Western Europe, private equity and consultancies drive marcoms M&A market in 2017
Our recent research has shown that the marcoms M&A market in 2017 was led by increased interest in agencies in Western Europe. A quarter (25%) of deals took place in that region, up from 19% in 2016, while UK deals fell from 15% to 12% over the same period.
Western Europe deal volumes continue to increase
Our research has found that Western Europe was also the only region globally to see an increase in overall deal volumes over the same period, from 197 to 210. There were also 847 deals worldwide last year, down from the 1,023 seen in 2016, with many of the holding companies focusing their attention inward on internal development and reorganisation rather than acquisition.
Deals highlighting the growing importance and appeal of Western European acquisitions:
- Orient Hontai acquiring a 54% stake in Spanish marketing group Imagina for more than $1bn
- Accenture buying SinnerSchrader AG in Germany
- Dentsu Aegis acquiring Oxyma Group in the Netherlands
Julie Langley Partner at Results International comments:
“A lot of buyers are looking to boost their global footprint in order to provide a more joined-up global offering to their clients. Many of the US acquirers made substantial acquisitions in the UK over the past two years and are now turning their attentions to the major continental European markets.”Read More
More private equity involvement than ever before
Private equity (PE) involvement also came to the fore in 2017. There were 31 PE-backed deals in Q4, marking the most active quarter for PE in 2017 and representing 16.1% of marcoms deals overall. Meanwhile, total PE activity for the year was up on 2016, with 107 transactions in 2017 compared to 94 the year before.
One of the more notable private equity deals in Q4 was Bain Capital acquiring an 87% stake in ASATSU-DK, Japan’s third largest ad agency, for $1.4bn. Another was Equistone buying Birmingham-based digital agency Inspired Thinking Group (ITG) from Bridgepoint.
Julie Langley adds:
“The private equity houses are now moving into marcoms in a big way. Bain’s acquisition of ASATSU marks one of the largest PE investments yet seen in the sector. 2017 also saw a number of meaningful exits for PE, such as Bridgepoint’s sale of ITG, Nordian Capital’s sale of Oxyma and BGF’s exit from Zone.
“This could be a sign of things to come. PE clearly now has the appetite for big deals and seeing good exits will give them more confidence that they can make money in marcoms. And given that holdco share price performance was poor in 2017, we may even see private equity looking at some of these players this year. The largest listed groups like WPP, Publicis and Omnicom are probably too large, but we could see PE interest in the smaller listed groups.”
In Q4 last year, Dentsu regained pole position as the most active buyer with eight marcoms deals; it and WPP were the most active buyers of 2017 with 29 and 30 deals in total respectively. More intriguingly, Accenture was third with 11 deals last year and other consultancies continue to buy in the marcoms space: Accenture, Deloitte and Ernst & Young each made two acquisitions in Q4.
In addition, a number of other management consultancies are now dipping their toes into marcoms. Last year saw meaningful purchases in the sector by Cognizant (acquiring UK digital agency Zone), Concentrix (buying digital products and strategy business Tigerspike) and Capgemini (acquiring Idean and Lyons).
The interest from consultancies is primarily in digital businesses and full-service digital remains far and away the most popular subsector for marcoms M&A overall, with 43 deals in Q4 2017 (up from 29 in Q3).
Julie Langley concludes:
“The consultancies may not be at the top in terms of deal volume, but they’re undoubtedly behind many of the most interesting and high-profile investments in the sector – such as Accenture buying Wire Stone and Deloitte Digital acquiring Acne. Some are looking to expand their digital offering, but others are looking to move into the creative side of marcoms as well.
“Next year we’re likely to see continued buyer interest in hot areas including: the convergence of physical and digital environments; proprietary data and data skills; digital transformation; transparent media buying; and content.”Read Less