The WPP Group has been the most active in the mergers and acquisitions (M&A) department for the marketing and communications (marcoms) sector according to research by Results International.
Nine deals were made by WPP and its subsidiaries in Q1 2017, focusing on emerging markets such as India, China and Brazil.
Dentsu and Publicis lag behind with four deals each. Dentsu has been topping the M&A charts for the marcoms sector in recent quarters, while Publicis is getting back on the acquisition wagon.
Management consultancies are also increasing their competition in the market; with the only exception of IBM did deals in Q1 2017. The buyer market continues to expand with new entrants such as The Gotcha Group and Groupe Marc De Lacharrière SA making multiple acquisitions for the first time.
Q1 saw 219 marcoms deals, down from 238 in Q4 2016 according to Results International. UK saw deal volume falling (24 in Q1: 39 in Q4) while Western Europe saw an increase (61 in Q1: 51 in Q4). Across Western Europe, including the UK, the number of deals still remained in line with previous deal volumes.
Continental Europe appears attractive for buyers looking to service clients globally; this strategy is reflected by Accenture’s recent acquisition of German agency, SinnerSchrader. APAC buyer numbers slipped from 44 in Q4 2016 to 27 in Q1 2017, with market discussions suggesting the drop off due to Chinese currency restrictions rather than concerns over international politics.
Results International’s research highlights that several marcoms sectors are seeing an uptick in activity in Q1 2017. There were 10 shopper deals, up from three in Q4 2016, including Bain Capital’s acquisition of Daymon Worldwide (US) for $413m and HLD Associés acquisition of French Tessi’s remaining stake for $150m. Private equity funded those deals and its appetite remains strong, with Providence recently investing in multiple assets and Lake Capital’s decision to put Engine on the market with a $500m price tag imply investments are maturing.
The most popular target appears to be full-service digital agencies, accounting for 27 deals in Q1. Website UX, design & build saw 15 deals this quarter, up from nine in Q4, and events & experiential saw 19 deals, up from 11 in Q4. Results International postulate that this is reflective of broader B2B groups expanding their proposition via acquisitions.
The media buying sector however saw a fall in deal volumes from 20 in Q4 2016 to nine in Q1 2017, along with data/analytics (12 in Q4 to four in Q1). This fall could be the market leveling off after the rush to enter media and data in 2016, as acquirers have build capabilities internally or already made their plays.
“WPP is back on top for deal volumes, when you add in Publicis getting back into M&A and continued activity from Dentsu, it underlines that quality targets are still very much sought after by both established and emerging players,” said Julie Langley, partner, Results International.
“There are many different types of buyers that understand the value of a marcoms presence to reinforce and supplement what they’re trying to offer and give them more influence over the c-suite. This is the widest buyer universe we’ve seen and it continues to expand with new entrants and emerging holdcos continuing to bolster activity from the traditional acquirers, consultancies and technology players.
“Brexit is yet to have much impact on M&A but the consequences may be more apparent in terms of client budgets as brands take longer to define spend, and there is also increasing scrutiny across a number of marketing services disciplines. Overall though, the M&A market continues to be an exciting environment for agencies looking to drive growth and value,” she added.