The Dentsu Aegis Network acquisition of Covario announced Wednesday will bring its search subsidiary iProspect new clients, strategies and a stronger position in market segments like business-to-business and high-tech -- and will add to iProspect's existing strength in travel and retail, among other areas.
Jeremy Cornfeldt, president iProspect U.S., called the overlap in clients "minimal to almost none." He believes it's time to build on the success of structural changes and expansion of services that the company made last year, along with the addition of nearly 25 new accounts.
Negotiations began earlier this year. Cornfeldt said the deal came together in several stages. "They had been in the market," he said. "We had initial conversations. Things became quiet for quite a while and then I reengaged in those conversations and it took off from there."
Covario, a San Diego, Calif.-based company, ranks among the top 20 largest search agencies and vendors in the United States. The firm was selected by MediaPost as the Search Agency of the Year for three years from 2011 to 2013. As a private company, the majority of Covario's annual revenue -- estimated between $35 million and $40 million in 2013 -- came from agency support like providing guidance on paid search and search engine optimization, best practices, bid adjustments, education, training and governance. A minority of the revenue came from standalone software tools provided by the Rio SEO, which remains a standalone company under its venture capital and investor shareholders.
Covario grew from managing search budgets for clients in aggregate of $100 million in 2011, to more than $200 million in 2013. Last year it brought on clients like Hewlett-Packard, Kraft, JC Penney, Sony, Jenny Craig, Panasonic, and Meredith, among others. It continues working with Lenovo, Intel, Guthy-Renker, Bank of America, State Farm, T-Mobile, and more.
Cornfeldt said iProspect will keep Covario's San Diego headquarters. "It's a fantastic geographic complement to the significant number of employees we have on the east coast," he said.
Aaron Goldman, Kenshoo CMO, called Covario a world-class agency with strong capabilities across paid and organic search and social. "This acquisition by Dentsu and pairing of iProspect and Covario will create a strong global network for blue-chip brands," he said.
Following the completion of the deal, Covario’s agency business will become part of the Dentsu Aegis Network, and will transition toward operating as iProspect, Dentsu Aegis Network’s global digital performance agency, in the coming months.
Michael Gullaksen and Jeff Johnson, Co-CEOs of Covario, will join iProspect to take roles as key senior executives. Dema Zlotin, one of the original founders of Covario, will join Rio SEO to lead the company as CEO. Rio SEO raised additional funds from FTV Capital, Dubilier & Co., Voyager Capital, and Stratim Capital to further develop its technology platform for local search, mobile search, and social media measurement.