Digital takeover targets? Who should be next on AEGIS and WPP shortlist? Salmon, Iris, Javelin...

Firstly, let’s consider what the large groups will be looking for in a takeover target? Perhaps most importantly, they will be looking for a sustainable company that can show between three to five years potential profits. In these rapidly changing times five years may sound like a lifetime away, but AEGIS, WPP and Publicis will need to feel confident and have assurances that any potential takeover target is bang on the pulse and can and will react quickly, and profitably, to new technologies and game changing platforms that come along.

Succession management is also a major issue in many agencies and more often than not it’s not at the top of the agenda, but for any agency business looking to be acquired by a super group they must be able to demonstrate a very strong management team and structure. If you are an agency owner, ask yourself, could you go on holiday for six months, leave the business in the hands of your management team and come back to a better business? If not, then chances are you won’t be a potential takeover target.

Obviously, to be able to forecast five years profits you have to have and be able to demonstrate a solid and stable client base. You should review your clients regularly and take a view on where they as businesses are heading themselves. Are they in growth sectors or are they essentially in declining or dramatically changings sectors, which could put them in jeopardy? Take a step outside your business, or ask a business person not connected with your agency if they envy your client list. If they don’t, I wouldn’t expect Sir Martin to either.

I actually know a number of MiNetwork agencies who are going through this process right now and are actively looking to jettison some of the clients that they don’t feel have a strong enough future to support their own ambitions and growth. Be honest – would the time your people spend servicing that client that isn’t really going anywhere be better spent building a working relationship with a business that has a bright future and who’s subsequent success you can make more money from?

What’s your new business track record like? Do you convert more pitches than you lose or have you been on a bad run…for the last two years? Do you always rely on the risks and unpredictability of the pitch or do you bring new business in through organic growth, contacts, networks and media profile? Any potential buyer is going to want to see a solid demonstration that you as a business can attract new clients to spend money with you. It’s also a good idea to show that you as the agency owner are not integral to the new business cycle. If you exit the business will the new business pipeline stop flowing or dry up?

One other thing to bear in mind is economies of scale. Do you have offices, clients and staff already in some of the same overseas geographic locations as WPP, AEGIIS or Publicis? Any buyer will look to bolt on revenue while trimming off costs, so if you have a thriving overseas operation that can easily be integrated into their current operation then so much the better for them.

Do you operate in a niche sector or have specific skill sets that appeal to a growing niche? I know one agency that is doing very nicely out of the explosion in online gambling. That has become their niche and they are making a very good living from that. Another MiNetwork member specialises in charity work, which may sound like working for free or very little, but check out the marketing budgets of some charities and you may change your tune. I recall one judge at the MiAwards judging day last year being visibly shocked when a fellow judge, the marketing director of one of the UK’s lesser known charities, told him they spend £6m a year on marketing.

That's a quick overview of some of the things you need to consider if you want a call from Sir Martin or Martin anytime soon. There are clearly lots of agencies out there that fall into the bracket of being an attractive takeover target. But based on the above MiNetwork has selected ten agencies that you could be attracting the attentions of Messers Sorrell and Buhlmann based on their management, clients, revenues, geographic spread and profile within the industry.

Iris

Located in a HQ close to The Globe Theatre in London, Iris employs around 400 UK staff, 120 of those digital experts, and has a digital fee income of £23.7m from digital work.The agency was launched in 1999 by Ian Milner, who also heads up the MAA, so the agency is mature and Milner’s his personal profile is up there with the best of them. The agency has an attractive client list including the Olympics (they created the mascots), adidas, Philips, Shell and Volkswagon, but it was Sony Erickson that shrewd founder Ian Milner built his empire upon. He built a strategic network of overseas offices following Sony Erickson into different markets and he is not afraid to make big decisions when they need to be made. He’s also built a solid management team around him, making Iris a highly buyable agency.

Salmon

Based in Watford Salmon employs 220 people and enjoys digital fee income of £19m a year from digital work. The agency was launched by Chris Harvey and Nick Holl in 1989, so again is at a good age and now ripe for acquisition. Salmon’s client list includes Argos, Boots, Endsleigh Insurance, Halfords, Kiddicare and Pets At Home among others and its international office networks extends to the US, Australia and China. Holl has stepped up to the role of chairman and beneath him has also installed a broad management team to take the business forward with a network that extends across the US, China, Australia and India.

Javelin Group

Launched in 1997 by CEO Tony Stockil and COO Richard Wolff, Javelin employs 140 digital staff in the UK and has a digital fee income in excess of £13m. The e-commerce and multi-channel retail consultancy has offices outside the UK in France and Eastern Europe, Bulgaria to be exact, which is one area the larger networks are known to be interested in at present. Clients include many of the best known retailers Debenhams, Lakeland, Marks & Spencer, Mothercare and Waitrose and the agency actually boasts of working with 15 of the top 20 largest retailers in the UK, which makes it sure fire target at some point in the future as retailers all continue to invest in new technologies and depend increasingly on digital experts to sell their products.

Reading Room

Launched in 1996 and headed up by Margaret Manning, Reading Room employs some 130 UK staff and has a digital fee income in excess of £10m a year.

The agency has an international network of offices, with a strong focus on Australia, and the agency has recently having moved into the Singapore market, where Manning now spends much of her time developing the business. The agency has an interesting mix of clients including Skoda, Love Film, OFSTED, Trader Media Group, Teletext Holidays and Malvern Instruments. Manning is clearly the face of the business and one of the digital industry’s few high profile female leaders, and she has built a business that consists of nine specialist divisions that would certainly be attractive to the larger networks.

Zone

Founded in 2000 and now headed up by CEO James Freedman and MD Jon Davie, Zone is a full-service digital agency with more than ten years’ experience working with media, entertainment and retail brands. Key clients that deliver the agency's £5.7m digital fee income and will attract the attentions of the bigger groups include BT, Channel 4, Coca-Cola, BUPA and the National Trust. Zone is an interesting agency in as much as its team of 85 includes a large editorial team, including editors, writers, copywriters, subs, picture researchers and video producers. This editorial expertise allows Zone to produce content for its clients across the array of digital platforms. The agency devises and executes integrated content strategies for Coca-Cola, BT, Channel 4, BUPA and The Economist and perhaps this USP could draw the attentions of the larger groups as they continue to consolidate their digital, and push their social media, offerings.

TH_NK

Launched in Newcastle a decade ago by Tarek Nseir, TH_NK has a digital fee income of £13.5m from digital work with a workforce of some 90-plus. Entrepreneur Nseir has built an agency to get noticed and recently brought in MT Rainey as Chairman, so he is a forward thinker and a go-getting entrepreneur. The agency is now in London and works for brands such as Sony, BBC and BlackBerry. Services include research and strategy, online marketing, creative design and UX, technical design and build, and hosting and support, so TH_NK ticks all the right boxes. TH_NK is also an Investor in People and one of only 10 companies in the UK to be members of the W3C - a global organisation, which works to ensure the web is reaching its full potential. The agency also achieved a top-ten spot in the Deloitte Fast 50 for three years running.

Profero

Based in London, Profero was launched in 1998 and has a digital fee income of around £8m a year. Headed up by Dale Gall, the agency has grown into an impressive network of offices across Europe, Asia, North America and Australia. The agency is perhaps best known in the UK for its Mini and ASOS work, in particularly its ASOS Marketplace site, which enables fashion lovers to trade online. 2011 saw a strong of new business wins including brands such as Smirnoff, Barclays, ASOS, HTC, Lipton Ice Tea, Western Union Global Search, Promethean and TENA, so it goes without saying that big things could be on the cards at Profero.

StartJudgeGill

This agency is the amalgamation of Start, launched in London in 1996 by Mike Curtis and Darren Whittingham and JudgeGill launched in Manchester in 1994 by Kevin Gill and David Judge, so the agency has a raft of solid management in place. The agency employs some 120-plus people and has an annual digital fee income of £10.5m and is very highly respected within its own industry. With offices in the UK, Hong Kong and Dubai, as well as a growing presence in Russia, they have an international client list including adidas, Barclays, M&S and Virgin Media, Virgin Mobile MEA, Dubai Airports, Qatar Airways, Chow Tai Fook, Intel and P&G. Start JudgeGill could be an attractive prospect to any of the networks, not just AEGIS or WPP.

Rufus Leonard

Founded in 1989 by CEO Neil Svenson, Rufus Leonard is an independently-owned full service agency based in London and Dubai. The 90-plus strong agency works with businesses and leading UK brands that include Lloyds TSB, O2, John Lewis and the market leading utility company, British Gas and has a digital fee income of more than £11.8m. Recent work includes the development of Google mapping technology for Transport for London and campaigns for Lloyd TSB’s London Olympics 2012 sponsorship. As well as this the agency has continued its work with British Gas, for whom it became the lead digital agency in 2009. That Middle East office could be a big plus for the agency along with its solid structure and management team, driving the business forward under Svenson and MD Will Rowe.

Agenda21

Perhaps a bit of an outsider at the moment, but since its launch in 2005 by Pete Robbins, Nick Suckley and Rhys Williams the agency has gone about carving out a solid reputation and a highly respectable digital fee income of almost £10m. A varied and broad client list includes Prudential, Epson, SportingBet.com, Investec, DFDS Seaways, Christian Aid, First Drinks and the Rugby Football Union among others. The agency is still relatively young, but all the original founders are still on board so there is a strong and ambitious management team in place.

Obviously, there are other who could have made this list - 20:20, TBG, Realise, Equator, Lawtons Communications, RPM - to name a few, so I;d also add these in to the 'keep an eye on them' category.