Based in the Cayman Islands with operating companies in China and revenue sources in the U.S., Acquity Group (proposed AQ) scheduled a $50 million IPO with a market capitalization of $212 million at a price range mid-point of $9 per ADS for Friday, April 27, 2012. One ADR represents two shares. [S-1]
ACRE is one of eight IPOs are scheduled for the week of April 23th. (Full IPO calendar here).
Manager, Joint Managers: Citigroup; Oppenheimer.
AQ is a digital marketing company (ad agency) with current clients in the US. AQ plans to expand in the US, in China and in Europe. In 2011, AQ derived over 70% of revenues from clients that were clients in the previous year.
AQ's auditors are Ernst & Young LLP, based in Chicago, Illinois.
On the surface, AQ appears reasonably priced at the price range mid-point of $9, 25 times earnings for the year ended December, 2011 based on its growth prospects.
The large ad agency Interpublic (IPG), however, is priced at nine times trailing 12 months earnings.
And there are questions about China-based companies, including the accountability of auditors. AQ's auditor, Ernst & Young, is a well-regarded auditor and that's a plus for AQ.
Plus, there is considerable negative sentiment regarding China-based companies IPO'ing in the U.S.
AQ is a leading brand e-commerce and digital marketing company that leverages the internet, mobile devices and social media to enhance our clients' brands and e-commerce performance. AQ offers three types of services: digital strategy, multi-channel digital marketing and brand e-commerce technology services.
Projects are performed on a time and materials, with a small portion performed on a fixed cost basis.
AQ has served more than 500 companies and their global brands, with many of whom have had multi-year relationships with AQ of up to ten years. In 2011, AQ derived over 70% of revenues from clients that were clients in the previous year.
AQ is the digital agency of record for a number of well-known global brands in multiple industries, including Allstate Insurance (ALL), Discover Card (DFS)'s mobile-related business, Shimano, Tommy Bahama and W.W. Grainger (GWW) which means AQ is the principal provider of the brand e-commerce and digital marketing services for these clients.
'Digital Agency" means that AQ is the principal provider of brand e-commerce and digital marketing services for clients.
U.S. FOCUS TO-DATE
AQ has offices in ten cities in the United States and plan to leverage existing capabilities to strategically grow its business in China, which has the largest population of Internet users in the world, according to a 2011 report by IDC.
China is expected to be the third-fastest growing internet retailing market for the next five years, according to research by Euromonitor International in 2012.
AQ has opened offices in Beijing and Shanghai and operate the Chinese websites for several of clients, including General Motors, Motorola and Underwriter's Laboratories.
As part of AQ's China strategy, AQ has focused on building on the sportswear market. AQ believes that the brand experience is critical for sports marketing and that sportswear will be a fast-growing e-commerce segment.
AQ recently entered into a joint venture with Li Ning Co., Ltd, or Li Ning, which is China's largest sports brand and is among the top ten sports brands globally in terms of revenues, based on public company filings. This joint venture was established to develop, market and sell Li Ning's sports apparel, shoes and accessories via brand e-commerce and digital marketing in the United States and elevate the Li Ning brand from a national Chinese brand into a global brand.
AQ recently entered into a joint venture relating to k121.com, a leading internet retailing website for sportswear products in China, which sells brands such as Nike (NKE), Adidas and Kappa. AQ plans to introduce other global sports brands to consumers in China through this platform.
AQ derived all of its revenues in the three-year period ended December 31, 2011 from clients in the United States. Revenues from fees for services generated on a project-by-project basis.
Most of the services are provided on a time-and-materials basis, with a small portion being performed on a fixed-price basis.
AQ believes it is a pioneer in the area of brand e-commerce and one of the only agencies offering a full suite of services including digital strategy, multi-channel digital marketing and brand e-commerce technology. Competitors include:
. Digital strategy - digital advisory arms of strategic consulting firms such as A.T. Kearney, The Boston Consulting Group and McKinsey & Company;
. Multi-channel digital marketing - digital marketing agencies that are either independent such as AKQA Inc., or subsidiaries of global advertising holding companies, such as Rosetta Marketing Group, LLC and Razorfish Inc.
. Brand e-commerce technology - providers of e-commerce solutions that enable online sales channel capabilities, such as Accenture Interactive, a division of (ACN), Deloitte Consulting, Digital River (DRIV), GSI Commerce, Inc., IBM Global Business Services and SapientNitro (SAPE). There are other IT consulting companies providing services in this area, such as Cognizant (CTSH), Infosys (INFY) and Wipro (WIT).
AQ also faces competition from the in-house digital marketing departments of some of clients that may decide to take over the work once AQ has formulated a strategy or established an initial platform for them.
USE OF PROCEEDS
AQ expects to net $38 million from selling 4.78 million ADS (each ADS represents two common shares). Shareholders intend to sell 4.8 million ADSs.
Proceeds are allocated as follows:
. $20 for market expansion in North America & Europe
. $10 million for market expansion in China
. Balance for working capital & general corporate purposes.
Disclaimer: This AQ IPO report is based on a reading and analysis of AQ's S-1 filing, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.