Global Consultancies Are Buying Up Agencies and Reshaping the Brand Marketing World

Industry watchers predict the trend will only accelerate

Accenture, Deloitte, IBM, KPMG, McKinsey and PricewaterhouseCoopers are among the most aggressive players.
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In the waning weeks of 2015, Mike Barrett, president of San Francisco agency Heat, and his partners, John Elder and Steve Stone, faced the biggest decision of their careers as they mulled acquisition options for the shop, which, true to its name, had grown to rank among the hottest independents in the business.

Should they join one of the global agency holding companies showing interest?

That seemed like a logical move for a group that had built a reputation for creative innovation with high-profile campaigns on behalf of EA Sports’ Madden NFL franchise and a Star Wars: Battlefront reboot en route to being named Adweek’s Breakthrough Agency of the Year.

Ultimately, however, Barrett’s team chose to go in a different direction.

Along with the usual holding-company suspects, a different breed of suitor was knocking on Heat’s door. The agency was generating interest from big professional services and IT consulting firms, which, in recent years, had begun buying shops to build out their marketing-focused operations and gain a larger slice of the client pie.

Accenture, Deloitte, IBM, KPMG, McKinsey and PricewaterhouseCoopers rank among the most aggressive players, and Heat believed that a union with such a firm offered clear advantages. “Our view was, four or five years from now, in terms of client technology strategy and advertising strategy—there’s not going to be any daylight between those two things,” says Barrett. “So, when they called, we knew who was calling, and why, so we were pretty excited.”

In February 2016, the 112-person agency joined Deloitte’s expanding digital operations that now employ 15,000 staffers worldwide. In addition to Heat, shops such as Polish agency Digital One, global consultancy Daemon Quest, innovation practice Doblin and user experience (UX) designer Flow have signed up, helping Deloitte Digital boost its global revenue 32 percent year over year to $3.1 billion.

For Deloitte, integrating branding and content expertise with core strategic offerings such as financial and technology services, data analytics and customer segmentation makes the company a more valuable partner to current and prospective clients. “Now, you basically have this little package under one roof to help deliver on clients’ ambition to ‘future-proof’ themselves” and take on all challenges in the marketplace, says Andy Main, head of Deloitte Digital.

For Heat, the union represented the chance to work at greater scale and address issues at the heart of global business. “Deloitte just engages across a broader set of client touch points” than agency firms like WPP, Omnicom, Publicis and IPG, Barrett says. “It’s bigger than any holding company by quite a bit. So, you wind up having these conversations with clients where the client is like, ‘Hey, what do you know about X industry in China?’ And it turns out you’ve got an entire practice in that industry, in that country, led by well-respected experts.”

As digital ad spending continues to grow—eMarketer projects a rise to nearly $305 billion in 2019 from $230 billion this year—industry watchers predict the trend of consultancies buying up agencies will only accelerate.

“As marketing becomes more front and center for C-suite executives, there is a move toward providing a more holistic approach that includes both marketing and consulting,” says Seth Alpert, managing partner of mergers and acquisitions firm AdMedia. “This leads to an opportunity for consulting companies to expand their purview.”

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Digital transformation

Along with a desire by consultancies to tap into clients’ escalating digital marketing budgets, the acquisition trend reflects the ongoing transformation of the business landscape as a whole, and provides a blueprint for how consultancies and agencies will do business moving forward.

“The consultants’ bread and butter has traditionally been large IT and business-transformation projects,” says Julie Langley, a partner at Results International, an M&A and fundraising advisory firm. “But, increasingly, these types of projects have ‘customer experience’ at their center. In other words, ‘How do I improve the experience my customers get whenever and however they interact with my brand? How do I onboard new customers in a way that’s as easy as using Uber?’ This skill set has historically been owned by agencies offering disciplines such as UX, design, creativity, customer-centric data analytics and customer engagement.”

If Accenture, Deloitte, PwC and others don’t acquire these skills, “they will slowly see their core revenues eroded by others who do,” Langley says.

In a sense, experts say, data is in the driver’s seat. Agencies lust after the deep, actionable consumer information collected through decades by the big consultancies. Meanwhile, the Accentures and Deloittes of the world want their data to work harder and generate new revenue streams. These goals intersect for brands seeking to produce campaigns, events and points of contact (digital, in-store and otherwise) that foster one-to-one relationships with customers, sell products quickly and efficiently, and keep buyers coming back for more.

“Brands are now created by a series of connected—or often disconnected—experiences [consumers have] with a company across multiple channels,” says Brian Whipple, head of Accenture Interactive. “This requires a new level of connectivity between marketing/creative, business and digital/technology. So, clients are coming to us looking for the merger of these three worlds.”

Toward that end, Accenture in the past few years has grown its operations to include 18,000 digital and creative professionals worldwide. Notably, last November, Accenture acquired 250-person London creative shop Karmarama in a deal some media outlets estimated north of $60 million. And just last month, the firm made one of its biggest buys yet, adding 500-person German digital shop SinnerSchrader to bolster its capabilities in customer experience design, ecommerce and mobile marketing.

So, it’s not just about advertising anymore—although media-driven outreach remains a key component. Other items of interest include the ability to design customer transaction platforms (think: ordering from a client website), coding chops to make the technology involved in such endeavors efficient and reliable, and data mining to generate leads, find prospects and hyper-target or fine-tune campaigns.

Though creativity comes into play across the board, “we are really not talking about creative in the traditional campaign sense,” says Whipple. “We’re not aiming to be the agency you’d hire to do your Super Bowl ad. Instead, we want to infuse creativity into everything we do.”

Experts say old-school ad players should be worried—very worried—because consultancies’ digital marketing units are beginning to win business and produce notable work that clients would previously have assigned to agencies belonging to holding companies.

For example, Barrett credits Deloitte’s acquisition of Heat for generating a major project from one of the world’s leading consumer electronics firms. “We’re in the middle of shooting a global handset launch for LG for their new smartphone that’s going to take on the iPhone 7 and Samsung,” he says of LG’s flagship G6 phone. “It’s going to run in a number of different countries, and that came to us through Deloitte. That wasn’t one where LG picked up the phone in Seoul and called an agency in San Francisco.”

Deloitte agency Heat is in the midst of shooting a global handset launch of the LG G6, which is expected to take on Samsung and iPhone 7. The marketer’s long-standing ties with Deloitte allowed the Heat team to leverage sales data, customer-preference information and competitive assessments to fashion a winning pitch.

Heat had no previous relationship with LG, but the marketer’s long-standing ties with Deloitte allowed Barrett’s team to leverage sales data, customer-preference information and competitive assessments to fashion a winning pitch. His team wouldn’t even have been considered without that advantage, he says. Conversely, Deloitte might not have added the work from LG, despite its status as a key client vendor, without bringing the creative energy of Heat to bear.

“When we first met Heat during the pitch process, we knew they were a great fit based on their work,” says Suyoung Kim, LG’s global marketing vp. “With the added insight from Deloitte about our business, and what we were already doing in the marketplace,” tapping Heat for the launch was a no-brainer, he says. “The workflow is seamless. The connection between our business strategy and marketing strategy is extremely helpful. We are able to save time and resources by working with one business instead of several to get what we need.”

Branding baked right in

Elsewhere, the recipe for Papa Murphy’s Pizza, which specializes in preparing pies at its shops for customers to bake at home, “shows the microcosm of what’s possible,” says Deloitte’s Main. “It’s a very good example of the branding, marketing communications and advertising capabilities of Heat joining up with the experience and digital capabilities of Deloitte Digital.”

This story first appeared in the March 13, 2017, issue of Adweek magazine. Click here to subscribe.