To help build and expand its service-fee revenues and its international footprint, American Express Co. plans to acquire Loyalty Partner, a leading European marketing-services company, the card company announced Dec. 16.
Loyalty Partners’ business mirrors that of AmEx’s Membership Rewards program, Business Insights division and Loyalty Edge platform, Ed Gilligan, AmEx vice chairman, tells PaymentsSource. The company operates loyalty programs in Germany, Poland and India and has a combined customer base of 34 million cardholders. It also provides market analysis and consulting services.
“AmEx has a number of key things to drive the growth of the company, including trying to accelerate international business, and [this deal] brings in 34 million customers,” Gilligan says. The deal also enables AmEx to “build fee revenue to diversify, but do it in adjacency to our existing business and in the loyalty space.”
AmEx expects the purchase, which is subject to regulatory approval, to close in the first quarter of 2011. It values the deal at $660 million (496 euros). The transaction includes an upfront cash payment of $566 million plus $94 million in equity interest held by Loyalty Partner’s management. AmEx would acquire that interest over the next five years at a value based on performance, AmEx said in a statement.
Loyalty Partner runs a coalition program, in which loyalty cards are distributed to millions of consumers who, when using their cards, earn points and discounts at hundreds of merchant locations. Some cards may be cobranded with a financial institution. Moving forward into new markets, AmEx may become the loyalty card cobranded partner, Gilligan says.
Merchants fund the consumer offers, and Loyalty Partner earns revenue from operating the loyalty platform and by providing marketing support.
“The loyalty coalition model is growing rapidly in many parts of the world,” says Gilligan. “Increasingly, consumer decisions about where to shop and how to pay are based on loyalty offerings, and Loyalty Partner is a premier player in this space.”
The acquisition is a good fit for AmEx and will help it meet its goals for expanding outside the United States, contends Megan Bramlette, a director at Auriemma Consulting Group. The deal also aligns with Auriemma’s research that shows an increased focus on location-based marketing services, she notes.
Indeed, AmEx recognizes that “network scale, technology, marketing expertise and customer loyalty are keys to a new generation of mobile- and location-based digital marketing services,” Gilligan said in a statement. Location-based marketing uses smart phone apps that identify where consumer are and offers them deals and discounts for shopping based on those locations.
“Specifically for a loyalty company, it can do all sorts of cool stuff with location-based marketing because you’re influencing the behavior of the consumer when they are shopping,” says Bramlette. “Location-based marketing, coupled with mobile apps, is a pretty powerful tool.”
The payments and loyalty industries for years have wanted real-time applications so they could support a truly targeted marketing effort, Bramlette says. “The fact that Loyalty Partner has got this platform really puts AmEx in a pretty nice position to take some big strides forward in this area, and this is the way the industry is going to move forward,” she says.
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