Hot Acquisition Sector Alert: Marketing Agencies

The changing face of marketing

Up until fairly recently, marketing agencies have generally specialised in one or two areas of marketing. Agencies traditionally offered either well-established marketing services such as PR or earned-media marketing, or they were one of a newer breed of agency specialising in digital approaches, often involving data analytics, or content and social marketing services, for example. Fast-forward to 2019 and the M&A market is full of deals involving the coming together of traditional and non-traditional forms of marketing, creating agencies that can offer a more holistic service for demanding clients.

The main reason why agencies want to offer a combination of traditional and non-traditional marketing is that businesses demand both types of marketing services. Brands that have tried to switch to digital-only, or have just stayed traditional, usually suffer as they alienate a section of their market. Take Pepsi, for example. The soft drinks giant decided to switch wholly to social media marketing and pulled its TV adverts completely, only to reverse the decision within months after realising a large section of its target audience were no longer being reached through its campaigns.

Notable deals

In the UK there have been several deals involving marketing agencies buying up other agencies that enable them to offer new capabilities to their customers. And the majority involve more traditional marketing agencies acquiring those with digital capabilities, which can enhance their non-traditional offering.

Shoot the Moon is a marketing agency based in Manchester that has built up its client base over two decades in operation. It has recently purchased JGM Agency, along with its specialist digital team of 13, to strengthen its digital offering.

Meanwhile, The Unlimited Group, a marketing services firm based in the UK, has announced that it has purchased Model Citizen, which offers advanced analytics services.

Although The Unlimited Group already promoted itself as a digital agency, the addition of Model Citizen, which it is rebranding as Realise Unlimited, will further enhance its ability to utilise consumer data to improve its marketing services.

CEO of The Unlimited Group, Michael Richards, explained: “Advanced data analytics presents one of the most exciting opportunities in our industry and this acquisition gives us both the credibility and platform to super-charge our offering.”

Another smaller digital agency recently snapped up by a larger buyer is ?What If!, a UK-based innovation agency. It has been purchased by consultancy giant Accenture and is the latest in a string of marketing services acquisitions from the business.

Despite being founded back in 1992, ?What If! offers a complete range of services helping its big brand clients to build an ‘innovation culture’. It says it uses an: “experimentation-driven approach to help clients incubate new products, services, business models and organisational cultures.” Accenture says the acquisition will allow it to: “help C-suite executives ask the right questions at the front end of their innovation journeys, imagine the 'art of the possible', and then reinvent themselves.”

Another notable recent deal has been made by the UK’s largest out-of-home media firm, Talon, which has purchased US-based Grandesign, in order to enhance its data-driven approach to outdoor advertising, which used to be seen as a more traditional way of marketing.

The move will see Grandesign’s offices in the US rebranded as Talon. Talon’s founder Eric Newnham, explained: “Data and technology is enabling real differentiation and growth for us globally, and this is part of a wider expansion programme that is just beginning.”

Opportunities for agencies looking to buy or sell

In the above acquisition, Grandesign’s chief executive officer, Aaron Gaeir, said the business was founded with the intention of one day finding a suitable buyer. The exit strategy was clear from the outset and in the current climate, the right buyer wasn’t too hard to find.

Gaeir explained that he was able to wait for a buyer who put as much emphasis on its employees as he felt he did. He said: “This was the plan from the start: build an attractive company for eventual liquidity.”

He added: “We’ve always had what we felt was very sought after—aggressive growth, great environment, a diversified portfolio and great clients.”

The Grandesign deal is an example of how smaller agencies with digital marketing specialism, skills and clients already established will find that they are widely sought-after by buyers looking to boost their own capabilities. Clients increasingly want a marketing agency to provide solutions to all their marketing problems and this generally now involves providing both traditional and non-traditional marketing services.

For strategic buyers in the marketing industry looking to buy a smaller agency to boost their offering, it pays to spend time finding a target that fits your current culture and ethos, which you will be able to bolt onto your existing agency as seamlessly as possible.

A thorough due diligence process is, of course, recommended to ensure that the business is valued correctly. It’s wise to take careful consideration of assets such as staff with expertise, as they are arguably the most important part of the sale. Without the right talent, the agency may begin hemorrhaging clients soon after a sale. If you can retain the talent, you will be more likely to retain the clients.

To sum up, there’s a real trend for agencies to grow through acquisition at the moment, and much of this growth is focused around building digital capabilities, especially with regards to data and how it can enhance marketing services. For buyers, it’s important to keep your finger on the pulse to ensure you are in the right position to buy when an opportunity comes along, and for smaller, successful digital agencies - don’t be surprised if you soon become the target of rather a lot of interest.

Share this article

Latest Businesses for Sale

---

---

---

View more businesses for sale