Whenever management consultants make a move on our industry, it’s pretty big news. Accenture swooping on Karmarama is the biggest news yet. It’s a real statement of intent that signals they are truly serious about creativity, the heart and soul of our industry. For some, it’s scary stuff.
Yet it makes perfect sense for Accenture to add creativity to its offering. The lines between online and offline have completely disappeared and, as such, there’s now much greater harmonization of campaigns across channels to create consistent messaging. Through the Karmarama acquisition Accenture wants to lead the market with a fully integrated offer across all channels and solutions.
It will be hard for competitors, regardless of their sector to match this kind of offering through acquisition. Quite simply there are few independent creative agencies of the size of Karmarama left in the UK, and not that many globally.
That said, we already know a number of the digital players are looking to add more creativity to their offer. The Accenture deal could lead to more M&A activity from the mid-market groups, private equity backed businesses and other consulting groups as they attempt to respond in kind.
"Earnouts often create barriers because people who have sold their business on this basis become focused on maximising the profits for that particular company"
And what of the major holding groups? It’s unlikely they’ll respond with a raft of acquisitions. I suspect it will drive them to look more carefully at how they organize themselves and how they bring their different discplines together to present a more coherent offer. And let’s be honest, this is going to be a significant challenge. While we’ve recently seen Publicis Groupe bring SapientNitro and Razorfish together, there’s no indication they would, or indeed could, bring their creative agencies, such as Saatchi and Saatchi, into that mix as well. Most operate as separate organisations with different P&Ls and this can act as a major obstacle to cooperation.
Of course, integrating a creative business like Karmarama into a culture like Accenture isn’t going to be without its own challenges. The culture in a management consultancy is clearly going to be very different to that of an agency, and might not seem a natural fit. And while Accenture has already bought into the marcoms sector, these have mainly been digital businesses. But on the plus side, there is the fact that these acquired agencies sit within a separate division, Accenture Interactive, set up specifically to service clients’ marketing needs.
A major new player
For Karmarama, what’s appealing is becoming part of a big group that does not have a competitive offering. If it had joined one of the networks it could easily have found itself pitching against other creative shops. The fact too that three members of Karmarama’s senior leadership team are being given broader roles at Accenture is likely to assuage concerns about the integration process.
Let’s speculate on the deal structure; Accenture has not typically favored earnouts, whereas the holding companies do. Furthermore, Karmarama’s biggest shareholder was Phoenix Private Equity and PE firms don’t tend to sell on earnouts. This would have positioned Accenture as an attractive choice. Earnouts often create barriers because people who have sold their business on this basis become focused on maximizing the profits for that particular company.
When all is said and done, this deal means that there’s a major new player in town and this acquisition does not preclude it from making further acquisitions in other markets. Perhaps the biggest question is whether Accenture, or any of the other consulting group(s), will try to get into media buying, the (significant) missing piece of the jigsaw!
—Keith Hunt is managing partner at Results International