EMZ emerges as bidder for Equistone's digital marketing agency PIA

Sponsor Equistone Partners launched a process to sell the portfolio company last year, advised by RW Baird, marketing the business off EUR 25m to EUR 28m EBITDA, as reported.

The auction appeared to be dragging, with potential bidders questioning the company’s future cash flow and EBITDA, a third source familiar said. The sale process has since regained traction with multiple, fresh bids on the table, a fourth source familiar said.

EMZ is working with Houlihan Lokey to finance the transaction, one of these and a fifth source familiar said.

The company has reached EUR 28m EBITDA over the last 12 months, two of the sources said. However, financing the deal may be challenging, as PIA’s performance has been patchy throughout Equistone’s tenure, another two of the sources said.

The business is valued at around EUR 250m, one of the sources said, which implies a 9x EV/EBITDA multiple.

It is not clear how sustainable PIA’s EBITDA is, two of the sources said, one noting that marketing spend among PIA’s corporate clients is likely to tighten amid a gloomy economic outlook, which means the agency could yet take hit. In addition, the way it books digital marketing revenues creates opacity in its financial reporting, one of the sources added.

As an agency, PIA’s business model leans towards consultancy and revenues are project-driven, which creates forward-looking uncertainties, as reported.

PIA reported EUR 278m in FY19 sales, according to its most recent public filings. It forecast a low double-digit percentage increase in sales and a high single-digit percentage increase in EBITDA for 2020, the filings state.

The business’s services include digital marketing and advertising, social media monitoring, web analytics, and search-engine optimisation and search-engine advertising for over 900 customers.

Equistone, EMZ and Houlihan Lokey declined to comment. PIA did not respond to a request for comment.

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