How the Accenture-Droga5 deal will send ripples through the M&A space

Founder David Droga (right) will remain creative chairman / Accenture

Droga5 and Accenture Interactive finally announced today what many had been speculating on since last summer.

The news is a big deal; one of the highest profile ad industry acquisitions in recent years. Droga5 is just the latest in a long line of sexy agency names to seek out security within a bigger entity. And the arguments supporting the strategy from each party’s perspective are now so well practised they don’t need repeating.

The industry is in a very different place than it was when Accenture Interactive bought Karmarama in 2015.

That news provoked a sharp intake of breath, some speculation over the clash of cultures and accusations of Karmarama selling out creatively. Fast forward several years, and there’s no doubt that Accenture Interactive has been consistent in its M&A strategy to build strong marcoms capabilities that complement its core consulting offer.

In 2018 Accenture retained its third position in the list of most active buyers with nine deals. While there might have been a small slow down in deal activity by the consultancies in Q2 last year – when Accenture and EY each bought a full-service digital agency – did not signal a reduced level of interest in marketing services.

Accenture upped the pace again in Q4 when it snapped up Swedish data-driven marketing group Kaplan, followed by the acquisition of programmatic adtech company Adaptly a month later in December, confirming Accenture’s foray into media after the launch of its programmatic unit in May 2018.

Our industry is now much more familiar with the coming together of creative, data and technology businesses than it was even a couple of years ago.

If you’re a management consultancy with data expertise it’s much easier from a practical point of view to acquire and integrate creative capability than it is for a creative shop to buy its way into technology and data. That said, the cultural divide between a Wunderman and a JWT is much smaller than that between an Accenture/Deloitte and a creative shop. Wunderman and JWT inhabit the same world.

So how can we expect other acquirers to respond in the months ahead?

With this deal secured, there is a smaller range of independents for other buyers who want to bag themselves a famous creative agency name. Although there are options outside of the agency world, for example, those businesses that offer tech integration or e-commerce optimisation.

The mid-sized holding companies, You & Mr Jones, Stagwell, S4 etc continue to build capabilities around data, creative and automation as part of an effort to deliver value faster and cheaper to clients.

We are more likely to see them competing against the management consultancies for assets than we are to see any of the networks entering the fray.

Mark Read at WPP has a job on his hands to protect shareholder value and deliver on his creative transformation strategy. The other networks continue to invest heavily in data/analytics and automation; we saw IPG acquire Axciom for in excess of $2 billion last October and Publicis has recently confirmed it’s interest in Epsilon, which is likely to be an even larger deal.

And what deal activity can we expect from Accenture going forwards? While there won’t likely be anything quite as spectacular as today’s news – time is needed to integrate Droga5 - we should see them continue in their strategy of acquiring smaller, regional businesses that grow their footprint, a regular drum-beat of activity if you like. So far this year they have acquired: Danish Creative Agency Hjaltelin Stahl, Dutch digital agency Storm Digital and UK-Based Innovation Firm, What If.

The Accenture-Droga5 merger is likely to work well for both parties.

There’s no better way of testing chemistry than by partnering informally, and by all accounts, that is what the two businesses did a couple of years ago when they pitched jointly.

Working out differences and commonalties away from the spotlight means there should be a strong understanding that will stand them in good stead in the months ahead. And Droga5 is a slick, well-run agency which since taking on investment in 2013 has transformed itself and fully entered adulthood.

Paul Georges-Picot is director at Results International

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