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Stagwell has significant growth ambitions, as recent reports of founder Mark Penn approaching a potential merger with S4 Capital show.
With a technological focus, it currently employs around 13,000 people across more than 34 countries within agencies such as Anomaly, 72&Sunny, Forsman & Bodenfors, Doner and Gale.
Speaking to ADWEEK, Penn would not comment on any progress of a potential $700m merger offer, repeating that it’s “pencils down.” But, M&A is on the cards, with a “steady stream of strategic acquisitions” planned, as well as growth in Europe and, like many agencies, figuring out AI.
International expansion is a priority, said Penn, following end-of-year results that saw international revenue grow by 13% last year, largely driven by EMEA, where growth was 17% for the year. Overall, he forecasts 5% to 7% organic revenue growth, expecting clients to increase their spending after a challenging year for marketing services, where tech companies, in particular, have reduced spending.
“We’re diversifying our geographic footprint. [At the moment] we’re at about 20/80 U.S. to global/U.S but we want to get that to about 60/40… as soon as possible,” he said.
That’s buoyed by recent M&A activity like buying creative agency Movers+Shakers for a reported $50 million, as well as culturalist agency Team Epiphany, European-based specialist agency group Sidekick and French digital agency What Next Partners.
According to Green Square partner Barry Dudley, any move to merge with S4 Capital would be focused on growing scale and take the resulting company to around 22,000 people, placing it on a similar size to that of Havas, another rumored suitor for Martin Sorrel’s empire. Sorrell has dismissed the offers saying there had been “no credible takeover approaches”.
“All of the big groups will have been circling one way or another,” said Dudley. “S4C would undoubtedly bring new capabilities and expertise, but I don’t think this would be the main driver.”
A focus on European growth
In September, Stagwell announced the promotion of its media agency Assembly’s CEO James Townsend to CEO of EMEA. He will be based out of the newly opened London hub, supporting the 20 agencies operating in the region.
“We expect our growth to come from share gains within Europe,” Penn said. “Already we see the kinds of pitches and opportunities that we’re getting once people realize the diversified talent we have there.”
Currently, its roster of clients in Europe includes BMW, Unilever, Netflix, P&G, Lenovo, Diageo, Google, Estee Lauder and Volvo.
“There’s a huge opportunity and momentum building in our EMEA business where we intend to be an alternative to the established competition,” Townsend claimed.
Within Townsend’s new remit is M&A as well as a focus on unlocking greater vertical integration across agencies to help clients do more with less and navigate an increasingly fragmented media landscape.
Procurement specialist Tina Fegent, who has handled agency pitches involving Stagwell believes that while there is a desire for digital expertise, not all clients want their agency partner to be digital-first. “Brands want a mix,” she said.
“The individual agencies are strong, especially in the States,” said Fegent, “but they need to be more connected and talking more about clients that are already using them across multiple agencies.”
A return of the business’ Sport Beach activation at Cannes Lions for a second year is another example of Stagwell’s growing ambitions, with Penn describing plans for this summer as “Sports Beach Plus” as it aims to go bigger.
AI to recreate the customer experience
Stagwell has recently worked with Google and Oracle to develop AI applications to add to its tech stack.
“We don’t forsake or minimize the role of human creativity,” said Penn. “We believe you’ve got to have high levels of talent and technology and combine those into a modern offering.”
Rather than generating creative assets or efficient market research, he views AI as useful for recreating the customer experience and brand connection.
“There are many companies now that do no external advertising, their entire brand image is created through the experience that people have interacting with them online, that experience is going to fundamentally change,” he said.
