By Scott Denne
Acxiom (NASDAQ:ACXM) has spent the last two years separating a fragmented set of services into discrete units and sharpening its focus around the largest portion of its business: marketing data and technology services. Now sources tell us it may take the next step in separating those units by selling its IT infrastructure services business, a unit that accounts for about a quarter of the company's revenue.
Its IT infrastructure business, which includes mainframe, server hosting and cloud infrastructure services, generated $271m in revenue over the last 12 months. The division's sales have been shrinking as it lost customers and faced pricing pressure. Revenue is down from its most recent fiscal year (ending in March), when it brought in $275m, and from FY 2012, when it logged $292m. But the unit is becoming more profitable. In the most recent quarter, operating profit rose to $12m from $9m a year ago, with operating profit margins increasing from 12% to 18%. Acxiom's IT infrastructure business recorded $89m in EBITDA in its last fiscal year.
Acxiom already sold off several of its other business units, including its background-screening business in early 2012 for $74m. The company's divestitures are part of a plan to make its three separate business units - marketing data, IT services and other services - operationally independent. Axciom even separated its internal IT functions from its IT services business, likely in preparation for a sale.
Based on recent acquisition valuations, Axciom's IT infrastructure business could fetch a price as high as $600m. Hosting companies landed a median valuation of 9.4x EBITDA in the last few years, but Acxiom's assets will likely sell for less. Telecommunications companies have paid the highest multiples so far, but those buyers may be put off by the mainframe portion of the business, or at least value that portion significantly less. The unit's improving profit margin make it attractive to private equity firms or sponsored companies, which have paid a median 6.8x EBITDA since 2010, according to the 451 M&A KnowledgeBase.