A new group of private equity, consulting firms and agricultural companies from China emerged as unlikely players in a complicated competitive space for investing in the communications industry, according to a summary of 2015 M&A activity from R3.
Top 10 deals
The 10 largest deals for 2015 reflect the diversity of the leading M&A players as well as the rise of China based investors.
|LEO Group||Wan Sheng Wei Ye (万圣伟业)||China|
|Providence Equity||Clarion Events||UK|
|WPP||Bruin Sports Capital||US|
WPP leads the way
WPP led all firms with 42 acquisitions (35 percent of the total) with a total sales value of US$1.56 billion (29 percent), covering six continents, with the Chime UL and STW Australia as standouts. WPP has been very shrewd in capitalizing when the time is right. The increased investment in Australia came with their dollar in decline and the STW stock down from its March 2015 peak. Chime’s stock was also down from 2014 highs.
Asia-based acquirers gain prominence
Five of the top 11 holding groups in R3’s report are based in Asia, and four of the top 10 deals came from these firms. While Dentsu completed more than 25 deals and Hakuhodo invested in Canada’s most famous global agency, Sid Lee, it was the Chinese agricultural companies Leo Group and Lecron creating the most unlikely of deals.
Leo Group, a manufacturer of pumps for water irrigation, expanded on its 2014 investments in digital agencies with four more deals valued at more than $500 million. Meantime, a Chinese chemical company, Shandong Lecron Group, announced three large deals of similar digital firms valued at $494 million.
It’s no secret that China has created its own digital ecosystem, and these investors have seen rising stock as a result of some of these deals.
APAC M&A League Table
The rise of the consultants?
In 2015, both Accenture and PwC became active players in this space—with Accenture’s investments in six digital agencies covering five different continents, and PwC staking an investment in Hong Kong’s Fluid Group. The definition of a digital agency is still to settle down, and a number of consulting firms, including McKinsey and Accenture are exploring opportunities to diversify. This is going to add pressure to agency relationships.
- Havas makes some big bets: Havas announced nine deals in 2015, up 383 percent in terms of investment from the previous year. Its acquisition of FullSix and CSA gave it more scale in Europe and other deals ranged from the US, UK, Canada and Vietnam. Havas is firmly committed to enhancing its ‘village’ concept, which is a clear point of differentiation, and highly motivating to the right group of marketers.
- A quieter year for Publicis Groupe: Publicis Groupe did half as many deals as the previous year's 20, with 93 percent less investment in M&A. Based on its November announcement, this was an important year for internal alignment and consolidation. We expect that future years in their new structure might highlight some gaps that need to be filled.
- Interpublic, Omnicom make strategic moves: Both Interpublic Group and Omnicom took the softening of the Russia and Brazil markets to increase their equity in their long term partners. Neither holding group has a strong recent history in the acquisition space, with just 17 deals between them globally in the last two years, compared to 155 from their European counterparts WPP and Publicis Groupe.
R3 anticipates that this wave of acquisitions will continue through the coming year. We foresee a continued interest in Asia Pacific, which represented 38 percent of all investments in 2015. New agencies are continuing to grow fast, particularly in China, where there is a totally different ecosystem.
We also expect more Asia-based firms to spread westward. We have already seen this with Dentsu, Bluefocus and Cheil in past years, and we expect more to follow suit.
Finally, we would look to more of the consulting firms—from Accenture, to BCG to McKinsey, to continue to build their offering in this space. They already have strong relationships with the CEOs and CFOs on their clients—it’s only a matter of time for them to extend this to the CMOs.
Greg Paull is principal at R3.
Methodology: R3 monthly reviews all public sources for M&A news across all marketing and media sectors in compiling this table. The complete table covers all individual acquisitions, more than can be featured in this summary report. R3 applies a consistent multiplier to the estimated revenue of all agencies acquired, based on the reported percentage required. Regardless of earn out terms, R3 assumes full sale amount of acquisitions at time of sale. For more details, write to [email protected]