Mergers and 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.

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1 November 2012 - 12:04pm | posted by | 0 comments

It's not just big groups buying agencies - private equity’s on the acquisition trail too

New Billington Cartmell CEO John GellettNew Billington Cartmell CEO John Gellett

One of the big misconceptions about the marketing services industry is that it’s a pond in which big fish swim around, sizing up smaller fish and then gobbling up those they regard as the most attractive and the most potentially nutritious.

While it’s true that most acquirers in our industry consist of large groups – WPP, Omnicom, Publicis, IPG etc – or ambitious medium-sized and smaller groups such as Creston, Chime, Cello, The Mission and WeAre2020, some interest does come from outside the industry.

Despite economic uncertainty, and the squeeze many clients are putting on their marketing budgets, marcomms agencies are still an attractive target for canny investors.

And so it proved earlier this month when Hutton Collins acquired Billington Cartmell Limited (BCL) for an undisclosed sum. Hutton Collins is an independent partnership that makes long-term investments on behalf of its blue-chip clients. One of the things it likes to do is work in “partnership with high quality, growth companies, managed by proven leaders”. Back in 2007 it acquired a minority stake in BCL, and the latter has now sold up to the private equity firm completely.

BCL will be familiar to most Drum readers – it’s an independent London-based integrated agency that’s done some interesting work for brands like Pot Noodle, Carlsberg, Lexus and Lucozade. As well as BCL itself, the company also consists of experiential agency Closer and creative agency Brave.

It has 180 employees and gross income was estimated at about £16m last year – so, with a client list that includes GlaxoSmithKline, Unilever, Panasonic and Morrisons, it’s a pretty meaty prospect.

Interestingly, BCL founders Ian Billington and Paul Cartmell have both left the agency – and add that they have no plans to return to the industry at present. One suspects that the pair feel they’ve taken the business as far as they can over the past 22 years and probably want to enjoy the fruits of their labours (and who can blame them?).

Hutton Collins and its clients will be delighted with the new acquisition – a decent agency with some excellent talent, a fine track record, an enviable client list and good long-term prospects.

But what of BCL itself?

The agency has always prided itself on its independence, and a sale to a private equity firm – as opposed to a larger agency or holding group – is a good way to preserve that independence. It will make hanging on to the best people – often a potential problem with some agency buyouts – easier as well. Apart from the founders, the rest of the management are staying put and a couple of high fliers have been added to the board in the form of John Gellett, a highly respected and experienced industry hand, as group CEO and former ITV top dog Rupert Howell, as non-executive chairman.

With new talent – and a big injection of ambition – BCL will definitely be an agency to watch. Howell has already gone on record saying he wants to build “a new type of independent communications group based around the skills that Billington Cartmell has in abundance”. We may well see BCL on the acquisition trail itself in the not too distant future.

Finally, I wanted to write about another acquisition – another specialist agency of the kind that we’ve been looking at over the past few weeks.

Chime Communications (which owns ad agency VCCP of Meerkat fame; PR firm Good Relations; and CSM Sport & Entertainment among others) last week snapped up pharmaceutical market access and data firm pH Associates (PHA) for an initial sum of £6.92m with further tranches of deferred contingent consideration of up to £14m payable depending upon future performance.

PHA, whose clients include blue-chips such as Abbott, Janssen Cilag, Novartis, Merck, GSK and Sanofi, will operate as part of Chime's healthcare division, OPEN Health, so it is a good fit with the existing business – one that Green Square helped augment in acting for Succinct Communications in its sale to Chime earlier this year.

Pharma marketing is one of those marcomms services that has demonstrated consistently good growth over the past few years. Because of the restrictions on pharmaceutical marketing here in the UK, and the specialist expertise required, pharma marketing is one of the sectors of the marketing services industry that generalists cannot muscle into, except by acquisition.

Buying PHA gives Chime (through OPEN Health) access to expertise in the use of “real world” data which helps healthcare professionals (PHA works with half of all the UK’s NHS Trusts) understand the value of new drugs and other innovations. PHA also counts a number of highly-rated consultants and data analysts amongst its team, so Chime is buying into some serious talent – vital in a competitive industry like pharma communications – and a strong fit with its existing portfolio.

Chime expects the acquisition of PHA to be immediately earnings enhancing – and indeed Chime’s share price rose when the news of the acquisition broke.

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

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