Waypoint’s Matt Lacey considers the near future in M&A, and why there’s such appetite for creative agencies right now.
M&A is a clear indication of what’s hot and what’s not in the market, and buyers will always acquire to build value. Because of the lead times required to get a deal over the line, and some of the conversations that may come to nothing, as an M&A adviser you get a really good sense of current and future appetites. Creative is hot currently and for the foreseeable.
The creative world used to be an easy one to understand and navigate. Today it is more complex, more polarized. It still includes traditional ATL businesses with their deep brand building and craft skills, but it’s increasingly about digital creative that delivers at pace and at scale – plus creative thinking underpinned by a CX skillset that delivers solution and service-based marketing. And that, in itself, is a vast over-simplification of the landscape.
Our industry is still working out what a modern creative solution looks like, and that endeavor is a key driver of demand for all types of creative assets. Acquiring businesses will have different requirements depending on their starting point. A traditional holding company might look to acquire creative businesses that update and help thread together existing assets. A performance-led business will instinctively look to bolster its creative production capabilities and, increasingly, the ability to respond strategically to creative briefs.
Recent deals provide a sense of the different types of creative solutions that are taking shape, although none of them is the finished product. Media.Monks – as a purpose-built response to today’s marketing needs and a prolific acquirer – is a good place to start. Roughly half of its acquisitions have been creative-led, including Decoded Advertising and cultural creative agency Cashmere. Its acquisition of digital transformation Zemoga is a clear signal of intent to be delivering solution-based creative.
But it’s not alone. In October, MSQ added creative production to its capabilities with the acquisition of Brave Spark studios; earlier in the year Jellyfish acquired creative technology business Splash Worldwide and Dept acquired creative marketing technology business Byte. Look out for the next moves of other acquirers such as Stagwell, Brainlabs, You & Mr Jones and Kyu.
Buyer appetite for creative continues to grow exponentially, particularly among highly acquisitive digital-first groups that have been purpose-built to service our turbo-charged, always-on digital media landscape with its insatiable thirst for content. One in three acquirer conversations we’re having at the moment are in this sort of space and demand vastly outstrips supply.
When buyers come to us with a creative shopping list, it’s our duty to challenge the brief. What is their vision for the creative solution they are looking to build? Where and how will the target business fit into their structure to deliver value? Does it address an immediate client need or is it about future-proofing the model? Are they looking in the right place?
These conversations are largely still polarized between brand creative and activation creative, probably reflective of the end-user (client) demand. While many agencies are still set up to respond to this, there are increasing numbers bridging both from the ground up.
No one’s yet got a perfect handle on how to build a holistic creative offer under one roof. Accenture Interactive’s got most of the parts and Dave Droga at the helm signals that its offering will be built around a creative heartbeat of some kind. S4 Capital is on its way. So who will get there first?
It might seem like a two-horse race, but actually some of the up-and-coming groups are contenders, holding key parts of the puzzle and each with their own take on how to bring things together.
If they can find the right kinds of creative businesses to bring into the fold, they might just find the winning formula. So creative-led M&A will surely continue to thrive, but not without its challenges for acquirers and sellers alike.
Matt Lacey is a partner at Waypoint