Look Who’s Buying Review|The M&A Event Series
An overview of our recent event…
We held our 4th M&A live event recently on the topic of “Look Who’s Buying”, an overview of corporate activity within the marketing services / agency sector, with a particular focus on the newer entrants to the market. Seventy or so marketing services leaders attended to listen to our expert panel, consisting of Anu Shah, Corporate Development, BBH; Laurence Buchanan, Partner & Head of Digital EMEIA, Ernst & Young; Tony Walford, Partner, Green Square Corporate Finance; Andrew Garside, Partner at Livingbridge Private Equity.
Some of the key questions answered and observations were:
What are the current key drivers and trends for M&A in the sector?
There was a consensus that technology is clearly a key driver and it’s no longer just a case of delivering “digital” as this is now a given for any agency . Attractive targets were those that really embraced tech for themselves and their clients, for example delivering tech platforms, Saas models and really digitising a client’s business model (not just the marketing element).
Andrew Garside pointed out that a strong and passionate management team is the most critical element for him as a PE investor and that succession planning was also key.
Who is actually buying marketing services businesses?
The key change and potential disruption here is the entrance of management consultancies. Laurence from E&Y pointed out that businesses like his, Deloitte, IBM and Accenture were very active, making multiple and high profile acquisitions in the last year. Marketing services has risen on the agenda of these consultancies as marketing has become performance based and as such, ROI is measurable. Consultancies “get this” much more than a creative business model. They are also keen to track the movement in spend from CTO / CIO to the CMO and therefore need a marketing service offering to capture this revenue. As such expect to see more deals along these lines.
The big holding groups are still active (as they always will) but given the above and also the interest from tech companies (such as Oracle and Adobe) the acquirer base is much broader. From a geographic perspective Tony from Green Square also mentioned Asian investment into EMEA and the US with Dentsu being active post the Aegis deal.
Is it all about tech, with creativity taking a back seat?
All the panelists agreed that tech was critical, but…that a successful agency would marry this with creativity. As Anu Shah of BBH commented , its about combining “logic with magic”. Creativity is still a critical point of differentiation and a source of ideas, envisioning the future and engaging with customers. An interesting side point (and one we didn’t have time to look at in depth) was how the newer entrants from the more orderly world of consultancy could foster a culture that can inspire creativity?
How can the more traditional agency model respond?
Where “traditional” agencies may have the advantage in terms of creativity and in a relationship with a client CMO, there was a feeling that the consultancies had some operational advantages. Digital is no longer just about communication, advertising or branding……it’s about how a business operates at its core and delivers its services or products. Consultancies are much more adept at delivering business transformation and in building marketing services arms, they are now able to take on the full circle of a change project.
Consultancies potentially have stronger board relationships (beyond CMO, at CEO, CFO, Chair etc level) and are therefore able to up and cross sell more effectively. Laurence pointed out that a key relationship is now with the CDO (Chief Digital Officer).
So to respond, agencies need to do a number of things. They need to make sure they are still the natural “home” for the best creative talent. They need to invest in tech solutions and to think beyond the communications aspect of what they can deliver on a digital project. Perhaps critically they need to work out how they can broaden their stakeholder base, recognising that whilst the CMO relationship is vital, there is a lot to be gained from the ability to sell into other senior management and this is what their “new” competitors will be doing.