The interactive marketing firm diversifies its business lines by getting into Web site development.
Interactive marketing technology and services firm aQuantive has agreed to buy Web development shop SBI.Razorfish for $160 million in cash and convertible notes.
AQuantive's move is aimed at acquiring new clients and cross-selling more services to existing customers. Razorfish's clients include 25 of the Fortune 100, including Ford Motor Company, Kraft, Visa and Microsoft. The company provides interactive marketing and technology services including Web sites, portals, intranets, e-commerce services, Web site analytics, branding and packaging.
"It is our belief that as the media world becomes more and more fragmented and broadband becomes more and more ubiquitous, the role of the Web site becomes more important in the marketing mix," said Brian McAndrews, president and CEO of aQuantive.
The purchase would strengthen aQuantive's agency business, which currently consists of media shops Avenue A and i-FRONTIER. Terms of the deal call for SBI.Razorfish to be combined with Avenue A, forming a new entity called Avenue A/Razorfish. AQuantive also operates a technology division, Atlas DMT, and a performance media unit, DRIVEpm.
AQuantive is also acquiring one of the most well-known and storied brand names of the dot-com era. Razorfish was one of the highest fliers of the boom years, before being acquired by professional services firm SBI for $8.2 million in November 2002. SBI combined the Razorfish operations with those of other distressed interactive agencies it had acquired, including Scient (which had earlier merged with iXL), Lante, and USWeb/CKS.
Though Ned Stringham, SBI Group's CEO and president, will not have an operating role in the new company, he will join the aQuantive board of directors. Other Razorfish executives, however, are expected to stay on and take leadership positions in the new Avenue A/Razorfish entity. Bob Lord, formerly Razorfish's executive vice president, will become president of Avenue A/Razorfish East, which will consist of Atlanta, Boston, Fort Lauderdale and New York offices. David Friedman, formerly Razorfish's executive vice president, will take the job of president of Avenue A/Razorfish Central and oversee the Chicago and Austin offices. Clark Kokich, fomerly president of Avenue A Seattle and Chicago, will be named president of Avenue A/Razorfish West, where he will oversee the Seattle, San Francisco, Los Angeles and Portland offices. Razorfish's Karen Hamilton and Darin Brown will both take executive vice president positions in the merged unit. AQuantive executives said they expect to retain most of SBI.Razorfish's 500 employees.
Razorfish turned a profit with net revenues of $93 million in 2003 excluding billings to clients for reimbursable costs, the companies said. Should the acquisition be completed at the end of July, as expected, company executives say the purchase will add $41 to $43 million to aQuantive's revenues in 2004. That will result in an additional $3 to $4 million in EBITDA.
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Pamela Parker is a former managing editor of ClickZ News, Features, and Experts. She's been covering interactive advertising and marketing since the boom days of 1999, chronicling the dot-com crash and the subsequent rise of the medium. Before working at ClickZ, Parker was associate editor at @NY, a pioneering Web site and e-mail newsletter covering New York new media start-ups. Parker received a master's degree in journalism, with a concentration in new media, from Columbia University's Graduate School of Journalism.
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