The Jordan, Edmiston Group's Tolman Geffs Discusses Industry M&A Trends, Sale Of Investopedia To ValueClick By Forbes

Tolman Geffs of JEGIRecently, ValueClick bought financial information site, Investopedia, from Forbes for $42 million in cash. Read the release.

The Jordan, Edmiston Group’s (JEGI) Co-President Tolman Geffs, which helped facilitate Forbes’ sale of Investopedia to ValueClick, discussed the trandsacation as well as overall mergers and acquisitions trends in the media space. Can you discuss a little bit about the value a company such as JEGI provides in a transaction like this?

TG: JEGI adds value in several ways to the sale of a company like Investopedia:

First, we bring a wide view of the market, and it is important to think through all the different buckets of potential buyers that could find a company interesting.  In the case of Investopedia, there were a number of “obvious” buyers in financial media, groups like or Time Inc., and we certainly spoke with those.  But, we were also interested in exploring the fit with buyers that are strong in performance-based advertising, a group that Forbes was less familiar with.  And, as so often happens, the buyer, as well as the runner-up bidder, was from that new bucket of performance-oriented media groups.  ValueClick is very strong in performance advertising and also brings deep traffic acquisition expertise to build on Investopedia’s SEO strength.

Second, JEGI makes the market by building buyer interest, shaping their view of valuation and driving competition to get their best price and terms on the table.  Then we pay a lot of attention to the details of negotiating and structuring the deal with the preferred bidder.  I am pleased to note that we had multiple bidders for Investopedia and fully satisfied our client’s expectations.

Finally, we do a lot of work to prepare the company for sale and then drive a disciplined process with a tight timetable.  This minimizes the period of market exposure and maximizes confidence to closing, avoiding the trap of a deal process that drags on.  Forbes announced its plan to sell Investopedia on June 11 and the deal closed less than 60 days later, a very quick and efficient process that gave welcome certainty to Forbes and to the Investopedia team. Why do you think Investopedia is a good fit for ValueClick?

ValueClick is a terrific new owner for Investopedia.  ValueClick has been building its stable of owned media properties to complement its enormous intermediary businesses like Commission Junction and ad networks.  Investopedia offers high margins and strong growth in an attractive category.  Investopedia attracts large audiences through direct traffic and natural search – most of its terms rank in the top three results on Google – and ValueClick will add to that traffic base with its expertise in traffic acquisition from other channels like SEM, affiliate and social media. Investopedia’s revenue is primarily performance-driven advertising for financial services marketers, and ValueClick will be able to expand Investopedia sales through its larger sales force.  Lastly, and very importantly, the Investopedia management team felt very comfortable with ValueClick CEO Jim Zarley and his team.  So, a strong fit on several dimensions.

What’s the M&A space like today as it relates to digital marketing and its offshoots?  What do you predict over the next 6-12 months as it relates to M&A?

The digital M&A market is definitely heating up; a recent update can be found at (look under Resources on the home page).  A few trends jump out.  First is the continuing wave of display ad targeting and buying, bringing search-like efficiency to brand and performance display advertising.  Quite a few major technology and data companies are maneuvering for their role in this value chain and will be making ad buy-side acquisitions.  Second, growing traffic organically in online media is harder than ever, placing a premium on acquisitions of businesses with strong audience loyalty and efficient traffic acquisition.  Third, on the sell-side, publishers have a long way to go in managing and monetizing the value of the data they originate, and we expect a number of acquisitions of groups that assist publishers in capturing more value from their data.

You’ve identified in the past that there are many companies “slicing” up the marketing dollar.  Do you see more companies coming? Is that a bad thing?

We are indeed seeing a period of remarkable innovation in online ad targeting and delivery, a sort of “Cambrian explosion” when a zillion new life forms evolved.  This is very healthy, as these new species compete to offer better performance with lower friction.  However, in the aggregate, the proliferation creates friction and eats into the margins of publishers and agencies in a non-sustainable way.  Natural selection will do its job, and we expect to see a great deal of consolidation, as larger creatures evolve that combine the best functions of several of the smaller entrants.  Continuing the Darwinian metaphor, if you don’t have a plan to get to scale, odds are good you will be someone else’s lunch.

Do you have any macro concerns for digital marketing/advertising, such as regulation or a weak economy?

There is an old Wall Street saying that “markets climb a wall of worry.”  We always ought to be concerned about disruptions like regulation or a sluggish economy, as consumers remain reluctant to spend.  However, high consumer savings rates, while a dampener on near-term growth, are a welcome correction to a generation of profligate borrowing and purchasing.  In the macro view, the pace of innovation in technology remains strong, and that should fuel productivity growth for many years to come.  And, we are seeing some positive micro signs as well – for example, one JEGI client is highly integrated with the marketing data of major offline merchants and direct marketers and is seeing good retailer confidence heading into the critical fall buying season.

By John Ebbert

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