Acxiom closes $190 million deal to acquire two East Coast startups, offering $21 million carrot to keep ‘select’ employees

Acxiom Corp. closed Wednesday (Dec. 7) on its recently announced deals to acquire two East Coast tech startups that industry analysts say are pioneers in the so-called “people-based” marketing industry that allows companies to more accurately target ads to consumers across multiple digital and mobile devices.

Acxiom first announced on Nov. 17 it would acquire New York City-based Arbor and Philadelphia-founded Circulate in a $190 million stock-and-cash deal, but recent SEC filings show that price may jump more than $20 million if key employees from the startups are enticed to remain with the Arkansas tech firm. In closing the deal in less than three weeks, Acxiom said the acquisitions will increase the scale of its LiveRamp unit’s identity and customer recognition network, and would also enable both startup brands to expand their people-based marketing beyond Google and Facebook.

“This is a big win for the entire LiveRamp ecosystem,” said Travis May, president and general manager at LiveRamp. “The addition of Arbor and Circulate materially strengthens our network and allows us to deliver even greater value to our clients and partners. These acquisitions both increase our deterministic reach and give us the ability to help all publishers tap into people-based marketing budgets.”

According to company officials, Arbor and Circulate will double Acxiom’s publisher partnerships to more than 450 and bring strong “mobile-first” technology, international reach and impressive employee rosters to LiveRamp, company officials said. The addition of Arbor and Circulate also extends LiveRamp’s leadership in identity resolution and provides meaningful scale to drive growth and value for Acxiom’s shareholders, officials said.

Based on the limited financial details Acxiom has disclosed about deal, the Little Rock data marketer is paying a premium to keep employees with both companies on board. Both Arbor and Circulate are fairly early in their companies’ respective development and have mostly been supported by venture capital funding. Only two months ago, Arbor completed its second round of funding after securing a $6.5 million Series A investment led by Canaan Partners.

The first round of $2.55 million in funding was led by First Round Capital in April 2015 and was filled out by MoPub CEO Jim Payne and Flatiron Health co-founders Nat Turner and Zach Weinberg. Arbor, which has offices in New York City and San Francisco, was founded in 2014 by three former Google employees David Yaffe, John Graettinger and Nikhil Dixit.

Circulate, which has offices in Philadelphia and New York City, also counts seed-stage venture firm First Round as one of its early investors. Founded in 2009, venture capital firms Bullpen Capital, New Atlantic Ventures and Charles River Ventures are also part of the Circulate funding roster. According to Crunchbase, Circulate has received $17.4 million from 10 investors in four founds of seed funding.

40 NEW NON-EXECUTIVE EMPLOYEES GET $19.5 MILLION STOCK PAYOFF
Acxiom did not respond directly to inquiries concerning the separate value of each company, and whether or not any top Arbor and Circulate execs are expected to remain with the company. However, filings on Tuesday (Dec. 6) with the federal Securities and Exchange Commission offer some additional details on the stock portion the deal, which officials originally valued at only $50 million.

However, shortly after the deal was announced, Acxiom increased the number of shares issued as part of the merger pact from 502,217 to 1,270,927, securities filings show. Acxiom said it has already issued a total of 768,710 inducement restricted stock unit awards to approximately 40 newly hired, non-executive employees from Arbor and Circulate. The awards were approved by Acxiom’s board of directors and were granted as inducements to employment in accordance with NASDAQ listing rules, officials said. Those additional shares have a proposed maximum offering price of $25.44, which would value the payoff to non-executive employees at $19.5 million.

The Arbor awards will vest over three years with 34% of the restricted stock vesting on the one-year anniversary of the closing date of the Arbor merger and the remainder vesting in equal quarterly installments thereafter, subject to the employee’s continued service through each vesting date, SEC filings show.

The Circulate stock awards, granted to “certain key employees,” will vest over two years with 50% of the shares vesting on the one-year anniversary of the closing date of the Circulate merger and the remainder vesting in equal quarterly installments thereafter, subject to the employee’s continued service through each vesting date. The remaining awards granted to Circulate employees will vest over four years with 25% of the award vesting on the one-year anniversary of the closing date of the Circulate merger and the remainder vesting in equal annual installments thereafter, subject to the employee’s continued service through each vesting date.

DEAL PRICE TAG NOW ABOVE $210 MILLION
After Wednesday’s close, Acxiom also plans to offer new restricted stock awards valued at $21 million to “select” Circulate and Arbor employees to entice them to accept employment with the Arkansas company. The Little Rock data analytics giant will also pay cash bonuses of $2.25 million to “certain” Circulate employees to satisfy a compensation deal adopted by the Philadelphia startup prior to the merger.

Altogether, with the additional half-million shares issued by Acxiom as a part of the stock inducements, the total value of the deal now stands at more than $210 million, based on the company’s SEC filings. In fiscal 2017, Arbor and Circulate are expected to contribute approximately $5 million in revenue and be neutral to adjusted earnings per share.

Acxiom has said it expects the two transactions to be dilutive by 11 cents to earnings per share due to higher non-cash compensation and estimated purchased intangible asset amortization. In fiscal 2018, Acxiom expects the transactions to be accretive to both pre-tax and non-GAAP diluted earnings per share.

On an annual basis, Acxiom now expects to report revenue in the range of $865 million to $875 million, and see a yearly profit of one penny per share. Still, even with the small financial boost from Arbor and Circulate, Acxiom’s yearly revenue is expected to fall below $1 billion for the first time in more than a decade.

Acxiom shares closed on Wednesday at $26.50, up 94 cents or 3.68% on the Nasdaq stock exchange.