Private equity share of marcoms M&A deals surges in 2018

MediaMonks: Victor Knaap and Wesley ter Haar sold their company to S4 Capital
MediaMonks: Victor Knaap and Wesley ter Haar sold their company to S4 Capital

Overall deals were up 4% as S4 Capital kicked off its acquisitions, but consultancies made fewer deals than in 2017.

Private equity was responsible for 192 (22%) of the 882 M&A deals that took place in the marcoms sector in 2018 – an increase of 79% year on year. The total number of deals was up 4% on 2017’s figure of 847.

Major private-equity deals included the acquisition of UK-listed integrated marketing services company Communisis by the Aquiline Capital Partners-backed Output Services Group for $273m (£213m) – a premium of 39.8% over its share price.

Consultancies only accounted for 23 deals, down from 33 in 2017, and 12 of these were completed in the fourth quarter. Nine of the 23 were by Accenture, the third most active buyer last year.

The most active buyer by some distance was Dentsu, with 31 deals, while second-placed WPP made 15 – half of its total from the previous year. There were 71 deals in total for the big six holding companies, down from 88 in 2017. Havas and Omnicom had seven each, Publicis Groupe six and Interpublic five.

Julie Langley, a partner at Results International, said: "The high deal activity of 2018 was driven by the continued emergence of new buyers and private-equity interest in the sector, as well as the continued requirement for in-demand skills in area such as technology, programmatic, content and analytics.

"Between private equity’s growing interest in the sector and the heavy costs related to being a listed entity, it wouldn’t be at all surprising to see more public-to-private transactions among small and mid-cap companies. The high premiums paid in the process constitute an attractive option."

The most active sub-sector for acquisitions was full-service digital, with 126, followed by integrated with 72. There were 65 deals in media, up 20% on the previous year – something that Langley said was driven by out-of-home acquisitions, such as the takeover of APN Outdoor by JCDecaux, and programmatic deals, including MightyHive, the second acquisition made by Sir Martin Sorrell’s S4 Capital.

Langley added: "The MightyHive deal adds another leg to S4 Capital after securing content capabilities through the MediaMonks acquisition in Q3. What’s worth noting is it highlights the significance of in-house offerings.

"This trend could be viewed as an effort to better compete with consulting firms that are used to on-premise work. It could equally be seen as a reaction to brands increasingly taking certain functions in-house; this strategy is also apparent in the majority stake taken in Inside Ideas Group, home to in-house agency Oliver, by You & Mr Jones earlier this month."

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