A study by global consulting firm R3 has revealed which media agencies have made the most acquisitions in the past 12 months with Dentsu leading the way with 39 and WPP second with 36.
R3 tracked 398 transactions around the world, covering $US14 billion 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” said Greg Paull, principal and co-founder of R3. “The only thing that’s clear is that CMOs have never had a less clear choice in seeking out partners in this space.”
Holding groups represent only 22 per cent of acquisitions
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 merger and acquisitions for the year.
The rise of the consultants
Last year was the year that the consulting firms got serious about expanding into marketing communications. IBM invested more than $US240 million into Resource Ammirati, Aperto and ecx.io. Accenture spent $US 175 million acquiring Karmarama in the UK and another agency. Deloitte invested into one of the US’s smartest boutique agencies, Heat.
Chinese and Indian buyers on the rise
This year also brought a number of new investors into the marketing services space – from P/E players, to Vice and Snapchat to new investors from India and China. Among the 10 largest deals of 2016 were investments from Salesforce, Telenor, Nielsen, India’s Miteno Group, and China’s Nantong Metals and Keda. “There’s a number of asynchronous buyers out there, many looking to make a major statement, to impact their business and share growth,” added Paull.
Private equity firms continue to invest
This year also saw a number of major deals by private equity firms in the sector, looking to build assets for future returns and sales. “With the growth of programmatic, analytics and mobile, the space has become a more dynamic sector for investors,” said Paull.
US leads the way from Asia
Despite extensive past activity in developing markets, 2016 saw the US market lead 50 per cent of value as well as 41 per cent of all deals. Asia Pacific ($US3.6 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 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.”
Trends for 2017
The coming year, with new governments in the US and other markets, promises to be a volatile one for investors. R3 is predicting 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 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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