Equity Firm Buys Into AKQA

SAN FRANCISCO Private equity firm General Atlantic has bought a majority stake in digital agency AKQA.

The San Francisco-based independent was previously majority owned by Francisco Partners, which invested $70 million to form AKQA in March 2001.

The company did not release terms of the deal, but sources said the shop has been on the block for about $250 million because Francisco, a $3 billion private equity firm, wanted to cash out. The deal will allow AKQA to chart an independent course from the big ad holding companies, sources said.

“We have a longer-term investment horizon and look for market leaders in their sector,” said Pat Hedley, svp at General Atlantic, which is based in Greenwich, Conn. For instance, the firm was an early investor in eTrade, which it held for about five years, she said. It has also invested in Priceline and online job service Dice.com. AKQA is the fund’s first significant investment in an online adveritising play.

AKQA had courted several interested buyers, including WPP Group and other holding companies, said sources. Even so, the high multiple commanded by AKQA, which sources said took in about $70 million in 2006 revenue, made AKQA too expensive for the holding companies, per sources. WPP was widely pegged as the leading candidate to buy AKQA, particularly after it was outbid for Digitas by Publicis Groupe in December. That $1.3 billion deal closed this week.

Instead, agency executives turned to an investment partner that was not in the marketing business and would back current management’s growth plans, said sources close to the deal. AKQA last year began a mobile division and it is beefing up its media planning and buying capabilities, recently brining in Agency.com veteran Scott Symonds to craft a media strategy.

The agency has about 470 employees in the U.S., Europe and Asia. It handles digital duties for blue-chip clients such as McDonald’s, Microsoft and Coke. It has run off a string of global account wins, including Coke, McDonald’s and Diageo.