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Karmarama, Nice Agency and the spirit of independence

By Andrew Moss

August 15, 2014 | 5 min read

Readers of this august journal will know that yesterday (Thursday 14 August), indie agency Karmarama acquired the mobile app specialist Nice Agency.

Terms of the deal (including any earn-outs or golden handcuffs) were not disclosed, but I think that whatever they were, this is one of the year’s more interesting deals, for a number of reasons. First let’s look at the bought and the buyer.

Nice Agency is one of those great little zeitgeisty shops that seems to have started up in the right place at the right time, doing the right things. Set up in Shoreditch, East London in 2009 by Peter Dolukhanov and Ryan Hall (who are co-managing directors), Nice has 50 staff, and has produced some great work in its short life.

It’s probably best known for creating the user experience for Channel 4’s 4oD on the iPad and iPhone, but the agency has also worked with a wide range of quality clients including the Times, Freesat, UEFA Champions League, UBS, Ralph Lauren and Reader’s Digest. What it's focussed on, and really, really good at, is helping brands transition to mobile, helping them get their messages out on this vital and fast-changing channel.

And what of Karmarama? Founded in 2000, it is now one of the biggest (it has billings of £70m-plus) UK indies and would, were it not for its willingness to hang onto that independence, be a prime target for one of the big holding groups; it has strong managerial talent and a client book – Virgin, BBC, Nintendo, Honda, BT and Costa are among those it’s worked for – that anyone would envy.

There have been some big changes in that managerial talent, with Nicola Mendelsohn and Dave Buonaguidi taking on new challenges, but the irrepressible Jon Wilkins has joined the group so it will be interesting to see where the CEO, Ben Bilboul, and he take the business next.

Karmarama cemented its independence in 2011 when it sold a stake to private equity house Phoenix Equity Partners (PEP), best known for its high-profile investments in Jimmy Choo and LK Bennett. Details of how much it invested were not revealed, although it is known that PEP has access to around £450m in funds, so it’s reasonable to deduce that it was tens of millions of pounds.

Karmarama said at the time that it would use the investment to fund expansion – of which the Nice acquisition seems to be the latest step. Prior investments by the group have included the CRM and data specialist Crayon and social media agency Grape. A ‘nice’ set of capabilities has been gathered which I suspect will be added to and I guess they will be eying international expansion at some stage.

The fact that the Karmarama management team have also invested in the company seems to cement that determination to remain independent – indeed, the Nice co-founders told The Drum yesterday that the acquirer’s independent status was a big attraction.

So, culturally, the two seem to be a good fit, and Karmarama and Nice Agency already have a working relationship, having collaborated on projects for FMCG brands like frozen yoghurt maker Snog and Magnum ice cream.

At some point in the future, Nice’s 50 strong team will move over to Karmarama’s HQ and another stage of Karmarama’s adventure will have been completed. Nice will continue to operate as an independent business within the wider Karmarama group, extending its capabilities across the client portfolio.

And of course, Nice gets access to a huge client and talent pool, and will benefit from investment while staying – notionally at least – independent. In fact I can see large indies like Karmarama and Engine becoming very attractive to start-ups and boutique agencies who wish to move to the next stage of their development and gain access to cash and resources without selling up to the big groups; and of course these ambitious indies will be looking to buy in specialised skills to broaden their own service offer.

Expect to read more of these deals over the coming months…

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

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