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Digital agencies were the subject of nearly half of the mergers and acquisitions by major advertising holding companies last year. The trend has continued into 2014, with a 8% like for like rise in acquisitions in the first 3 quarters. The momentum is set to continue into 2015, with strong multiples of EBITDA forecast, as the audience of acquirers continues to expand and marketing budgets continue to target digital comms. Agencies offering strength in analytics, social, digital and mobile continue to be the most sought after, whilst agencies focusing on corporate communications, experiential marketing and shopper marketing appear to be less on trend.
Who’s shopping?
Outside of the usual suspects (WPP, Omnicom, Publicis, Interpublic, Dentsu and Havas) who are the most active buyers, often making multiple purchases in quick succession, a new breed of buyer has evolved in the past 24 months; Business Process Outsourcers, Print Managers and Traditional Marketing Service Providers (production agencies, printers, design and artwork agencies) have recognised the need to have a healthy digital foot print.
Of these organisations, St Ives & Communisis in particular have been most active in the UK, with recent acquisitions including Branded3, Realise Holdings and Amaze all acquired by St Ives (by the very active, now ex-CEO Patrick Martell), whilst The Communications Agency & Jacaranda have recently been acquired by Communisis led by CEO Andy Blundell.
We are also seeing a surge in interest by the Private Equity firms, who are becoming more dominant in this sector as agency saturation levels reach new heights
The UK market
The UK is showing significant strength, with more activity in the past 12 months than any of the preceding three years. UK and Western European companies now account for almost a quarter of all digital M&A activity. UK digital CEOs, in particular, are recognising that strong valuations are available and are now moving at pace to start the right discussions, often in tandem with an M&A advisor in order to drive momentum.
If you’re thinking about your investment or exit strategy and wondering how to proceed or you’re just interested in the engagement process, what goes into a deal book or possible valuations, get in touch, we’re always happy to have a conversation.