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Loyalty Partner

Loyalty Partner

Invested:
September 2005

Exited:
March 2011

Return:
3.0x / 22% IRR

Sector:
Business Services

Headquarters:
Munich, Germany

Region:
Germany

Business:
Loyalty programme operator

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Business at time of investment

The Group was founded by Chief Executive Officer Alexander Rittweger, Lufthansa Commercial Holdings and Roland Berger in 1998. It operated the largest multi-partner loyalty programme in Germany with over 28 million PAYBACK cards in circulation and employed approximately 260 staff.

Investment rationale

Set against a stable backdrop of steadily increasing consumer spending behaviour in Germany, Palamon identified that Loyalty Partner, which had a highly scalable and profitable model, had three opportunities for accelerated growth:

  • Loyalty Partner owned one of the single largest consumer behaviour databases in Europe that was under-utilised but of great potential value in providing unique, below the line marketing services to existing retail partners
  • Opportunity to expand its offering to its committed base of active card holders by developing a payments service as well as a possible credit card
  • Expansion of its partner programme, both domestically and internationally

Value creation

Worked with senior management to design and implement a number of strategic initiatives which more than doubled revenue and profitability

  • Created data analytics marketing capability: Acquired a majority stake in emnos, a leading UK-based data analytics company, and extended it into Germany, Spain and France.  Used expertise to develop unique below-the-line marketing services to retailers.
  • Developed financial services product: Launched card payment capability backed by WestLB payment transaction infrastructure, transforming loyalty cards into payment cards.
  • Internationalised the business: Extending loyalty card operations into Poland and India
  • Expanded partner programme: Launched white label loyalty card operations for Deutsche Bahn, Germany’s railroad operator. Expanded the loyalty system to on-line, acquiring over 250 on-line retail partners and launching a transactional website, www.payback.de.

Company at exit

Loyalty Partner had 34 million PAYBACK cards in circulation and was Germany’s third most carried card, through which €15 billion of sales per year were processed. The company had doubled revenue and profits during the hold period and increased employee numbers to nearly 600 staff.

Result

On 1 March 2011 Palamon sold its shareholding in Loyalty Partner to AMEX in a transaction valued at approximately €500 million. The transaction generated a 3.0x return on invested capital and 22% IRR.


Loyalty Partner


“We have been able to achieve a step-change in the Loyalty Partner business during our five year partnership with Palamon. We greatly valued Palamon's contributions and their ability to work closely with us to develop our growth strategy and substantially expand our business”
Alexander Rittweger, CEO of Loyalty Partner