Periscope Equity closed its third platform deal out of its debut fund, which will continue to target lower-middle-market technology-enabled companies.
The Chicago private equity firm, formed in 2013 by a Bridge Investors veteran, made a growth investment for an undisclosed stake in Power Digital Marketing. Power Digital helps brands launch and scale digital revenue.
The bidding process was competitive and included private equity firms and strategics, some of which offered an outright buyout, Grayson Lafrenz, CEO of Power Digital, told Buyouts.
The interest was supported by the company’s clean balance sheet, Lafrenz added. Power Digital has taken no outside capital, equity or debt, and has been profitable every month since it was founded in 2012, he said.
The company has been exploring ways to grow the business without losing ownership.
Power Digital is targeting more than $25 million in revenue in 2019 and is working toward $80 million to $100 million in revenue in the next two to three years, according to Lafrenz.
“We think that it’s very realistic. We anticipate organic growth year-over year between 50 percent and 100 percent,” he said.
Unlike many traditional marketing companies that rarely scale beyond $5 million to $10 million, Power Digital has high growth potential largely because of its tech-enabled platform, a source familiar with the company said.
Currently, Power Digital uses five proprietary technology tools to help identify the best marketing and sales channels based on a client’s analytics.
Its Black Box Portal, for instance, gathers data on companies’ traffic levels, traffic channels and customer lifetime values and ultimately helps identify growth scenarios and strategy.
Power Digital’s clients include PE firms that use the technology to estimate growth potential and strategies for target investments.
Periscope plans to grow the platform organically by adding new products, building a dedicated internal sales function, and scaling its B2B business, Steve Jarmel, founder and partner, told Buyouts.
In the past month the company hired nearly 10 people, bringing its team to 85, according to Lafrenz. In early January, Power Digital hired away John Taumoepeau from MRC, a Xerox company, for the post of COO.
As part of the deal, Brian Mukherjee, a partner at Periscope, will become chairman at Power Digital.
Power Digital plans one or two add-ons a year, looking at opportunities in areas at the intersection of sales and marketing, B2B marketing analytics, and software that adds scale to the company’s proprietary technology, Lafrenz said.
Power Digital is the third platform investment out of Periscope Equity Fund I, which closed on $104 million last July.
The firm will continue to focus on founder-owned, tech-enabled companies in healthcare services, marketing, security, business-process outsourcing and software as a service.
“We would look at new markets like Chicago but also at add-ons that diversify our suite of tools,” Jarmel said.
Mark Salter, founder and CEO of New Century Capital Partners, assisted Power Digital on the transaction.
Update: This report was updated to include Periscope Equity’s founding year.
Action Item: Contact Periscope Equity in Chicago at +1 312-281-6205.