CVC Capital Partners, one of Europe’s largest private equity firms, is jointly acquiring a majority stake in We Are Social, along with its international sister agencies currently owned by BlueFocus: Fuseproject and Vision 7 International.
CVC is investing alongside global investment group Caisse de dépôt et placement du Québec (CDPQ).
Brett Marchand, president and chief executive of Vision 7 International, will lead the new combined agency group, which has more than 2,500 employees across 12 countries in North America, Europe, the Middle East and Asia Pacific.
Marchand told Campaign the merger will mean investment that is likely to lead to rapid growth and many more hires, focusing on core services of creatives for brand strategy, media planning and buying, earned media and product and brand design.
The sale demonstrates the influence of Martin Sorrell’s S4 Capital and its aggressive growth strategy on the agency landscape, according to media analyst Ian Whittaker.
Earlier this month, S4 Capital reported a 71% year-on-year increase in organic revenue (reported as “gross profit”) to £104m ($144m) for the first three months of 2021. This is a 33% increase on a like-for-like basis. S4 this week announced the latest in a string of acquisitions, of Brazil-based digital performance agency Raccoon Group.
The two-year-old business, formed by executive chairman Sorrell after his acrimonious exit from WPP in 2018, is now targeting “even stronger” growth this year as the global economy bounces back from the Covid-19 pandemic.
S4 is targeting 30% organic revenue growth this year, up from a previous target of 25%. In 2020 the business posted 19.4% growth in organic revenue to £295m.
Whittaker, who was head of media and digital equity research at investment bank Liberum Capital until 2020, told Campaign: “[CVC] have been expanding into more and more media assets recently (particularly in sports rights). There is a general interest in agency groups from private equity. Part because they have significant cash and they need to deploy it, part because the success of S4 Capital has shown that agencies can be successful and can provide a successful exit strategy.”
CVC has its headquarters in Luxembourg and has various investments, including sports media rights and the corporate public relations and advisory firm Teneo. In March, CVC became the new financial backer of rugby union’s Six Nations Championship at a cost of £365m for a 14.3% stake, bringing its total investment in professional rugby union to more than £700m.
Earlier this year, CVC was pointed to by sources as the private equity company that held talks with Publicis Groupe – though the French holding company denied this.
Whittaker added: “The S4 comparison probably leads on to why they want to expand quickly and in the areas they are talking about (such as data and technology). S4 has done that and its market cap has grown significantly, plus its valuation is at a significant premium to other agency groups. I think CVC / CPDQ would like to replicate that.”
The move – which means the firm is private, not publicly traded, creates a digital-first, technology-enabled global advertising and marketing services group of companies with the capital to invest in what Marchand describes as "an aggressive growth strategy".
Marchand said: “Companies today are looking for increased digital-first marketing and communications services and more transparent, business-focused outcomes versus just outputs. So you can expect to see us investing in expanding on our tech-enabled and data capabilities and talent. Also, we’ll be looking for some great new agencies to join our family.
“Of course, our agencies use freelancers from time to time, but we do prefer to bring the best talent in-house so they can add to the culture of the agency and diversity of thinking.”
What’s more, Marchand is already alluding to further acquisitions. “Our aggressive growth strategy includes expansion of capabilities and geographies. Some of that will be organic, but acquisitions are definitely planned so we can scale quickly in the areas most important to our growth. We’re looking for great agencies and entrepreneurs, to join us on our mission,” he said.
He stated the company’s private status meant it could focus on making long-term investments, instead of being focused on one quarter at a time.
Marchand added: “We believe in being a company that supports agencies and their growth instead of getting in the way. I call it being a PropelCo instead of a HoldCo. We are focused on making a meaningful impact on our agencies by investing in technology, data capabilities, geographic expansion and talent acquisition to benefit their rapid growth.”
We Are Social was acquired back in 2013 by BlueFocus Communication Group – then a mere 400 people in eight countries around the world. BlueFocus will continue to be a significant investor and partner for all agencies in the group.