M&A Activity in the Consumer Incentive Industry

Navigator Edition: July 2012
By: Omid Tofigh and Patrick Carroll

M&A drivers and valuations for consumer incentive companies have shifted in recent years with the emergence of the mobile channel.  Previously, investors and buyers in this sector sought profitable brands that extended existing product lines and/or services.  Upromise, Loyalty Management (Nectar), Rewards Network (iDine), and Carlson Marketing were established, revenue generating organizations at the time of acquisition and enabled their buyers to expand into new geographies or products.

Beginning in 2011, cash flow was largely replaced by advanced mobile capabilities as a key acquisition driver.  Companies such as Loyalty Partner, Where, CardStar, and Loopt all offered advanced mobile offer distribution platforms at the time of acquisition, and most (if not all) were not yet profitable.  For example, in March 2012, Green Dot purchased Loopt for $43MM in cash.  The acquisition will eventually enable Green Dot to send geolocation-based alerts and offers to cardholder’s smart phones.  Loopt was not profitable at the time, and Green Dot accordingly adjusted their profit outlook downward for the remainder of 2012 to account for the operating losses of the acquired company.

This shift in focus from established consumer incentive companies to technology-oriented service providers has brought a meaningful change in company valuation.  Until the emergence of the mobile channel, loyalty service providers generally had garnered 1x-3x revenue valuation multiples; however, recent technology-oriented loyalty players are often receiving valuations of 3x revenue or more.

The value these recent transactions drive for the acquiring entity depends in large part on their ability to utilize the acquired platforms to drive revenue streams or to increase consumer uptake for the core business.  To a large extent, these investments also represent the gamble that these organizations are making on consumer adoption of mobile commerce and the potential to monetize that channel.

Figure 1: Acquisition and Valuation Drivers


For more information, please contact Omid Tofigh, Principal specializing in M&A Advisory Services, omid.tofigh@firstannapolis.com; or  Patrick Carroll, Analyst specializing in Loyalty and Mobile Commerce, patrick.carroll@firstannapolis.com

Share: Tweet about this on TwitterShare on LinkedIn

To read the rest of this article, please subscribe to

The Navigator Newsletter