We ask marketers: will 2023 be a landmark year in agency M&A?
A recent flurry of agency acquisitions, particularly in the social space, might indicate a busy year ahead. We asked leaders from The Drum Network (acquirers and recently-acquired alike) what to expect, and how agencies can get acquisition-ready.
Do recent acquisitions of social agencies indicate a busy year ahead? / Freestocks via Unsplash
Alex Burgess, global managing director, The Goat Agency: “There have already been a number of acquisitions this year and I don't see it slowing down. Influencer agencies in particular are in high demand, as we’ve seen from our own acquisition by WPP.
“The influencer industry is reaching maturity. Increasingly, traditional creative/media agencies are having their budgets reduced as brands start to plug more into social. Naturally, they want to hold on to this budget and acquiring an existing agency that offers this specialism enables this.
“At Goat, we advise that on average, a brand should now be spending around 30% of their total marketing budget on social and influencers… As more and more brands start to approach this number, we’re likely to see even more acquisitions of influencer-specialist agencies.”
Paul Stephen, co-founder and chief growth officer, Remarkable Group: “Since Covid-19, we have been looking to acquire agencies to help us scale, because growing organically alone takes too long in a fast-changing agency world. Our clients’ needs are changing fast and we need to be able to provide the services that our clients need now, not in 18 months’ time.
“While the scale and profit margins are important, to be ‘fit for the future’, we look for agencies with a clear proposition that adds to (or augments) our other agencies. That might be a particular tech, a particular vertical or particular geography. With some agencies experiencing exponential growth since 2020, Private equity investors have high expectations and are driving up multiple values and shortening earn-out terms for businesses with strong recent trading history. We are more cautious and look for businesses with a sustainable go-to-market strategy and strong leadership that will continue that growth.”
Steve Bell, global chief executive, Iris: “The M&A market is busy, which is not surprising when you look at the need for agencies to grow and the time it can take to organically develop the specialisms that are required in today’s market.
“Having undertaken multiple global M&As over the years, the most important factor is the cultural chemistry between the leaders and a common goal around progress. What might work on paper may not work in reality if the cultural connection and integration plan aren’t well thought through.
“As much time needs to go into the integration plan of the acquired business as the commercial due diligence. A well-planned integration plan will ensure the business feels at home from day one, is understood by all parties, and is able to generate operational synergies and exponential revenue growth.
“Integration should take months to plan and even longer to implement. It’s not about rolling the red carpet out on day one; it’s how both parties feel and act as one. No confusion, no ambiguity, just a clear plan that everyone understands and believes in.
“It’s critical that any key decisions are discussed before the deal goes through – for example, is there a plan to rename the acquired business? Trust is everything and it can be eroded very quickly in the first few months of integration if things aren’t discussed and agreed upon upfront.”
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Nathan Ulery, chief operating officer, The Mx Group: “Economic uncertainty, higher interest rates, and reduced valuations may cool the Agency M&A market some in 2023, but the fundamentals have not changed. We will continue to see great agencies coming together for years to come because the major contributors will remain — aging agency principals looking to exit; client expectations requiring larger, global, full-service agencies; and plenty of private equity dry powder looking for valuable companies to acquire.
“The question is not what will happen in the M&A space, but rather how successful will these acquisitions be? Bringing one or more agencies together is a difficult task. Agencies are collections of talented people who need to be inspired by joining forces. The agencies well positioned for this consolidation are the ones ready to take on the challenge of assessing the strategic and (equally important) cultural fit of a potential acquisition and have a repeatable process for integration that respects the unique needs of each business.”
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The Goat Agency
We’re the leading global social media marketing agency powered by influencers. We pride ourselves in bringing together data-led performance, real human relationships, expert creative strategy, authentic, engaging content and laser-sharp paid media targeting.Find out more
The Mx Group
The Mx Group is the second largest independent, integrated B2B marketing agency in the U.S. Our mission is to impact the marketplace for companies that impact the world. For over 30 years, we’ve created meaningful end-to-end buying experiences for B2B brands. Our clients are leaders and innovators in energy, utilities, manufacturing, hospitality, automotive, health care, technology and SaaS who rely on our expertise to influence and grow their businesses. Our relationships with our clients and people are why B2B Marketing recognized us as Agency of the Year. Our headquarters are in Chicago, but our reach is global. Whether a client is an established or startup B2B brand, we have the people and perspective to be a strong partner that makes a difference.Find out more
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