After the digital buying frenzy, data will be key to next tranche of acquisitions

Partners at Green Square, Corporate Finance Advisors to the media and marketing sector, cast their eyes over the latest industry deals and look ahead to the next tranche of acquisitions.

Buying frenzy 'not over yet'

Industry observers might be forgiven for thinking – particularly in the wake of WPP’s stunning acquisition of AKQA in the summer – that there were no more hot digital agencies to acquire.

Here at Green Square, we’ve long been of the opinion that the acquisition frenzy is not over yet – it’s just that the big holding companies, their global agencies and other acquirers are now looking into the nooks and crannies of the agency world. This has been confirmed by the fact that over the last month or so, almost all M&A activity has been exclusively concentrated in two key niche areas – data analytics and mobile.

At the end of August, WhatRunsWhere, a global US-based company that enables ad agencies and advertisers to track competitors’ online ad campaigns, has acquired UK-based Mobile Ad Spy to expand its offering to mobile. Terms of the deal remain undisclosed, but this kind of “competitive intelligence” service for online media buying will be a big growth area, and WhatRunsWhere got in early, and probably acquired Mobile Ad Spy for a very good price – we think we can expect to see more of these companies being snapped up in the coming months, especially as online ad spend increasingly migrates to mobile.

And this month, we’ve seen IPG’s Draftfcb acquire Hudson Global, a New York-based integrated digital pharmaceutical marketing company that specialises in data and analytics. The new acquisition will be merged with Draftfcb Healthcare, creating a top five healthcare offering in the U.S, but more importantly, giving it a stronger data analytics offering.

Agencies in the UK haven’t been shy of snapping up specialists either. In the last few weeks, we’ve seen up-and-coming London agency Essence snap up San Francisco-based digital media agency, Black Bag Advertising. Essence believe that this not only gives them a toehold on the US West Coast, but again it beefs up analytical credentials.

Founded in 2004, Black Bag provides media strategy, planning and buying, campaign management and analysis to clients in the automotive, banking, insurance, retail, and consumer packaged goods industries. It looks like a good fit to us - besides being analytical and outcome-oriented, it is also entrepreneurial in spirit, which makes for a good cultural fit.

And with clients increasingly demanding highly targeted online campaigns, we reckon Emailvision Holdings’ purchase of PredictiveIntent, which specialises in behavioural targeting and predictive analytics technology, is an exciting development for both the acquirer and the market as a whole. Both companies are UK-based, and we expect to see more transactions of this type on this side of the pond.

With this acquisition, Emailvision – a specialist in customer intelligence consultancy and software which helps marketers develop personalised marketing on their websites and email campaigns – has upped its game.

PredictiveIntent has some interesting patent-pending predictive analytics technology which presents relevant content to every site visitor in real time. With intelligence around product preferences, marketers can automatically target subscribers with highly personalised email campaigns over the long term – the holy grail of effective direct marketing.

But of course there are a few large independents still left, and the biggest news since the AKQA deal was the acquisition this month of LBi by network giant Publicis in a deal worth €416m (£331m). This was a deal we actually tipped on this very site earlier in the year. LBi has long been an attractive target so perhaps the only real surprise was that it was Publicis, and not Omnicom - which admitted it was in talks with LBi in June - that sealed the deal.

It’s a great acquisition for Publicis, giving the group real scale in the digital arena. With revenues of €119.4m and adjusted EBITDA of €19.9m in the six months to 30 June 2012 the valuation seems high, but with so few “pureplay” digital independents of scale left, the price was bound to be a premium one. LBi lost money in 2009, broke even in 2010 but has returned to growth with decent profit margins. So it looks like an astute – if pricey – acquisition: LBi is on an upward curve and, taken in conjunction with last year’s $575m acquisition of Rosetta, it means that Publicis is at the top table in terms of digital assets alongside its great rival WPP.

We think we can expect to see further consolidation over the next six months as the inter-group acquisition arms race continues – and as the pool of potential targets gets smaller, the prices paid can only get larger.

Tony Walford is a partner at Green Square, corporate finance advisers to the media and marketing communications sector.

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