- M&A market ($5.3b, 119 deals) down 32% on 2014
- WPP leads all acquisitions with 42 investments
- China based Leo Group and Lecron Group diversify from farming to Digital agencies
- PwC and Accenture new players in acquisition space
NEW YORK, Jan 23rd, 2016 – 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 research from R3, an independent marketing consulting firm.
Top Ten Deals
The ten largest deals for 2015 reflect the diversity of the leading M&A players as well as the rise of China based investors.
WPP lead the way
WPP led all firms with 42 acquisitions (35% of total) with a total sales value of US$1.56b (29%), covering six continents, with the Chime UL and STW Australia standouts. “WPP has been very shrewd in capitalizing when the time is right” said Greg Paull, Principal of R3. “The increased investment in Australia came with their dollar in decline and the STW stock down from its March 2015 peak” he added. Chime’s stock was also down from 2014 highs.
Asian Based acquirers gain prominence
Five of the top eleven based holding groups in R3’s report are based in Asia, and four of the top ten deals came from these firms. While Dentsu completed more than twenty five 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 $500m. Meantime, a Chinese chemical company, Shandong Lecron Group, announced three large deals of similar digital firms valued at $494m. “It’s no secret that China has created its own digital eco-system, and these investors have seen rising stock as a result of some of these deals“ added Mr Paull.
Havas makes some big bets
Havas announced nine deals in 2015, up 383% in terms of investment from the previous year. Their acquisition of FullSix and CSA gave them more scale in Europe and other deals ranged from the US, UK, Canada and Vietnam. “Havas is firmly committed to enhancing their ‘village’ concept, which is a clear point of differentiation, and highly motivating to the right group of marketers” added Mr Paull.
A quieter year for Publicis Groupe
After the heady days of twenty investments, including Sapient in 2014, Publicis Groupe did half as many deals, with 93% less investment in M&A, according to R3’s analysis. “Based on their November announcement, this was an important year for internal alignment and consolidation” said R3’s Paull. “We expect that future years in their new structure might highlight some gaps that need to be filled” he added.
Interpublic , Omnicom make strategic developing market moves
Both Interpublic Group and Omnicom took the softening of the Russia and Brazil markets to increase their equity in their long term partners. In Russia, IPG increased its investment in ADV, along with completing its first ever deal in China, acquiring Magic Group for their Golin agency. In Brazil, Omnicom did something similar with Grupo ABC, along with a small deal in Germany. 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.
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 – a number of consulting firms, including McKinsey and Accenture are exploring opportunities to diversify – this is going to add pressure to agency relationships” said Mr Paull.
The Outlook for 2016
R3 anticipates that this wave of acquisitions will continue through the coming year. “We foresee a continued interest in Asia Pacific, which represented 38% of all investments in 2015 – new agencies are continuing to grow fast, particularly in China, where there is a totally different eco-system” said Mr Paull. “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” he added. “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 CEO’ and CFO’s on their clients – it’s only a matter of time for them to extend this to the CMO” he said.
M&A League Tables –
http://rthree.com/insights/category/m-a/
About R3
R3 (www.rthree.com), is a global consultancy focused on improving the efficiency and effectiveness of marketers and their agencies. We work with eight of the world’s top twenty marketer, including Samsung, Nestle, Unilever, GM, Johnson & Johnson and Visa.
For more information, please write to Erin Singleton, [email protected].
