Inside Accenture's big buy-out: ‘We weren’t ready to acquire Karmarama a year ago’
Accenture’s buy-out of Karmarama, one of the largest independent creative agencies in the UK, today (29 November) sent ripples through the industry as the management consultancy declared that “the next wave of marketing is here” – and that, crucially, it’s the one leading it.
The rise of consultancies pitching for (and winning) work within the marketing sector is not new and agencies have been keeping an eye on blurring lines between what they offer and the likes of Accenture, Deloitte and IBM.
Danny Hopwood, EMEA vice-president of solutions and platform operations at Publicis Media, summed up the crux of why these consultancies are making such aggressive moves into the space in a recent article for The Drum. He said: “Their relationships with chief information officers and chief financial officers are their prized possessions. They’ve come in from a finance angle, helping their client set up IT products and services, which is why, when they make a slight pivot, it’s easy for them to go to the chief information officer and say ‘we can instigate a complete technology change in your marketing business’.”
In the past 18 months these companies have snapped up design firms, digital agencies, and experience shops but didn’t have what they really needed to stitch it all together – a strong creative offering. And so, until now, comfort has been sought in the fact that these giants have been stuck in the 'digital services' space.
Speaking to The Drum, Joydeep Bhattacharya, managing director of Accenture Interactive – the ‘agency’ within Accenture – admitted that it was simply not set up to integrate a creative shop until very recently.
“Frankly speaking, we wanted to be ready and learn from all the acquisitions to make sure that we were ready for the next step of acquiring a creative agency,” he said. “If we had of done it a year ago, we might have been ahead of a curve but not ready or going where there were good prospects. As part of the strategy, we feel like we’re now ready to do something like this.”
But it was the sheer size of the acquisition that has surprised many. Karmarama was amongst the largest independent creative agencies in the UK - with a staff of some 250 - and going after it has sent an unmistakable signal of intent from Accenture that itwants to play amongst the WPPs and Publicis' for those big brand briefs.
But beyond that, Bhattacharya said there was also the need to bring in an agency with “credibility and authenticity” to prove it could be a creative powerhouse that can also design, build and connect customer experiences.
Karmarama will now sit alongside design agency Fjord - which Accenture acquired in 2013 – and more widely IMJ Corporation (IMJ), a full-service digital agency in Japan, independent Brazilian digital agency AD.Dialeto, creative tech studio Chaotic Moon, and Swedish content creator Brightstep.
The team (who are "delighted" with the move) will stay in its office in Farringdon and led by the executive team, a crucial point to retaining the “culture” that Accenture has bought into.
But Accenture will, in time, look to transform Karmarama's multi-floored space in North London into a place where all of the different agencies within Interactive can come together.
“Karmarama’s office is fantastic and it will be a nice way of bringing all the different brands together. That’s the intention – we want to make sure people are together and comfortable and it supports the culture," continued Bhattacharya.
Threat to holding companies?
So, it seems, the final piece of the puzzle to offering an ‘end-to-end’ service is in place and Accenture believes that it will now be uniquely placed with “the best brains in the business” to create and execute whatever a brand might need.
“You experience [marketing] in moments, that’s where the world is at. What [this deal] signals to the industry and CMOs is that this is becoming real,” said Bhattacharya . “The next wave of marketing is here and we’re ready for it.”
For Karmarama, it was this thinking that nudged it to sell up to a consultancy over a traditional holding company. The agency has global clients that it services from the UK and it realised that to scale up whilst retaining its autonomy, it needed a partner like Accenture.
“Increasingly those clients were looking for us to join up the other work they do – whether it’s digital experiences or other marketing services – and we knew that we had to give a more connected offering to clients,” said Karmarama chief executive Ben Bilboul.
“But it’s a challenge for clients and agencies to join them up. [Our acquisition] is a big signal that that connectivity of customer experiences is going to be one of the most important things for CMOs going forward.”
It’s for this reason that Accenture’s fellow consultancies and marketing groups will be looking at this deal with a keen and cautious eye.
The creative space has been the preserve of the more traditional marcomms groups and will undoubtedly leave the major networks – and the mid-market ones like Oliver Group and MDC - a little shaken.
“This is very much a large new player announcing its intent to be a full-scale marcoms agency, rather than one just operating at the more technical end of digital marcoms,” said Keith Hunt, managing partner at Results.
“Deloitte Digital, IBM iX, PWC, EY have all made acquisitions in the digital space in the last few years. They must now be looking at this and wondering what their next step should be."
And now that Accenture has made such a bold move, they may also need to reevaluate and consider whether the time has come to do the same. Tristan Rice - who manages SI Partners' European M&A advisory practice - predicted that this will lead to a spate of acquisitions in the coming year.
"Karmarama is a substantial business; it's the largest business Accenture could have bought that was available in the UK of that nature," he said. "You can imagine this marks the start of a fairly sustained M&A trend in that space. It's likely to lead to more deals, not only by Accenture but also its peer group."