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Acquisitive vs. Organic Growth

September 13th, 2010 8:07PM by Brendon Kensel

Digital media and marketing companies have slogged through the recession and are now hoping to see a rebound in 2011. While there is still macro-economic uncertainty, trends in the digital media and marketing sectors are moving in the right direction. Next year marketing expenditures on digital and online media in the U.S. is expected to surpass the marketing budget allocated to print for the first time.

As senior executives at digital media and marketing companies begin to plan their corporate strategy for 2011 many are trying to determine the right growth strategy — acquisitive or organic. Many CEO’s are now recognizing that their optimal corporate growth strategy will likely include a combination of acquisitive and organic growth. While most companies in the media and marketing sectors have been growing organically, now may be a good time to accelerate growth through acquisitions.

Successful corporate strategies incorporate organic growth fostered by the pursuit of operational and financial strategies along with select acquisitions that dovetail to the company’s key strengths. Executives that decide to pursue acquisitions should be able to identify the strategic reasons why they want to acquire a particular target.

The primary drivers of an acquisition typically include one or more of the following: a) acquire new distribution channel/customers; b) acquire key technology; c) expand or add a product line; d) gain executive/technical/creative talent; e) gain expertise and entry in a new market; f) gain a time-to-market advantage; and/or g) increase profitability.

Ultimately, acquisitions are made because companies believe it is a more effective means of meeting a strategic need and increasing shareholder value than organic growth. While any of the above attribute will enhance value, capturing proprietary technology or products with a significant competitive advantage, or gaining market leadership in a fast-growing market segment can dramatically enhance value. The merger and acquisition market in the media and marketing services sector has been brisk this year. Recent examples include:

In June GSI Commerce (NASDAQ: GSIC) acquired FetchBack, an advertising startup that specialized in retargeting, for about $40 million according to reports. This acquisition is very complimentary to GSI’s other marketing service offerings since retargeting will allow GSI to drive customers back to their clients’ websites.

Broadcaster and publisher Meredith Corp. (NYSE: MDP) acquired mobile agency The Hyperfactory in July. This acquisition provides Meredith with a strong mobile foothold and enhances its marketing services group.

Google (NASDAQ: GOOG) acquired social applications developer Slide for $182 million in August. The acquisition gives Google a seasoned team that knows social, something Google is working diligently to get right.

This month blog network Glam Media acquired German men’s online media company Fantastic Zero. This acquisition expands Glam’s efforts to reach males and will help broaden its overall demographic and geographic reach.

To further fuel your creative M&A juices check additional deals at CruchBase.