Q1 2017 has been another busy quarter for M&A in the marcoms sector, with WPP leading the charge. WPP and its subsidiaries made nine acquisitions in Q1 2017 with a focus on emerging markets, including India, China and Brazil.
This put the global group well ahead of the four deals each made by Dentsu and Publicis, the former of which had been topping the marcoms M&A charts in recent quarters, whereas the latter gets back into the acquisition trail. The holdcos continue to face competition from management consultancies, of which all the major consultancies, with the exception of IBM, did deals in the first quarter. The continuing expansion of the buyer market was further highlighted by a number of new entrants such as The Gotcha Group and Groupe Marc de Lacharrière SA making multiple acquisitions for the first time in Q1.
There were 219 marcoms deals in total in Q1, down slightly from the 238 in Q4 2016. Deal volumes fell in the UK (24 deals vs. 39 in Q4 last year) but rose in Western Europe (from 51 in Q4 2016 to 61 in Q1 this year). When taken as a whole to include the UK, the number of deals across Western Europe remained broadly in line with previous deal volumes.
Buyers are increasingly looking to acquire in continental Europe to service clients on a global scale and this strategy can be seen in Accenture’s recent acquisition of SinnerSchrader, one of the leading independent agencies in Germany. The number of APAC buyers slipped from 44 in Q4 2016 to 27 in Q1 this year but discussions in the market suggest this drop-off was more likely due to currency restrictions in China than any concerns over international politics.
Our research also highlighted several marcoms sectors seeing an increase in activity in Q1: there were 10 shopper marketing deals (up from three in Q4 2016), including Bain Capital’s acquisition of Daymon Worldwide (USA) for $413m and HLD Associés remaining stake acquisition of Tessi in France for $150m. These deals were both PE-backed and appetite remains strong in the private equity sector. Providence has recently invested in multiple assets and Lake Capital’s decision to put Engine on the market with a $500m price tag suggests earlier investments in the space are starting to mature.
Full-service digital agencies remained the most popular targets overall, accounting for 27 deals in Q1. There were 15 deals in website UX, design & build (up from nine in Q4) and 19 transactions involving events & experiential, up from 11 in Q4 last year. This is most likely reflective of the broader B2B groups such as UBM expanding their proposition via acquisitions.
At the same time, Q1 2017 saw a fall in deal volumes in the media buying sector (20 in Q4 2016, nine in Q1 and data/analytics (12 down to four) subsectors. This was likely due to the market levelling off after the rush to get into media and data in 2016, as many acquirers have already made plays or built capabilities internally.
Julie Langley, partner at Results International, comments: “WPP is back on top for deal volumes, when you add in Publicis getting back into M&A and continued activity from Dentsu, it underlines that quality targets are still very much sought after by both established and emerging players.
“There are many different types of buyers that understand the value of a marcoms presence to reinforce and supplement what they’re trying to offer and give them more influence over the c-suite. This is the widest buyer universe we’ve seen and it continues to expand with new entrants and emerging holdcos continuing to bolster activity from the traditional acquirers, consultancies and technology players.
“Brexit is yet to have much impact on M&A but the consequences may be more apparent in terms of client budgets as brands take longer to define spend, and there is also increasing scrutiny across a number of marketing services disciplines. Overall though, the M&A market continues to be an exciting environment for agencies looking to drive growth and value.”