Roark Targets Consumers With Coupons

Target: DX Marketing

Sponsor: Roark Capital Group (via Money Mailer Holding Corp.)

Value: Undisclosed

Financial Advisor: Heritage Capital Group Inc.

Legal Counsel: Alston & Bird LLP

Accountants: Habif Arogeti & Wynne LLP

Roark Capital Group is stepping up its game in the $59 billion direct mail industry. Earlier this month, the Atlanta, Ga.-based firm acquired DX Marketing, a market and consumer research company that it will use to bolster its existing direct mail platform; Money Mailer Holding Corp. Terms of the transaction were not disclosed.

Money Mailer is a shared-mail advertising and promotion business with more than 300 company-owned and franchise locations in 35 states. Roark acquired the company, which prints and mails coupon- and advertisement-filled envelopes, in May 2003. The envelopes are mailed out—shotgun style—to potential customers, typically in a three- to five-mile radius of the businesses being advertised.

DX Marketing, on the other hand, has a much more targeted approach. The company provides market research, customer prospecting and data mapping services, in addition to its printing and direct mail activities, to help its clients pinpoint their most likely customers. It operates from facilities in Jacksonville, Fla. and Savannah, Ga.

“It’s a way for Money Mailer to provide their clients with a different method of reaching their customers,” said Roark Partner Larry DeAngelo. “Before they could only do shared mail with about 30 other businesses in a single envelope. Now they have the opportunity to individually target customers… It is more costly, but customer hits tend to be more lucrative.”

DX meets with its clients and, through a joint session, comes up with a profile of the company’s most likely customers—taking into account issues like age, income, marital status, family size, credit score and education level, among other demographic markers. Individual advertisements and coupons are then sent to those people.

“It’s surprising how many list companies are out there with enormous amounts of information on consumers,” DeAngelo said.

Businesses that take advantage of DX’s services include financial services companies such as Advance America, business services firms, and local service businesses like dry cleaners and lawn care services. The targeted approach is particularly important when the service being advertised is expensive, DeAngelo said.

He added that targeted advertising has become more prevalent over the last few years. It is most noticeable on cable television, where there are entire channels dedicated to specific interests, such as sports and cooking.

While Money Mailer does not have a television component, DeAngelo did say the firm was considering the acquisition of an Internet mailer sometime in the future.

Trends aside, the statistics in the coupon/direct mail segment do portray an attractive environment. According to Money Mailer, 85% of all consumers use some form of coupons, and 64% of consumers switch brands using coupons.

DX represents Money Mailer’s first product expansion since Roark acquired the company. Prior to this deal, Money Mailer’s add-on activity consisted of targeted extensions by buying out select franchisors.

The DX acquisition was financed with equity from Money Mailer’s balance sheet, an extension of the company’s credit facility with Merrill Lynch and the rollover of Money Mailer stock to DX’s management team, DeAngelo said.

Money Mailer is one of Roark’s five pre-fund investments. In 2005 the firm closed its first institutional buyout fund, Roark Capital Partners LP, with $413 million in commitments. —A.N.