Vin Murria’s investment company AdvancedAdvT has laid out its plan for taking over M&C Saatchi through a reverse takeover but has received an immediate, negative response from the agency group’s independent directors, who said it does not “benefit” shareholders.
Both sides said they had made their statements “without the prior consent” of each other in what appears to be a sign of significant tension, especially given Murria is already the top shareholder in M&C Saatchi and sits on its board.
AdvancedAdvT, a listed acquisition vehicle, outlined its takeover proposal for M&C Saatchi in a stock market announcement at 7am on Friday (7 January), saying that it wants the agency group to focus on “data, analytics and digital” and to ramp up M&A.
Murria’s investment company said it sees “significant value” in the agency sector, pointing to the “out-performance and valuation of data-led digital marketing agencies and consultancy peers”.
That is thought to be a nod to UK-listed companies S4 Capital and Next 15 as well as other global players from Accenture to You & Mr Jones, which are challenging legacy agency groups and have been highly acquisitive.
AdvancedAdvT is proposing a “share exchange merger” with M&C Saatchi to create an “enlarged” company with greater financial resources and additional management expertise.
Murria’s company, which has previously raised £130 million in funds, gave no details about how a potential deal might be structured but suspended its own shares because of the takeover proposal.
M&C Saatchi said AdvancedAdvT would offer each M&C Saatchi shareholder 1.86 new AdvT ordinary shares for each M&C Saatchi ordinary share.
It is understood that would value M&C Saatchi at about £220 million, on the basis of AdvancedAdvT’s share price.
M&C Saatchi’s shares had shot up from about 167p to 210p during the earlier part of this week when AdvancedAdvT’s interest first emerged, but they slipped about 10% to about 185p on news of the proposed share exchange merger, because it suggests there would not be a straight buy-out or offer of cash.
Independent directors see little merit in Murria’s proposal
Murria, a former software entrepreneur, knows M&C Saatchi well because she has sat on its board as deputy chair since 2021.
M&C Saatchi’s other non-executive directors, who are led by Gareth Davis, the chairman, responded in a statement at 3pm on Friday, saying they saw little merit in her proposal at this time.
“The independent directors’ initial opinion is that this all-share proposal does not articulate an alternative strategy for the benefit of the company’s stakeholders beyond an initial change of control of M&C Saatchi,” they said.
“Furthermore, the proposal does not reflect the value of the business and its future prospects and would disproportionately transfer equity value from M&C Saatchi shareholders to AdvT shareholders.”
They added: “It is not clear to the independent directors how shareholders and other stakeholders would benefit from ownership dilution and a change in board leadership of the company.”
M&C Saatchi, which has its headquarters in Golden Square in London’s Soho, launched in 1995 as a breakaway from Saatchi & Saatchi.
The advertising agency group reported steady growth as it expanded internationally through a network of local agency entrepreneurs, rather than M&A, and expanded in areas such as performance marketing, public relations and talent management over the next two decades.
The group was rocked by accounting irregularities in 2019, which led to a boardroom exodus and a slump in the shares from 330p to just 30p at the start of the pandemic.
Murria, who made her money from her previous firm, Advanced Computer Software, which she built by making 14 acquisitions, has become a growing influence at M&C Saatchi.
She controls about 22.5% of the stock. She has a 12.5% personal shareholding, which she acquired for about 40p a share in 2020, and AdvancedAdvT took a 10% stake at 200p a share at the start of this month.
The latest share price purchase—at a premium of nearly 20% to where the stock was trading—fuelled speculation of a possible bid and led to AdvancedAdvT announcing its takeover plan.
Focus on data, analytics and digital
AdvancedAdvT said: “The merger, combined with a focus on a data, analytics and digital creative marketing strategy plus M&A, would enable the enlarged group to capitalise on the heightened opportunity to ‘navigate, create and lead meaningful change’ whilst guiding companies on their new digital journey.
“It would defend M&C’s traditional creative base against disruptive competitors and enable the enlarged group to grow market share against its peers. The merger would also enable M&C to resolve the legacy put option issue [as local agency entrepreneurs have earn-outs that need to be paid in shares] as well as providing the cash to accelerate investment in the business and transformational digital-led M&A.”
AdvancedAdvT, whose management team includes several of Murria’s old colleagues from Advanced Computer Software, pointed out it “brings additional management skills with considerable expertise and experience to complement, accelerate and grow the enlarged group through strategic and bolt-on acquisitions in fragmented international markets”.
Murria’s management team has “proven previous success in identifying, realising and harnessing latent value within businesses”, AdvancedAdvT added.
“The combination of the M&C brand and platform with the Company’s funding and experience is expected to increase the M&A opportunity pipeline. The combined reach and renewed appeal of the platform could attract many more quality assets.”
AdvancedAdvT suggested M&C Saatchi was lagging rivals because it had not been more aggressive about M&A.
“The outperformance and valuation of data-led digital marketing agencies and consultancy peers demonstrates investor support for companies who successfully capitalise on the perceived market opportunity. Other digital marketing groups have been successful in using M&A to acquire digital capability.
“We see a significant opportunity for the enlarged group, with an accelerated data, analytics and digital strategy and combined stewardship, to achieve similar valuation multiples, improve the liquidity of the shares, implement a progressive re-instatement of the dividend policy which we believe will enhance the business’ attractiveness to investors.”
Although Murria’s company did not cite examples, Sir Martin Sorrell’s S4 Capital has won a valuation of more than £3 billion since launching in 2018 and making more than two dozen acquisitions.
Moray MacLennan has been chief executive of M&C Saatchi since January 2021. The company has more than 2,500 staff and operates in 23 markets, including Australia, South Africa and the US.
He has pushed a strategy of simplification and digitisation and the stock price doubled last year, before AdvancedAdvT’s approach.
M&C Saatchi has also won clients including Uber, Google, TikTok and Tinder as well as new assignments from existing clients including the
AdvancedAdvT issued a follow-up statement at 6pm, in response to the independent directors, which struck a more emollient tone as it said: “We have a high regard for M&C’s business, management and board. We look forward to the opportunity to discuss our proposal and address the points raised in today’s statement with the independent committee of M&C.”
Private equity backing
AdvanceAdvT declined to elaborate on its intentions or plans to Campaign but several industry observers, speaking privately, suggested Murria will have plotted her course carefully.
Murria is “a very good operator” and “she does tend to get her own way”, according to two ad industry figures who know her and who speculated that she might take the group private if a takeover succeeds.
Marwyn Capital, a private equity firm, is one of the backers of AdvancedAdvT, after previously supporting Murria at Advanced Computer Software.
A person with knowledge of the financial markets, who is not involved in the M&C Saatchi situation, said: “AdvancedAdvT is private equity-backed, so [if it succeeds in taking over M&C Saatchi] they will be thinking about selling the business at a later date.
“They will be able to fund agency acquisitions and have access to capital but I am not sure it will be to the extent needed to get to S4 Capital’s levels. AdvancedAdvT’s statement makes clear that it will do deals but it’s not clear whether they are going to be piecemeal or gung-ho transformational.”
When Murria built Advanced Computer Software, she set it up as an acquisition vehicle and made an initial purchase of a management software company for £12 million in 2008 before going on to make a further 13 acquisitions.
Advanced Computer Software grew profits before exceptional items, known as Ebitda, from £1.8 million at the time of the first acquisition to £48.5 million in 2014, before selling the business for £750 million in 2015.
She was also a non-executive director of Chime, owner of VCCP, before its sale to private equity in 2015.