Why market researchers are an attractive prospect to investors

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.

In Drum blog posts past, my Green Square colleague Tony Walford has spoken about the appeal of niche marcomms companies – operating in areas like data, mobile and pharma – for the big agency groups.

Andrew Moss

Another related area that’s seen a lot of M&A activity over the past year or so is market research. Ad agencies and their marcomms peers have always relied on market research – whether it’s to sound out the potential effectiveness of a campaign, or to gain the consumer insights necessary for creating those campaigns in the first place; and of course we all know the importance of market research to brands as well.

The very best research agencies will always be an attractive proposition to an acquirer – bringing fieldwork and (especially) high-margin analytics/consultancy expertise; as well as client lists and relationships and personnel in-house makes sense as it provides the acquirer with a possible revenue stream if it chooses.

Two of the most interesting deals of recent weeks have involved market research companies. Interestingly, neither of the acquired businesses have fitted the traditional picture of a market research agency. While it still forms an important part of the business, the “phone and clipboard” methods of fieldwork are starting to be superseded by more sophisticated methods of gathering data – market research has been, and continues to be, revolutionised by digital, and by mobile and social media in particular. And the boundaries of what constitutes market research are expanding and blurring into new areas such as channel marketing, creative, CRM, search and affiliate marketing, which is what gives this corner of the marcomms industry an exciting, slightly “Wild West frontier” feel.

Both the deals we’re going to look at this week certainly don’t fit into the traditional idea of market research.

In the first, investment analysis and market index company MSCI Inc has just agreed buy IPD Group Ltd for $125m in cash, in a deal expected to conclude before the end of the year.

IPD is a London-based real estate information business that claims to be “the world leader in performance analysis for the owners, investors, managers and occupiers of real estate”. A particular strength of the business is its highly-regarded real estate research and performance analysis offer – a niche offer to be sure, but one that is potentially of huge interest to fund managers and property developers.

For this reason, MSCI has got itself an incredibly valuable – if pricey (IPD had just $47.7m of revenue in 2011) – business. Its purchase of IPD gives it a trusted brand that investors use to track real estate performance indexes and property transactions. MSCI’s shares had been trading at a three-year low but following the deal they are moving upwards again. And no wonder - the real estate investment market presents considerable opportunities for growth for MSC’s fund manager customers, especially as it’s becoming more institutionalised and globalised. It’s what IPD adds to MSCI’s reputation that is perhaps just as important as its contribution to its bottom line.

The second deal is a bit closer to home but still far away from the traditional picture of market research – Plymouth-based Sound Financial Management Ltd, one of the largest firms of Independent Financial Advisers (IFAs) in the South West of England, has merged with its smaller rival Venture Wealth Management of Cornwall.

VWM has made a bit of a name for itself for its research. It uses the very latest software to research, compare and select the most suitable financial solutions for its clients and its individual IFAs are also well thought of. Its services and research capabilities should fit in Sound Financial’s existing offering very well.

These deals may seem a little off the beaten track for Drum readers, but I’m wondering whether we might see some of the holding groups start to show an interest in these kinds of deals in the future.

Many of WPP, Publicis and Omnicom’s big agencies are starting to move towards providing consultancy as well as creative services for their clients (more of this in a future blog) and the hyper-specialised research offered by the likes of VWM and IPD would be very attractive in developing this model.

Next week, my colleague Barry Dudley will be taking a look at some exciting new digital M&As.

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

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