Dentsu, WPP led acquisitions in mktg world in 2016: R3
It was a watershed year for acquisitions in the marketing sector with traditional players fighting with Private Equity, Consulting and IT firms, Chinese conglomerates and new buyers such as Snapchat, Vice, Visa and The New York Times, according to consulting firm, R3.
The firm tracked 398 transactions around the world, covering $14b in estimated deal value, a 150 per cent increase over 2015. “This increase was driven by more buyers seeking out the best digital and analytic talent from around the world. The only thing that’s clear is that CMOs have never had a less clear choice in seeking out partners in this space,” said Greg Paull, Principal and Co-Founder of R3.
The traditional buyers in this space, the six global holding groups, represented just 22 per cent of all transactions, with Japan’s Dentsu leading the way. Dentsu bought one of the largest independent agencies in the US (Merkle), bringing in significant data and analytics talent. Dentsu also invested in gyro, a global B2B agency. WPP (36 transactions, down from 45 in 205) was also active this year, investing in Triad Retail Group in the US – with over 80 per cent of their investments in digital agencies and technology. The other four holding groups made just 19 deals between them and represented just 3 per cent of total M&A for the year.
2015, 2016 Acquisitions by Holding Group
2016 was the year that the consulting firms got serious about expanding into marketing communications. IBM invested more than US$240m into Resource Ammirati, Aperto and ecx.io. Accenture spent USD 175m acquiring Karmarama in the UK and another agency. Deloitte invested into one of the US’s smartest boutique agencies, Heat.
Ten largest unconventional investors – 2016
This year also brought a number of new investors into the marketing services space with new challenges – from P/E players, to Vice and Snapchat to new investors from India and China. Amongst the ten largest deals of 2016 were investments from Salesforce, Telenor, Nielsen, India’s Miteno Group, and China’s Nantong Metals and Keda. “There’s a number of asynchronous buyers out there, many looking to make a major statement, to impact their business and share growth,” added Mr Paull.
Ten largest deals – 2016
This year also saw a number of major deals by private equity firms in the sector, looking to build assets for future returns and sales. “With the growth of programmatic, analytics and mobile, the space has become a more dynamic sector for investors,” said Mr Paull.
2016 Top ten deals by Private Equity firms
Despite extensive past activity in developing markets, 2016 saw the US market lead 50 per cent of value as well as 41 per cent of all deals. Asia Pacific (USD 3.6 billion in deal value) was the second ranked region, ahead of Europe and Latin America. “More buyers are trying to build a strong foundation first in the world’s largest marketing base,” said Mr Paull. “We expect more growth from Asia Pacific next year in terms of number of deals, but transaction size will be smaller than in the US,” he added.
The coming year, with new governments in the US and other markets, promises to be a volatile one for investors. R3 predicts a new group of players will emerge through this year. “We expect companies such as Facebook, Google, Amazon and Salesforce to be more active investors in the sector this year,” added Mr Paull. “They have the cash, and they are continuing to take leadership roles on content creation – so the need for talent will only increase,” he added.
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