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Merkle Lands $75M Private- Equity Investment Merkle lands $75M private-equity investment | Baltimore Business Journal Page 1 of 3 This Was Printed From Baltimore Business Journal Merkle lands $75M private- equity investment Premium content from Baltimore Business Journal - by Gary Haber Date: Monday, October 18, 2010, 12:00am EDT - Last Modified: Thursday, October 14, 2010, 3:40pm EDT Merkle has snagged a $75 million investment from a Silicon Valley private equity firm known for backing high-tech high flyers like Netflix, Expedia and the online dating site, eHarmony. Technology Crossover Ventures’ cash infusion in the Columbia marketing firm is likely the biggest stake a private equity firm has taken in a Baltimore-area company this year and a healthy sign for Greater Baltimore’s economy. “That’s a good size deal for Baltimore,” said George Nemphos, who runs the corporate practice at law firm Duane Morris, which was not involved in the deal. “The fact that they took a minority stake for that much money shows there are companies in the Baltimore area that can attract this type of investment.” The size of the deal is noteworthy, said Andrew Clark, managing principal of the mergers and acquisitions practice at Evergreen Advisors in Columbia. Most private equity deals in the region are in the range of $10 million to $20 million or less. Hovde Private Equity Partners’ recent investment in Lutherville’s Bay Bank was $24 million, for example. In August, Harbinger Capital Partners, a New York private equity fund, said it would pay $350 million to buy Old Mutual Plc’s Baltimore-based U.S. life insurance business. But unlike the Merkle deal, Harbinger is buying the entire business, not just taking a minority stake. http://www.bizjournals.com/baltimore/stories/2010/10/18/story2.html?b=1287374400%25... 12/7/2010 Merkle lands $75M private-equity investment | Baltimore Business Journal Page 2 of 3 Merkle’s deal with TCV is the first time the Columbia digital marketing and direct mail company has sold a piece of itself since CEO David Williams bought the business in 1988. Among other things, Merkle will use the money to grow its consulting and digital marketing businesses, staff up offices in China and the United Kingdom and expand its abilities to design marketing programs for multinational companies like Dell and Wendy’s using the Internet and cell phones to beam ads and coupons directly to customers. Merkle mines reams of computerized data about consumers to develop targeted marketing campaigns for companies and charities. The private equity investment “dramatically strengthens our capital base to allow us to respond to the changing needs of our customers,” Williams said. TCV wasn’t the only firm interested in buying a piece of Merkle. Six other firms made offers. Williams said he chose TCV’s offer because it understands Merkle’s industry niche, having backed similar types of companies. “They only co-invest with the top firms,” Douglas Schmidt, CEO of Chessiecap Securities in Bethesda, said of TCV. David Yuan, a TCV principal, said in an e-mailed statement that his firm liked Merkle because of the “tremendous opportunities for the company to extend its market leadership.” But taking $75 million doesn’t come without strings. TCV will get a seat on Merkle’s board of directors, giving it a voice in how the privately held company is run. Private equity firms also eventually want to cash out their investment, said Frank Jones Jr., who chairs the business department at Baltimore law firm Whiteford, Taylor & Preston. “They’re looking for an exit at some point, which typically takes the form of a sale,” said Jones, whose firm was not involved in the deal. Investors have not shown much of an appetite for initial public offerings lately. So, private equity firms are more likely to cash out of a deal by pushing for the company to be sold, Jones said. Merkle, with 1,400 employees, has been growing fast. The company is on pace for revenue of between $250 million and $260 million this year. http://www.bizjournals.com/baltimore/stories/2010/10/18/story2.html?b=1287374400%25... 12/7/2010 Merkle lands $75M private-equity investment | Baltimore Business Journal Page 3 of 3 “Long term, we have our sights on being a $1 billion company,” said Williams, who did not discuss an exit strategy. Expansion at Merkle would be good news for Howard and Washington counties, where the company employs about 800 combined. “If they were able to grow, either facility-wise or employment wise, it would be a huge bonus for our community,” said Tim Troxell, executive director of the Hagerstown-Washington County Economic Development Commission. Any new jobs would be welcome in a county where the unemployment rate is about 10 percent, Troxell said. Richard Story, CEO of the Howard County Economic Development Authority, said he would like to see TCV’s investment spur hiring at Merkle’s Columbia headquarters and for the company to build another building next door. “Since day one, they’ve planned to expand,” Story said. “This gives them the resources to do the expansion they planned all along.” http://www.bizjournals.com/baltimore/stories/2010/10/18/story2.html?b=1287374400%25... 12/7/2010.
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