Domain Group sold to Merkle Direct Marketing.

Merkle Direct Marketing has acquired Domain Group in a deal that combines two prominent firms in the nonprofit direct response business into a muscular $140 million operation.

The 85-person Domain Group, a fundraising creative shop, will continue to operate from its locations in Seattle and Atlanta. There will be no change in leadership, management or strategic direction of the Domain Group, according to Michael Mathias, senior vice president of the Agency Group at Merkle.

Domain Group will become part of Merkle's Agency Group, which provides a full range of services that support the strategic implementation of direct response programs. The Agency Group will have revenue of more than $70 million and more than 200 employees, said Mathias.

Merkle's 2005 revenue is projected at between $100 and $105 million. With Domain's billings of approximately $40 million, that puts Merkle at between $140 and $145 million, said Mathias.

Financial terms of the acquisition were not disclosed.

Domain Co-founder Timothy Burgess said that he and business partner Richard Perry began developing a succession plan two years ago. "We began exploring how we would pass the agency to a new generation of leaders and through that process Michael and his colleagues expressed interest in acquiring Domain," said Burgess.

"What attracted us to Merkle is a couple of things, led most prominently by their data and analytics capability, their data processing service and the extra punch and power that would bring to Domain's service," said Burgess. "But we also found a company culturally and strategically very similar to Domain."

Direct response agencies, especially those that deal in the nonprofit world such as Domain, often make operating agreements with vendors that provide complementary services, such as an online fundraising vendor. Those deals, for now, remain intact, said Mathias.

One such arrangement Domain had was with online fundraising firm Convio. "I believe consolidation is a necessary trend in the industry and this is a great move for both companies--Domain and Merkle," said Vinay Bhagat, founder, chairman & chief strategy officer at Austin, Texas-based Convio. "Both companies offer strong and complementary services. Convio has valued its partnership with Domain Group--as we do with other leading direct marketing agencies and service providers in the nonprofit sector. We will continue to work with them under the Merkle umbrella," said Bhagat.

According to Mathias, Domain and Merkle had "very few" clients that previously worked with both firms. Merkle's fundraising clients include the Arthritis Foundation, American Heart Association, Christian Appalachian Project, American Cancer Society, and Cystic Fibrosis Foundation. Domain's clients include America's Second Harvest, CARE, The Lance Armstrong Foundation, Prison Fellowship, and certain divisions of The Salvation Army.

There had been industry rumors several years ago that Merkle was eyeing

going public with an Initial Public Offering but pulled back when the stock market went soft. Mathias said Merkle is not going public and that all of the rumors were uninformed industry chatter.

"It has never been a desire of Merkle to go IPO. As a shareholder of the company, I can tell you we believe that the standard of being judged in the public market eye is something we should be aware of and that is a very high standard. But, it is just one of the standards. We are about building a great company for our clients and employees and there's no discussion of anything down that path," said Mathias.