party data, its unique data sets and its vertical expertise in the Auto sector will be placed at the core of the Groupe. The Publicis PeopleCloud platform and related activities will be folded into Epsilon. 

It will be run by its current CEO Bryan Kennedy, who will join the Groupe Executive Committee and report directly to Arthur Sadoun. 

Synergies will be created by combining Epsilon’s creative agency businesses with Publicis Communications North America, while CJ Affiliate will be aligned with Publicis Media to leverage its growth potential. 

Epsilon will turbocharge all of Publicis Groupe’s operations 

The integration of Epsilon will accelerate the seamless implementation of the Power of One for the benefit of Publicis’ clients. 

Publicis Communications will leverage Epsilon’s customer insights to improve ideation and build more relevant campaigns, and will power Epsilon’s Dynamic Creative Engine to adapt to real-time consumer context. 

Publicis Media’s billions of touchpoints will be connected with Epsilon’s data sets to provide superior intelligence to build consumer IDs, segment audiences and maximise media buying ROI. 

Publicis Sapient will gain access to deep proprietary customer insights to optimise their clients’ organisation and business model. 

And Publicis Health will partner with Epsilon’s health practice to deliver outcomes-based measurement and optimization across strategic, creative and media engagements. 

Financial details of the acquisition 

Publicis Groupe financed the acquisition of Epsilon through the successful placement of 2.25 billion euros bonds in three tranches on June 5, 2019, combined with a term loan and the use of $650 million of cash on the Groupe’s balance sheet. 

The financing of the transaction aims to maintain a financial profile in line with current BBB+ / Baa2 ratings, with full deleveraging four years after completion of the transaction. Publicis Groupe remains committed to its current dividend pay-out of 45 per cent. 

Publicis Groupe will begin consolidating Epsilon’s financial results as of July 1, 2019.