The UK's largest independent digital media agency, i-level, and parent company ILG digital have sold a majority stake to private equity group ECI in £45.5m deal.
MediaGuardian.co.uk can reveal details of the deal, which will see British group ECI take a 60% stake in the business, launched in 1999 by Andrew Walmsley and Charlie Dobres, with six of iLG's senior management controlling the remaining 40%.
David Pattison, the co-founder of media agency PHD who joined iLG as chief executive in April last year, said that the deal simplified a complicated shareholder structure and providde a "war chest" to expand in the UK and internationally.
"There is no earn-out or anything like that, this is not an exit deal," said Pattison. "Having a complicated shareholder base holding around 45% of the business made it difficult to round up [shareholders] and get a commitment to strategically invest going forward".
The deal will have made millionaires of certain members of senior management including co-founder Walmsley.
Under the terms of the deal ECI has invested £38m to consolidate disparate shareholders - including investment firm Beringea which controlled around 20% and more than two dozen "angel" investors that held up to 12%.
The remaining £7.5m has come from the pockets of Pattison, iLG deputy chairman Andrew Walmsley, group chief financial officer Stephen Rust, group managing director Faith Carthy, i-level finance director Andrew Martin and managing director Mark Creighton.
Pattison said the deal meant that the pressure on the business had now "completely gone away" and management had about three years to expand the business before ECI was likely to evaluate its options.
The deal is thought to have been struck on a multiple of 12 times earnings before interest and tax, topping similar deals by digital agencies Dare and Glue, which were both set at about 10 times earnings.
The company, which previously had been linked with Aegis and AKQA, posted a pre-tax profit of £4.7m for the year to 31 March 2007, according to accounts filed at Companies House yesterday.
Pattison said that the next step would be expand of iLG beyond digital marketing services.
Digital PR and reputation management were two burgeoning areas that iLG considered ripe for expansion.
The company is likely to seed acquisitions in the major European markets and, potentially, launch start-ups in emerging markets such as the Far East.
"The focus is initially on broadening the UK offering," said Pattison. "If you look at a lot of businesses in our sector they make the mistake of setting up international operations and neglecting the mothership back home that has funded everything."
He rejected the idea that the massive scale of the major marketing services companies, such as WPP or Omnicom, might eventually squeeze out digital specialists.
"In terms of volume we are the largest independent in the market and the second largest standalone digital unit," said Pattison. "We have a turnover of over £100m, if you are talking of volume we have it."
ECI, based in London and Manchester, owns stakes in M2 Digital and previously invested in laterooms.com.
i-level handles the online media planning and buying accounts for government central advertising body the COI, Sony and Beck's.
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