The advertising industry M&A market was red-hot in the first quarter of 2018. It just didn’t come from the usual suspects.
A new report from consultancy R3 found that the global value of such deals soared 126 percent in the first three months of the year, led by “non-traditional buyers” like the consulting behemoths disrupting business on Madison Ave.
“The consultants and other non-traditional buyers are taking the lion’s share of the assets,” R3 principal Greg Paull wrote in the report. “The holding groups have their own internal challenges, along with those from their shareholders, and it means that more than enough other investors are stepping in.”
In January, February and March alone, there were 100 agency-related deals worth a collective $4.6 billion in sales, up from 94 deals worth $2 billion in the first three months of 2017. U.S. deals outnumbered the rest, showing a 366 percent rise year-over-year to 58 worth $3.1 billion.
In 2017, Dentsu Aegis Network and WPP led M&A activity—but during the first quarter of 2018, only 14 percent of all recorded deals were made by agency holding companies. Instead, consultancies Accenture and Capgemini, along with private equity firm Ocelot Partners, dominated the landscape as tracked by R3’s research.
In March, Accenture ranked first globally on the strength of two deals worth $420 million (Germany’s Mackevision for $210 million and New York digital shop Meredith Xcelerated Marketing for $210 million). Due to the Meredith acquisition, Accenture ranked fourth in North America behind No. 3 data platform Evergage, which bought MyBuys for $224 million, No. 2 software provider Amdocs, which acquired content developer Vubiquity for $224 million and No. 1 Capgemini which purchased customer engagement company LiquidHub for $303 million.
(Purchase prices were estimated by R3.)
Globally, Capgemini ranked No. 2 behind Accenture for its LiquidHub acquisition and Ocelot No. 3 for its estimated $248 million purchase of London digital agency Ocean Outdoor.
“Consultants have the client base, the C-suite relationships and the cash to expand aggressively in the marketing sector,” Paull noted. “We expect them to be equally active through the rest of the year.”
Private equity firms like Ocelot and KKR, which led M&A activity in the Asia Pacific market with its estimated $80 million acquisition of Singapore’s Global Sports Commerce, are “looking for stronger margin growth for their investments,” Paull said.
Agency holding companies, meanwhile, face multiple challenges limiting their ability to make large-scale acquisitions. Their largest clients, including behemoths like P&G and Unilever, are looking to cut costs and bring more work in-house due, in large part, to pressure from investors to streamline their global operations.