Credit: Stephen Harlan via Unsplash
An at first glance unusual deal by XPON Technologies Group, an AI marketing technology company, to acquire a digital agency, Alpha Digital, started with a phone call and firmed with a chat over lunch.
The idea was to use the agency to test XPON’s AI output which aims to acquire, retain, and monetise customers, with transparency. For Alpha, being part of XPON gave access to AI technology.
The final deal by ASX-listed XPON was a payment of $1.72 million to Alpha, made up of shares, cash and a two year earn out.
“As AI matures, it’s going to collapse a lot of the complexity that’s in the marketing ecosystem,” XPON founder and group CEO Matt Forman told AdNews.
“We do a lot of work with customers to make sure their data is fit for purpose and able to be used by AI. Once that data’s fit for purpose, AI can generate predictions at scale and activate those really simply to deliver the value for a brand
“We work with lots of agencies and our view was, if we could acquire one and bring them closer to us, we'd be able to test and validate things a lot faster.”
Alpha Digital, which generated $4.6 million revenue last financial year, will retain its brand and continue to operate independently, servicing brands such as Target, K-Mart and QUT.
Matt Cooper, Alpha Digital’s founder, will continue as CEO.
Forman said he wanted to acquire the agency because it has “great customers” and a team which is “forward thinking”.
“I've known Matt for a long time – since before he started Alpha and I founded XPON – so we have history,” he said.
“When Matt and I started talking about this as a potential opportunity, it was clear that we were really aligned on culture. The teams are very focused on customer centricity and they’re quite forward leaning in the way they think about how AI is changing marketing.
“[Alpha Digital] didn't have the AI capability. That’s where we come in – to plug and play our AI technology to help accelerate Matt’s vision of being an AI-first digital agency.”
Forman revealed that he called Cooper about six months ago with the proposition.
“I just picked up the phone and suggested we have lunch and a chat. It was pretty informal because we’ve got an existing relationship,” he told AdNews.
“I said to Matt, ‘Hey, I've got this idea’, and he said, ‘It sounds interesting, let’s keep talking’. But these things don’t happen overnight so we’ve been working on this for probably six months.
“He wanted some time to process it but it didn't take him long to come back and say we should explore this further.”
This acquisition represents the first in XPON’s future M&A strategy focused on the tech-enabled digital marketing sector.
Forman said there are currently no plans for further acquisitions but has not ruled out the possibility in the future.
“We want to get it right. We’re not going to rush and try to do 100 things at once,” he said.
“We don’t want low quality businesses with lots of problems, we want high quality businesses that can add value… It's not just agencies, it's martech products as well.
“How many businesses we look to acquire over time remains to be seen.”
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