Our recent research shows that marcoms agencies in Western Europe (excluding the UK) are becoming increasingly attractive to global buyers.
A quarter (25%) of all industry M&A deals in Q1-Q3 this year involved targets in the region, compared to only 19% over the same period in 2016, and included:
- WPP acquiring Thjnk, an independent creative agency in Germany focused on advertising, design and corporate publishing
- AKQA (WPP) buying Dis/Play, a Danish digital agency providing strategy, user experience, design and technical development solutions
- Altavia Saint-Étienne SAS (Altavia) acquiring Jetpulp in France, a digital strategy firm focused on e-business and website design.
The number of Western Europe deals for the first three quarters of the year jumped from 146 to 162 year-on-year.
In contrast, deals involving UK targets were slightly down over the same period, from 15% of the total to 13%. However, 2016 UK deal volumes were exceptionally high and it is possible that this is a temporary blip with Brexit prompting some international buyers to pay closer attention to high-quality targets in emerging digital hubs in markets such as Germany and Scandinavia.
Globally, there were 216 marcoms deals in Q3, on a par with the 219 seen in each of the previous two quarters. This amounted to 654 in the first nine months of 2017, down from 785 in the same period last year.
Accenture is now the third largest marcoms buyer for Q1 to Q3 after completing nine deals, behind only WPP (25 deals) and Dentsu (21). In the same period Deloitte made three acquisitions, while Omnicom made two.
Results International Partner, Julie Langley commented:
“Although the networks continue to dominate by deal volume, the management consultancies are making strategically important transactions further into the heart of adland: deals such as Accenture buying Wire Stone and The Monkeys, and Deloitte buying Acne. It will be interesting to see how they and the other consultancies continue on this path.
“There are also some highly attractive marcoms businesses in the main continental markets of Germany, the Nordics and France, made even more so by buyers who may be looking to de-risk with Brexit on the horizon. The rise in cross-border activity shows that buyers from around the world want to expand into key new markets through acquisition.”
From our research we also found that the largest subsector in Q3 was once again full-service digital with 29 deals, but there were sharp increases in M&A activity involving advertising & creative agencies (13 acquisitions, up from five in Q2), shopper marketing agencies (11 deals, up from four), media businesses (17, up from 12 in Q2) and social media agencies (eight deals in Q3 this year – the highest volume seen since Q1 2016). Julie Langley adds:
“Increased deal activity in creative in Q3 isn’t surprising. As audiences become ad-blind, and the ROI on advertising is being put under the spotlight, we’re seeing all the large acquirers put more focus on the importance of creative, particularly in major media pitches.”
Private equity during the first three quarters accounted for 12% of all marcoms deals, and was higher than the same period last year (8%). Langley added:
“PE houses have traditionally been wary of businesses focused on project-based work, which is why they shied away from much of the sector except for PR. However, private equity has a lot of funds to deploy and is increasingly looking at marcoms as an attractive sector.
“We wouldn’t be surprised to see even more private equity interest in marcoms over the coming months. Indeed, we wouldn’t rule out PE investors taking a closer look at some of the holdcos.”