We estimate that we will receive net proceeds from this offering of
approximately US$24.4 million, or approximately US$29.0 million if the
underwriters exercise the over-allotment in full, after deducting the
underwriting discounts and commissions and estimated aggregate outstanding
offering expenses payable by us, based on the initial public offering price of
US$6.00 per ADS.
We intend to use the net proceeds we receive from this offering primarily for
the following purposes:
• approximately US$15.4 million to conduct acquisitions and increase its
working capital; and
• approximately US$9.0 million to maintain its existing ownership interests in
current joint ventures.
Depending on future events and other changes in the business climate, we may
determine at a later time to use the net proceeds for different purposes.
Pending these uses, we intend to invest the net proceeds to us in short-term
bank deposits, direct or guaranteed obligations of the U.S. government or other
short-term money market instruments. These investments may have a material
adverse effect on the U.S. federal income tax consequences of your investment
in our ADSs. It is possible that we may become a PFIC for U.S. federal tax
purposes, which could result in negative tax consequences for you.
We will not receive any of the proceeds from the sale of ADSs by the selling
shareholders.
We believe we are a pioneer in the area of brand e-commerce and one of the only
agencies offering a full suite of services including digital strategy, multi-
channel digital marketing and brand e-commerce technology. However, we face
many competitors that compete with us with respect to different parts of our
business. Our competitors range from large international advertising agencies
to smaller companies offering specialized e-commerce solutions. The competitive
environment is also changing as a result of increased alliances among our
competitors and through strategic acquisitions. We also face competition from
the in-house digital marketing departments of some of our clients that may
decide to take over the work once we have formulated a strategy or established
an initial platform for them.
We face the following competitors in each of our respective service areas:
• Digital strategy: The digital advisory arms of strategic consulting firms
such as A.T. Kearney, The Boston Consulting Group and McKinsey & Company;
• Multi-channel digital marketing: Digital marketing agencies that are either
independent such as AKQA Inc., or subsidiaries of global advertising holding
companies, such as Rosetta Marketing Group, LLC and Razorfish Inc.; and
• Brand e-commerce technology: Providers of e-commerce solutions that enable
online sales channel capabilities, such as Accenture Interactive, Deloitte
Consulting, Digital River, Inc., GSI Commerce, Inc., IBM Global Business
Services and SapientNitro. There are other IT consulting companies providing
services in this area, such as Cognizant, Infosys and Wipro.
We believe that the principal competitive factors in our industry are quality
of services, time to market, technical and strategic expertise, ability to
provide end-to-end solutions, brand recognition and track record size of the
firm, as well as financial stability. We believe that we compete favorably with
respect to these factors.
Allstate Insurance
Company, Discover Card's mobile-related business, Shimano, Tommy Bahama and
W.W. Grainger Inc., which means that we are the principal provider of brand
e-commerce and digital marketing services for these clients.
We deliver end-to-end solutions to address our clients' brand e-commerce and
digital marketing needs. We offer three types of services: digital strategy,
multi-channel digital marketing and brand e-commerce technology services.
• Digital strategy: We provide our clients a broad array of digital strategy
services aimed at enhancing the brand experience, increasing brand loyalty
and monetizing their brands. We combine our business and technology expertise
to analyze how products, brands and consumers interact and the role that
current and emerging technologies play in this digital relationship. We
assist clients to develop strategies to translate their brand identity to
the digital channel in order to enhance their brand e-commerce websites,
integrate the customer's online brand experience with their offline brand
experience and increase the conversion of site visits to sales. Our
strategies are formulated to deliver quantifiable results for our clients.
We also provide business technology optimization, or BTO, services to help
our clients assess and improve their business technology assets.
• Multi-channel digital marketing: We assist our clients to create a seamless
brand experience across internet, mobile devices and social media
applications, allowing them to develop higher value and long-term customer
relationships. We employ digital marketing techniques such as targeted online
promotional activities, newsfeeds on social network websites, search engine
optimization, mobile marketing and location-based services to engage
customers with the brand. As a result, we help transform a client's digital
brand into an engaging experience for its customers, investors, vendors and
prospective employees. We also help our clients analyze and track the
effectiveness of these multi-channel digital marketing efforts.
• Brand e-commerce technology: We design and implement online stores and
other points of sale for our clients that can supplement their physical store
networks or serve as an effective alternative to expanding those networks. In
some cases, we also operate websites on behalf of our clients. As a result,
we manage or control the user experience of many multinational and multi-
lingual digital corporate platforms. Our brand e-commerce technology services
also help our clients to create a lasting brand impression with their
customers and sell their products and services. In addition, our technology
experts assist our clients to enhance the technical aspects of their
platform, such as creating applications and employing software and
architectural solutions to fit their specific needs. Our Commerce OnDemand TM
solution facilitates our clients' quick integration and implementation of
their e-commerce sites.
Our experience and multinational capabilities have enabled us to serve more
than 500 companies and their global brands, with many of whom we have had
multi-year relationships of up to ten years. In 2011, we derived over 70% of
our revenues from clients that were our clients in the previous year.
We have offices in ten cities in the United States and plan to leverage our
existing capabilities to strategically grow our business in China, which has
the largest population of Internet users in the world, according to a 2011
report by IDC. China is also expected to be the third-fastest growing internet
retailing market for the next five years, according to research by Euromonitor
International in 2012. We have opened offices in Beijing and Shanghai and
operate the Chinese websites for several of our clients, including General
Motors, Motorola and Underwriter's Laboratories.
As part of our China strategy, we have focused on building our presence and
capabilities in the sportswear market. We believe that the brand experience is
critical for sports marketing and that sportswear will be a fast-growing e-
commerce segment. We recently entered into a joint venture with Li Ning Co.,
Ltd, or Li Ning, which is China's largest sports brand and is among the top
ten sports brands globally in terms of revenues, based on public company
filings. This joint venture was established to develop, market and sell Li
Ning's sports apparel, shoes and accessories via brand e-commerce and digital
marketing in the United States and elevate the Li Ning brand from a national
Chinese brand into a global brand. We recently entered into a joint venture
relating to k121.com, a leading internet retailing website for sportswear
products in China, which sells brands such as Nike, Adidas and Kappa. We plan
to introduce other global sports brands to consumers in China through this
platform.
Our revenues increased from US$51.1 million in 2009 to US$72.6 million in 2010,
and grew further to US$106.7 million in 2011. Our gross profit increased from
US$22.0 million in 2009 to US$31.4 million in 2010, and grew further to US$46.1
million in 2011. Our net loss was US$0.1 million and US$3.4 million in 2009
and 2010, respectively. Our net profit was US$8.3 million in 2011. Our adjusted
EBITDA increased from US$8.0 million in 2009 to US$10.6 million in 2010 and to
US$20.0 million in 2011, representing a CAGR of 57.6% from 2009 to 2011.
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Our principal executive offices are located at 6th Floor, Alexandra House, 18
Chater Road, Hong Kong. Our telephone number at this address is (852) 3106-4999
and our fax number is (852) 3106-4706. Our registered office is located at
Walkers Corporate Services Limited, 87 Mary Street, George Town, Grand Cayman
KYI-9005, Cayman Islands. Our website is www.acquitygroup.com. Our agent for
service of process in the United States is National Corporate Research, Ltd.,
located at 10 East 40 Street, New York, N.Y. 10016.