Droga5 Sells Sizable Stake to WME

Deal pegged at $115 million

Droga5 will sell a large minority stake to William Morris Endeavor, the companies announced Thursday.

The deal, estimated at $115 million for 49 percent of the agency, follows Droga5's wildly successful 2012. Last year, the shop added work for a range of Coca-Cola and Mondelez brands. In 2013, it picked up the lead creative role for clients like Google's Motorola.

Still, a deal valuing the agency in the neighborhood of $230 million might seem high, given Droga5's estimated $59 million in 2012 revenue. The limited number of strong independent assets in the marketplace, an eager buyer—WME has long been trying to break into the advertising world—and Droga5’s other holdings, though, could help drive up the price.

De-De, the product development company Droga5 launched last year, for example, is rumored to be on the verge of announcing its own deal with a tech company, related to its Birdseye e-mail reader for tablets.

For Droga5, the sale to WME means a new set of partners in an agency that’s been vocal about maintaining its independence. With the exception of a relatively small loan in early 2012 to fuel expansion, Droga5 had until recently eschewed outside investment—despite overtures from advertising holding companies, a more likely buyer than a Hollywood talent agency.

The deal will also bring Droga5’s clients, which include Prudential, Puma and Spotify, closer to WME’s roster of artists, and vice versa. It's a move that will help WME compete with rival talent agency CAA, which has in recent years built its own marketing arm, CAA Marketing, from scratch.

“WME continually seeks partners who will provide our clients with unparalleled access and resources,” said Patrick Whitesell and Ari Emanuel, co-CEOs of WME, in a statement accompanying the announcement. “Droga5 is best in class across the board—from its management to its creative output. Through this investment, we will be able to join the best artists and storytellers from all verticals, and we look forward to creating new opportunities for our collective clients.”

Added Droga5 founder and creative chairman David Droga (via a statement): “Droga5 has always endeavored to be the most influential creative agency in the business, with ideas that move our clients and our industry forward. This partnership will exponentially accelerate our ability to realize that ambition.”

@GabrielBeltrone gabriel.beltrone@gmail.com Gabriel Beltrone is a frequent contributor to Adweek.