Leo Holdings Corp. (LHC) to Combine with Digital Media Solutions
by Kristi Marvin on 2020-04-23 at 9:01am

Leo Holdings Corp. (LHC), announced today that they have signed a definitive business combination agreement with Digital Media Solutions Holdings, LLC (“DMS”).  The Business Combination will introduce DMS to the equity capital markets as a publicly listed company with a total enterprise value of $757 million or 13.2x the Company’s fiscal year 2020 expected Adjusted EBITDA of $57 million and 10.0x the Company’s fiscal year 2021 expected Adjusted EBITDA of $75 million.

Digital Media Solutions is a martech-enabled business capitalizing on the secular shift of advertising dollars from traditional offline channels to online digital channels.  Essentially, DMS leverages proprietary technology solutions, proprietary media distribution and data-driven processes to help large brands acquire their customers. This helps clients de-risk marketing spend across digital channels through DMS’s pay-for-performance model, meaning DMS is paid to deliver customers rather than impressions across a variety of end markets including but not limited to insurance, education, health & wellness, consumer finance and home services.

Per the press release, Digital Media Solutions’ performance across their portfolio of verticals can be characterized in one of three ways:

  • A significant portion of their revenue comes from verticals that are in the early stages of transition to digital and therefore continuing on an elevated growth trajectory like Insurance, Health & Wellness and Direct-to-Consumer products.
  • Some verticals such as Education are counter-cyclical, with limited impact to client activity.
  • Certain marketplace solutions have been impacted, particularly in Consumer Finance given the reduction in demand for credit card, lending and other personal banking services. Consumer Finance represented only approximately 11% of total revenue last year, and DMS is optimistic that banks will increase marketing spend as consumer demand returns following COVID-related disruption. “We are nonetheless being disciplined on the cost side, and have multiple levers to align expenses with any changes in revenue.


  • Immediately prior to the closing of the Business Combination, Leo will domesticate as a Delaware corporation and additional investors will purchase $100 million of Class A common stock of Leo in a private placement at $10.00 per share.
  • In addition, cash held in Leo’s trust account, net of redemptions, and the gross proceeds of the private placement must be no less than $200 million, and such cash will be used:
    • To pay $30 million to DMS to be held on its balance sheet,
    • To pay down $10 million of DMS’s current credit facility,
    • To pay the parties’ transaction costs and
    • To pay the cash portion of the consideration payable to the current DMS equity holders.

Upon closing, the Board will be chaired by Mary Minnick, formerly the Global President of Marketing, Strategy and Innovation at The Coca-Cola Co. Ms. Minnick currently serves on the boards of the Target Corporation, Glanbia, plc and Leo.

In addition, the remaining Board members will include Robbie Isenberg (Managing Director, Clairvest Group), Lyndon Lea (Chairman & CEO, Leo), Robert Darwent (CFO, Leo), James Miller (General Counsel and Corporate Secretary, Clairvest Group), Joe Marinucci (CEO, DMS) and Fernando Borghese (COO, DMS).

The business combination is expected to close before July 31, 2020, LHC’s combination deadline.

Quick Takes:  When Leo first announced that it had signed a Term Sheet with DMS, back on February 7th (pre-Covid), it said that the total EV of the proposed transaction was $757 million, or 12.0x expected fiscal year 2020, with an expected adjusted EBITDA of $63 million.   As of today, that adjusted EBITDA number has been revised down to $57 million, but we now have a multiple of 13.2x, so this transaction is looking a little more expensive.  And while addressing the effects of Covid in both the press release and the presentation is very much appreciated, we still don’t really know just how badly the economic impact is going to be.  So even if we look at the comps or try to evaluate valuation, it’s still really difficult, if not impossible. For the most part, all of the estimates are based on a pre-Covid world.  However, the fact remains, Leo is still buying DMS at $757 million.  This transaction also has a $200 million cash closing condition (inclusive of the $100 million PIPE), but in the current climate, redemptions are more of a risk.  Having said that, this is a more modern, tech/data driven solution for advertisers and it should appeal to customers going forward since they will be looking for more effective solutions in an environment where every dollar counts.  The merger agreement has not been filed yet, so we don’t have all of the nitty gritty details of this deal yet, but the potential for a good transaction is there.  It’s just…well, Covid.  It creates a lot of guesswork.


  • Citigroup Global Markets Inc. acted as financial advisor, capital markets advisor and private placement agent to Leo.
  • Kirkland & Ellis LLP acted as legal counsel to Leo.
  • Skadden, Arps, Slate, Meagher & Flom LLP acted as legal counsel to DMS.





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