Heading beyond card processing, First Data Corp. has signed an agreement to acquire Donnelley Marketing Inc.
The $185 million cash deal, signed Friday, will bring together Donnelley's expertise in compiling consumer demographics and buying behavior with First Data's technology for processing that information.
"It expands an existing emphasis on information to increase the value of the transaction processing business," said Gregory M. Gould, an analyst at Goldman, Sachs & Co.
He said First Data is trying to build its collections business and add more value to its relationships with card issuers. "It's information for multiple stages of the credit card cycle," he added.
Mr. Gould said Donnelley would add $75 million to $100 million a year to First Data's revenue. That equals about 2% of the company's fiscal 1996 revenues of $4.9 billion.
Donnelley Marketing would become part of First Data Infosource, which in turn is part of First Data Solutions, Houston.
"It's part of our strategy to become more involved as an information provider than just a transaction type of company," said Michael Geppert, vice president of marketing at the Infosource unit inOmaha. "Now we are positioned much stronger on the marketing side."
Infosource has information on 8 million to 10 million households, 10 million businesses, and nearly 380 million consumer credit files from Equifax and Trans Union.
Donnelley, which was founded in 1917 and was a unit of Dun & Bradstreet until 1992, maintains a factual and behavioral data base on 96 million households and 170 million consumers.
The deal supplements First Data's acquisition this year of Hogan Information Services, which specializes in public-records data, such as bankruptcies and liens.
Industry experts said First Data Corp. is increasing the scope of its core card processing business base, something its key competitor has also done.
Stanley W. Anderson, president of Anderson and Associates, Denver, pointed out that Total System Services Inc., Columbus, Ga., bought two direct marketing firms in 1992 - Mailtek Inc. and Lincoln Marketing Inc.
"As a processor, the interest is in managing the whole process for bank customers," he said. "First Data is eliminating the middleman and has reduced outsourcing costs and increased their profitability. Donnelley is a very high quality firm, which has been around for a long time."
David J.S. Flaschen, chairman and chief executive officer of Donnelley Marketing, Chicago, said he had two primary objectives in pursuing the acquisition.
He said he aimed for "strategic planning for Donnelley to continue its high-profile growth over the last five years" and "to insure that (Donnelley) had financial, technical, and human resources to fuel that huge growth.
"FDC was at the top of the list of investors," he said.
Donnelley and First Data have worked together since 1988, most recently setting up a credit card product that would help issuers acquire, activate, and retain new customers.
"We needed to round out our marketing," said Mr. Geppert of Infosource. "When you put us together, we round out each other's programs."
Donnelley "has a proprietary expertise in data and how to use it," said John R. Soderlund, managing director at First Annapolis Consulting, Linthicum, Md. "It's consistent with First Data's information-based approach, moving beyond their core data processing services."