What does the AKQA deal mean for WPP and which digital agency will be bought next? The Drum gets the expert's view
Marketing giant WPP stunned the industry today when it announced that it had agreed to pay £348m to buy digital agency AKQA. But is it a good deal?
The Drum spoke to Green Square partner Tony Walford, an expert in providing financial advice to media companies, to find out what WPP would be getting for its money.
And he told us that now AKQA is off the market, another digital agency looks ripe for acquisition.
But before we get to that, let's drill into the numbers behind today's deal.
Walford says: "As many will know, there was a lot of speculation around a sale last year, but not to WPP, at around the $600m mark. This is not far off the $540m WPP quoted as the enterprise value on its website. On billings of $230m, a deal at the $540m level makes this transaction quite toppy, but what price a brand such as AKQA, one of the most respected and truly global digital businesses which has held that positioning for a number of years?"
So what does the deal mean for WPP?
"WPP has been very keen on increasing its digital capability for a while," Walford says. "It has undertaken numerous transactions in the area and has also looked at growing it from within. However, in making this acquisition it will be able to champion itself as now having significant strength in this arena."
And who will be next?
"The one to watch now is LBi, another huge digital business also backed by private equity which will have an equally high price tag. If it is not already being heavily targeted by the global marcoms groups who, let's face it, are the only players capable of paying such sums, then it certainly will be shortly."