the m&a market accelerates - results...
TRANSCRIPT
2011 was a great year for M&A activity.
2012 has been even stronger, driven
by an industry that is undergoing
dramatic change. Add to this the
historically high levels of cash on
balance sheets, a more diverse group
of strategic buyers and a deepening of
the available (entrepreneurial) talent
pool and you have a heady mix.
Size and scale are becoming ever more critical as
agencies compete for greater global reach, digital
expertise, and the ability to invest in innovative
technology; a move led by the major networks.
WPP continued to roll more of its agencies into its
global digital agency network, with Possible
Worldwide, acquiring UK based Fortune Cookie in
August. Naming Justin Cooke as Possible’s UK
CEO, Fortune Cookie will significantly strengthen
the network’s UK footprint and build upon
Possible’s position in Eastern Europe with a major
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Continued on page two
Contents:
The M&A market accelerates ..........1 & 2
Now it’s Brazil’s time in the sun ..............3
60 seconds ..............................................3
Global perspectives ..........................4 & 5
Round table 2012 .............................6 & 7
Results builds its AdTech practice...........7
Healthcare ...............................................8
Preparing for exit ......................................9
2012 Q3 deal statistics ..........................10
A year with Results ................................11
The team ...............................................12
BulletinIssue 59
4th Quarter
The M&A market accelerates
The leading adviser to companies seekingto build and realise value in the globalmarketing, technology, communicationsand healthcare industries.
new office in Poland. The game changed further
when WPP bought award-winning digital agency
AKQA (80% held by General Atlantic) for
£348million. Celebrated for its consistent double-
digit revenue growth, AKQA had been a target of
both Dentsu and WPP in recent years. The
acquisition is clearly a major coup for WPP (whose
offers had twice been rejected by AKQA) securing
the deal at a premium valuation (a multiple of
c.12.5x EBITDA) on billings of around £150million.
In a single stroke, this high profile acquisition
allowed WPP to temporarily claw back the digital
lead from Publicis, which had purchased Digitas for
$1.3bn in 2007 and Razorfish for $530m in 2009.
Not to be outdone, however, Publicis sought the
only remaining scaled digital player that could
command a truly premium valuation, acquiring LBi,
for around $540 million in September, reclaiming its
market-leading position.
The most dramatic agency shake up in 2012,
however, has been Dentsu’s near $5 billion takeover
of Aegis, its largest acquisition to date. In announcing
the bid Dentsu was very careful to note that it was
not planning to eliminate any of Aegis’ brands. While
clearly intended to allay any client concerns, this
statement was also wholly consistent with Takeda’s
understanding that to compete globally demands a
cross-cultural management dynamic.
For Aegis, a digital leader with best in class growth
rates, the sale came at an ideal time. It reported a
leap in PBT of more than £160m from the previous
year and a 10% rise in organic revenues to more
than £1billion. Having focused its digital strategy
disposing of Synovate in 2011 for £525 million,
Aegis’ shareholders are delighted with the excellent
returns. For Dentsu too, the deal makes clear
strategic sense. Despite its overwhelming strength
in its large domestic market, Dentsu has struggled
to compete with US and European rivals in
emerging countries and elsewhere. It currently
earns approximately 85% of its revenues from
Japan and the deal will reduce this over-
dependency to 60%.
Away from the networks’ race for digital scale,
Google+ has also been acquisitive. Having failed to
match the popularity of Facebook, it recently
acquired Wildfire, for a reported $250million,
seeking to leverage its analytics to measure the
effectiveness of social advertising. It is clear that in
the future the business models of Facebook and
Google will increasingly overlap. Meanwhile, there is
speculation Apple will use its $100bn of liquid
investment to make a strategic investment.
Aside from these headline deals, there have been a
record number of smaller deals in the Marcoms and
Adtech space. WPP has maintained its position as
leading ‘deal doer’ with 33 deals in the year to date,
trailed by Publicis on 17 and IPG on 10. But the
networks are not the only players in town. There
has been resurgence in activity amongst the UK
mid market groups who had largely been quiet
since the start of the recession in 2008.
Ebiquity, Mission and Chime have all been
acquisitive with the latter also divesting the Bell
Pottinger PR business in a £19.6m MBO.
We’ve also seen the emergence of new buyer
groups. For example, the major consulting firms
have become active in the sector with Deloitte
acquiring Ubermind, a US based mobile agency to
compliment Deliotte Digital, its full service digital
agency launched during the year.
PWC have also been active acquiring digital analytics
firm Logan Tod. It’s highly likely one will see more
activity from these and other consultancy firms.
Within Adtech, the major technology companies
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Continued from page one
The M&A marketaccelerates
have continued to show a strong appetite for
acquisitions, particularly related to social media.
Oracle, Salesforce.com, Google and Microsoft have
all spent billions of dollars strengthening their
offerings in that area.
2013 is looking equally promising across marcoms
and adtech with numerous deals in progress that
are likely to complete next year. Our tips for the
hottest sectors are data, e-commerce and content,
with mobile, e-commerce and healthcare all
expected to be very active too.
As technology and marcoms have become ever
closer and the ability to target consumers more
precisely becomes increasingly possible, the
demand for those companies with the skills to make
the most of the opportunities presented will continue
to grow.
Elsewhere, with everyone intent on building scale,
we might see further consolidation of some of these
established groups. Havas might be vulnerable to a
takeover given its reliance on the slowing market of
Europe.
What is clear from all of this activity and speculation
is that these are fascinating times in the global M&A
market. This year has taught us to expect the
unexpected, and much more besides.
If you would like to discuss this article,
please contact Chris Beaumont at
London organisers of the Olympicshanded the baton to Rio de Janeiroduring a colourful Closing Ceremony,hoping for a smooth exchange as thetravelling international sports eventheads to Latin America. Then, as thecalm settled over London’s OlympicStadium, the pressure started mountingin Rio de Janeiro.
Brazil now gets its chance and the clock is tickingfor the country to be ready to host the two largestsporting events in the world: the Olympics in 2016and also the World Cup two years earlier. TheBrazilian joy of life and the willingness of Brazil toshow the world that they are the first SouthAmerican nation to host the Olympics will light theway. All across the region, people will be hopingthat Brazil can succeed as the representative ofthe "new" Latin America - stable and prosperousbut with the same Latin flair.
It’s Samba time. It is Brazil’s time in the sun.
In fact, playing Olympic host is a high-stakes betfor any country, but Brazil seems to have moreriding on the games than most. The nation hasenjoyed an economic surge over the past decade.Explosive growth has pulled 40 million Braziliansout of poverty, a boom that saw it overtake Britainas the world's sixth biggest economy. The countryhas now climbed to the top of the global sportsplatform with Brazilians regarding the World Cupand Olympics as their emergence as one of theworld’s leading powers.
With success, however, often comes controversy,as such advances come with growing pains. In thissense, Brazil needs to decide what legacy theOlympics and World Cup will leave. Will it repeatthe success of Barcelona and London, or thefailure of Athens? How the country does in facingthe challenges remains to be seen. The fact is thatthese Games represent a golden opportunity forBrazil, which has a critical need for infrastructureimprovements. Brazilians hope that the largeinvestments will be permanent structuralimprovements and not cosmetic ones, but thereality is that, historically, the government has notcompleted projects as promised.
Not surprisingly, these new developments havetriggered a push by sports marketing agencies toopen outposts in Brazil, in addition to other globaltraditional advertising, digital, PR and eventsmarketing agencies. This seems to be a once-in-a-lifetime opportunity for these agencies: two megasporting events happening two years apart.
Brazil does not have a great tradition or heritage ofsports marketing expertise as in UK or USA, soalmost all of the mid-cap agencies and largenetworks are moving in. Although none of theagencies expects that building a business in Brazilwill be easy, their hope is that hosting the world’stwo biggest sporting events within two years ofone another will jump-start Brazil’s sportseconomy. Several are moving into the marketlargely to support existing clients and Brazilian andinternational sponsors who do business with FIFAand the IOC. But the plan is to ensure viablebusiness opportunities long after the last medal isawarded.
Brands in Brazil are also seeking to be part of theexperience. Although more or less set for theWorld Cup, many brands are still in the process ofdefining their Olympic strategies, and looking moreattentively at their longer-term strategies toward2014 and 2016.
Several areas of media engagement are becomingincreasingly important for brands in Brazil. Thesewill focus largely on unifying the various levels ofspectator experience across multiple platforms asbrands try to get closer to events and become partof the social conversation during the sportingaction. This reflects the increasing trend for socialmedia activity to be part of the TV viewingexperience. Additionally, microblogging chat onsites such as Twitter will continue its impressivegrowth trajectory to the expense of more traditionalmedia and PR sources.
Overall, the trend of shifting the focus to real timeinteraction and enhancing the sporting experienceinside the stadium, will continue at an acceleratedpace. The two forthcoming events will certainlygenerate more written content, more images, moresharing and more opinions than ever before seenfor a major sporting event.
If you would like to discuss this article, pleasecontact Eduardo Steiner at [email protected]
Now it’s Brazil’s time in the sun
60 secondsMike Amour
Chief Executive Officer, Project: WorldWide Asia Pacific
Q: Career highlight?A: Living and working in London, New York, Tokyo,
Paris and Singapore for some of the world's top
marcoms agencies.
Q: Best advice given?A: We don't see things as we are, we see things as
they are.
Q: Your biggest challenge to date? A: Working in post-bubble Japan in the early 90's.
Q: Your perfect day?A: Any fun activity with my two young kids in sunny
Singapore.
Q: Business or brand to watch?A: Huawei.
Q: Best campaign?A: P&G's 2012 Olympics 'Mothers' Work.
Q: Hottest sector in the industry?A: Mobile.
Q: Your best characteristics?A: Adapting to and leading in multiple global
business cultures; striving to be a good dad.
Q: Media must haves?A: iPhone.
Q: Your final word?A: Constant personal reinvention.
www.project.com
www.resultsig.com THREE
FOUR www.resultsig.com
Results global partners comment onsignificant developments in marcoms intheir region.
Andrew KeffordRegional Director, Asia Pacific & MENA Asia Pacific
Notwithstanding their largerdigital acquisitions, the continued expansion of WPP,Aegis and Publicis in the key markets of China andIndia has remained as strong this past year. They arecontinuing their acquisition drives of independentfirms when the general expectation was that they hadcompleted their network add-ons.
In 2013, we expect these three big groups to turntheir attention to the N15 countries with Indonesiabeing at the forefront of their acquisition plans withsmaller and newer networks becoming primarybuyers in China and India. The potential of theEconomic Integration of ASEAN in 2015 (a freetrading group of c.660 million people) will beincreasingly recognised, particularly in the leadingmarkets; Singapore, Indonesia, Malaysia, Thailandand Vietnam.
Eduardo SteinerRegional Director, LatinAmerica & ManagingPartner Brazil
The purchase of NeoGamaBrazil by Publicis in early July
(a combined transaction involving the acquisition ofthe remaining stake in BBH), represented a boldmove by Alexandre Gama, its founder. He has takenHegarty’s mantle as worldwide Chief Creative Officer.This transaction represents a historic changewhereby the old guard of such a prestigious agencyas BBH is being replaced by a new creative mindcoming out of Brazil.
Consolidation shall continue in 2013, especially insports marketing and events/entertainment. Thestability of Brazil’s economy, combined with a growingand strengthening middle class, have greatlycontributed to the diversification and sophistication ofthe way events and entertainment are enjoyed andconsumed. This trend will continue attracting theattention of new foreign players entering the marketeither by operating agreement or straight acquisition.
The M&A market will remain strong, although foreignbuyers remain somewhat cautious in view of adeceleration of Brazil’s economy.
Chris BeaumontRegional Director, North Asia
From Northern Asia, mobility isrewriting the rules of brandengagement and facilitating a deepening of culturalexchange.
The broadening of Asian creativity was bestexemplified, by Korean agency Cheil who, buildingon their Insight Exhibition for Samsung, won 12Cannes Lions. They too are expanding their globalfootprint through M&A; acquiring the McKinneyagency to strengthen their US network. There is aKorean phrase, ‘Hallyu’ which displays this trend withbroader impact: It means “Korean Wave ThroughDigital Wave” as exemplified by Korean Girl group2NE1 who demonstrate why many people aroundthe world should pay attention to K-pop!
Social media in China continues to explode in aunique manner. A larger market than that of WesternEurope, the Chinese spend almost half of their timeonline on social media platforms. Innovation is localand often ahead of the West. From a strategiccommunications perspective social media isespecially significant owing to the Chinese’ healthyscepticism for authority (a notion harder to censorthan on other media channels)!
Impacted by social media, supply-chain informationand transparency are giving some companies apremium edge (and enhanced growth prospects), asrecent product scandals have prioritised quality re-engineering on the corporate agenda. Success athome will be a spring-board for domestic brandsgoing global.
In Japan, the market for social games, in whichplayers go online to interact with others throughsocial networking services, has expanded in line withthe growing popularity of smartphones. The domesticmarket for social games is projected to surge toaround $4.5billion in fiscal 2012, providing afoundation for a number of local firms to monetisetheir games globally.
Going in to 2013, from all three geographies, expectdomestic leaders to make international land grabs.The law of large numbers prevails while the globalbalance is shifting!
Imad KublawiPartner MENA
The economies of The GCC states witnessed arecovery in 2012 which promises to continue intonext year, supported by high oil and gas prices and
increased governmentspending. In the marcomssector, Dubai continues to playa pivotal role as a regional hubdeveloping business in othermarkets, especially SaudiArabia and Qatar. M&A activity in the marcoms sectorhas grown substantially compared to previous yearsand further growth is expected in 2013.
Results International was pleased to have advisedFlip Media on their acquisition by Leo Burnett/Publicisin Q1. Later in 2012, Thomson Reuters announcedthe acquisition of business information service,Zawya, Souq.com acquired MidEast online shoppingclub Sukar, and Kantar Retail acquired a minorityinterest in GME, a Dubai based retail consultancy.
The Middle East will offer major growth opportunitiesfor global companies, a notion affirmed recently byAndrea Wong, President of International Productionat Sony Pictures Television: “We have a vibrantbusiness in Russia, we’re growing our Brazilbusiness and we have a joint venture in China. Butthe Middle East, in my opinion, is the biggest growthmarket we have in the next five years”.
The outlook for 2013 looks bright, mainly in the Gulf,and countries that witnessed the Arab Spring willcontinue their re-building efforts. Digital marketing willincrease in importance and share of corporatemarketing activity with IP traffic growing at a CAGR of57% between 2011 – 2016 and mobile data andinternet traffic expected to increase by 104% in thesame period.
Sunil GuptaManaging Partner, South Asia
The Indian tiger’s roar!,Though a bit more muted than
expected due to GDP growth rates receding to 6%from the highs of 9-10% of a few years ago, it is stillresonant. The Indian government is cognisant of thisslowdown and a new Finance Minister gives hope foran acceleration in growth, which will inevitably impactthe marcoms sector.
The marcoms industry is expected to grow about 9-10% in 2012, up from 8% in 2011, but while massmedia still rules the roost with a share of over 95%,sectors like Digital and Experiential are growing muchfaster. Advertisers have an increasing need formeasurable ROI on their marcoms investments anda need to penetrate and exploit the huge potential of
Global perspectives
India’s consumer markets. However, these marketsare widely spread and present their own challenges.
Two broad trends have emerged in the region’s M&Amarket: 1. The international networks are activelyconsolidating/increasing their presence in India, boththrough acquisition, and through trading relationships.This is true for Digital firms, PR, Experiential, andCRM/Loyalty. Over half a dozen firms were acquiredby the networks in the first half of 2012 and this pacewill only increase as the smaller internationalnetworks start to focus more on India.
2. Because of the above, many ‘smaller’ and evenregional firms across the marcoms spectrum are nowmore open to the idea of looking for a strategicpartner/investor. While deal sizes remain small inIndia, the networks/acquirers who are prescientenough to see value in not just size, but in theexperience and know-how of successfulentrepreneurs operating in a market that presentsmany logistical challenges, will prosper.
Jamie KeffordManager, South East Asia
There’s been a lot of talk ofAsia being the focus of a lot ofinternational businesses in
terms of sales, especially the big FMCGs. This isbeing driven by the large populations of Asiancountries (China’s population is1.3billon, India’s is1.2billion people and Indonesia’s population is242million) along with the fast-growing middleclasses.
The biggest story for FMCGs in 2012 has beenProcter & Gamble, who in May relocated its globalskin, cosmetics and personal-care unit from itsCincinnati Headquarters to Singapore, following adecision to base the business in the fast-growing Asiabeauty market. The first time P&G has moved abrand out of Cincinnati.
Singapore has also become a location for a growingnumber of Unilever Executives; in fact, the companynow has more people based there than it does inLondon.
Indonesia has the world's second largest number ofFacebook users and the third largest number ofTwitter users, globally. 87% of Indonesians who goonline have social networking site accounts. AlthoughIndonesia has been a contrarian market forsmartphones; it is one of the few world marketswhere the Blackberry beats the iPhone, outselling itas much as 12-to-1. Naturally, the scale of thisopportunity means that digital and mobile agenciesare hot property in and around Jakarta. In March,JWT's XM acquired Magnivate Group and there are
a number of other digital agency deals in progress. Foreign investment into Indonesian digital/socialmedia houses will increase dramatically in 2013.
Maurice WatkinsPartner, GroupArgent, USA
The first six months of 2012was a strong growth period for
US advertising and the agencies that service theindustry. This has a direct correlation with the gradualrecovery from the economic doldrums that began in2008. In 2011 alone, total US revenues for marketingcommunications agencies rose 7.9% year-on-yearand total spending on communications is expected togrow a further 5.6% in 2012. Specifically, revenue inthe digital agencies sector grew 16.4% in 2011 andfor the first time has contributed to more than half ofrevenue at CRM/direct marketing agencies.
A driving force behind ad growth and revenue hassurprisingly come from not only digital, but televisionas well. The 2012 Super Bowl and the LondonOlympics both claimed the title as the most watchedevents in US television history. That led to windfallsfor the ad agencies responsible for campaigns tied tothe broadcasts. A similar advertising bump will alsocome in the 2nd half of the year from the presidentialelection, which will not only affect television but radio,print and online as well. It is expected that the 2012election advertising spend will vastly outpace the2008 contest, with both parties having already spent$350 million on commercial ads before the post-Labor Day home stretch.
During the 2nd half of 2012 major internet companiesexpanded their reach into the digital and mobilespace, acquiring break-through technologies (andtheir underlying talent) in numerous acquisitions ofthe ~$100 million range. Yahoo acquired Stamped (amobile app developer), Google acquired of Wildfire(Enterprise Social Media Marketing Software), andFacebook acquired Threadsy (a maker of socialmarketing tools).
For 2013, we expect to see companies likeFacebook, Google, Microsoft and Yahoo (now led byMarissa Mayer, who’s bringing a renewed visioninspired by Google’s growth strategy) along withother mid-sized players continue their dynamicactivity in the M&A space, especially with acqui-hires– acquisitions of startups with disruptive technologieswhere the primary objective is to hire thedevelopment team.
David BloisRegional Director, Eastern & Central Europe
Two significant M&A deals have taken place in theTurkish market during the first half of 2012. 1) the
www.resultsig.com FIVE
acquisition of Istanbul basedMobilike, a provider of mobileadvertising services, by Berlinbased Madvertise MobileAdvertising and 2) WPP’sagency JWT’s acquisition of theremaining shareholding in Manajans Thomson - atraditional integrated marketing communicationsagency - that it did not already own. The mobile dealis representative of the new wave of technologyacquisitions that are sweeping the globe, oftenforming part of the stated strategy of many marketingcommunications groups.
On speaking with several of the major groups inTurkey, many have a stated aim to strengthen andgrow their traditional integrated business in thecoming months. In doing so they will have a strongeroffering for their client base and greater cross- sellingpotential for additional digital and marketingtechnology services.
In 2013, Central and Eastern Europe will seecontinued interest from the main agency groupscontinuing the consolidation of all things digital.Digital will be greater integrated into the serviceoffering of agencies and those without any digitaloffering, will acquire.
Afsor MiahKnowledge Manager, UK & Western Europe
It’s still too early to see whetherthe Olympics will have a
lasting legacy on the way brands market themselveshere in the UK and elsewhere the Eurozone crisis isunlikely to move beyond its current stalematescenario. It’s unsurprising, therefore that in themonths ahead any growth is definitely going to be ledout of the faster-growing emerging markets.
Data will truly take centre-stage next year and willreplace digital as the key driver of consolidation in themarket. Agencies are eager to support their clientslooking for the sort of data that can deliver actionableinsights. To this end, agencies are looking to bringrelevant data resources in-house and specialists whocan help deliver the insight that brands require will bequickly snapped up. Aegis and WPP have bothalready made a number of acquisitions in this space.
Mobile will continue to grow its influence as marketingspend follows consumer behaviour. Consumers arespending increasing chunks of time purchasing viamobile as well as consuming mobile content and it’sno surprise therefore that the big social mediaplatforms are focusing their efforts in this channel.Anyone specialising in mobile is likely to do well.
If you would like to discuss this piece, please contactAndrew Kefford at [email protected]
SIX www.resultsig.com
When you put a group of independentagency heads in a room and get themdiscussing issues affecting the industryand beyond, you’re always guaranteedlively debate.
This was certainly the case at Result’s eveningRound Table held in October.
Unsurprisingly, conversation touched upon the everamounting importance of digital as brands apportiongreater amounts of ad spend to the channel.However, with a table comprising guests from bothindependent and recently acquired agencies, thedominating debate centred on two key themes: 1) the benefits and disadvantages of remainingindependent and 2) the key factors that contribute toan independents’ success.
Facilitated by Keith Hunt, Result’s Managing Partner,the quorum shared their varying experiences when itcomes to pricing, maintaining a positive, successfulculture and how best to nurture key talent.
“A Network can help connect and provide thefirst soft contact, but the hard work remains”
When posed the question of whether participants hadever felt at a disadvantage when competing with thenetworks, the general consensus was that being anindependent player is tough but rewarding in equalmeasures.
But is there significant benefit from being part of alarger group? Neil McKay from Lakestar McCannwho recently sold his agency into a network felt thatmore doors were now open to him and hiscolleagues since relinquishing independent status. Inparticular, the increased number of client briefs thatwould never have come their way as anindependent.
But when it comes to pitching, surely it’s better to bepart of a large network brand offering? Disagreeing,Jon Davie from Zone stated that as an independent,he can win and lose pitches against both largeragencies and smaller specialists. Scale is a factor butbeing part of a network, in his experience, is lessimportant.
So, you’ve won the pitch and now have to deliver.Surely scale makes a big difference when it comes tothe ease of satisfying client demand? Stuart Wells ofWickedweb talked about how his agency had pitchedand won against much larger competitors. The ‘can-do’ attitude which won the agency the pitch meansthat the account team can end up working silly hours.
Wanting to deliver the best possible job as well as theteam having a real passion for what they do can spellcommercial disaster if it is left to run out of control. Certainly, with the consolidation of the larger digitalindependents throughout the year, everyone will bewatching with interest how AKQA and LBi fare undertheir new owners. Clearly only time will tell.
“The road to success [for independents] lies increating a differentiated culture”
Independents still have an important culturaladvantage over bigger organisations where it can beeasy to get bogged down in internal politics andmeetings about meetings.
With the challenges of growing an agency, what isthe glue that keeps it all together?
Jon Davie has built an agency of 125 people. To him,a key factor of achieving success lies in keeping theculture strong ensuring plentiful company socials anda highly visible senior team. As an agency head,walking into the office and not being able torecognise everyone is probably inevitable butworrying nonetheless.
This is a potential issue, rectified by Neil McKaydeciding that every morning he would walk aroundthe office, shaking hands and having contact with asmany people as possible. In other words, the well-known ‘management by walk-about’ technique!
With 15 years experience advising entrepreneurialtech businesses, Julie Langley, MD of Resultsconcurred that a successful culture is driven by aCEO and management team who clearly walk thetalk. They fly economy and stay in budget hotels.They treat their teams well by taking them out forshows and understanding that they have familycommitments. This is in sharp contrast often to largerbusinesses where there is one set of rules for seniormanagement and another for everyone else. Theowner-operated businesses that succeed, Julieexplained, are those that still operate as if they are 13people working from a garage!
A good culture, however, is not solely dependent onthe behaviours of the senior management team.Empowering Account Directors to recruit their ownteams is also a large contributor, passing downleadership responsibilities and allowing AD’s controlover cultivating a high performing team.
“Dynamo’s, Cruisers and Losers”
Talent is key to any agency’s success – but recruitingthe best remains a difficult process. What is the bestapproach to secure top talent? Is it harder for small
independent agencies than established networkbrands?
At Sense Worldwide, Jeremy Brown explained howthey make candidates work hard to get a job. Thatway you avoid making costly mistakes. Making andthen having to unravel the wrong senior hire can be anightmare and can take the business out of kilter foras much as a year. The trick is clearly to mitigate thisevent applying a rigorous selection process. Eachagency head develops their own techniques whenidentifying new recruits, one in particular applying auseful shorthand analysing prospective candidates as‘Dynamos’, ‘Cruisers’ and ‘Losers’. The dynamos arethose you want to have on board, but nurturingyoung, hungry talent also requires experienced (albeitexpensive) senior people who can grow the businessand nurture the dynamos.
It is easier, for flexible smaller agencies, to identifygood people to recruit and then create a job aroundthem. But equally there is no room for passengers, orCruisers.
“Digital is about ten times more labour intensivethan traditional media”
It was inevitable that the conversation would turn tothe ever increasing prominence of digital marketing,having been the focus of some of the largestacquisitions in the marcoms arena to date. The bignetworks have publicly committed to a certain level oftheir revenue coming from the discipline. And whilesuch pronouncements make for great headlines,even the most cursory examination of the figuresshows that the only way to hit such targets is byacquisition. Consequently this is great news for digitalspecialists and consolidation continues at pace.
Although whilst one of the fastest growing disciplines,it comes with pretty low profit margins. Many digitalagencies who started out in the early days believedthat any client win was good news and consequentlyoften sold themselves short. When digital salariesstarted to rise, they found themselves in hot water.
Agreeing with the predicament, an agency headstipulated that without a digital offer, the agencywould certainly be more profitable. From a purelycommercial perspective, digital would appear not tomake sense, but the team views it as an investmentin the future. For that agency, digital is about tentimes more labour intensive than traditional media.Both the agency and its clients struggle with this,though clients demand the service.
Despite the negative comments around digital, thereare a decent number of digital agencies making goodmoney and good profits. Strong management plays
Round Table 2012
Continued on page seven
www.resultsig.com SEVEN
We are delighted to announce therecent appointment of Julie Langley asmanaging director of ResultsInternational’s AdTech and Digital Mediapractice.
Julie has over 15 years experience advisingtechnology and digital media companies on M&A,financings and disposals. She has completedtransactions with many of the key buyers across thetechnology and media spectrum including Oracle,Microsoft, Experian, Moody’s, IAC, BT, Axel Springer,CNET and DMGT.
Julie started her corporate finance career atBroadview, a leading advisor on technologytransactions, where she specialised in the softwareand digital media sectors. In 2003 she joinedJefferies International where she was a ManagingDirector and ran the European software practice.
Transaction highlights include:• 3i’s acquisition of Seloger.com, the leading
French property website• Experian’s acquisition of Footfall, in retail data
and analytics• Microsoft’s acquisition of ScreenTonic, in mobile
ad serving technology • Oracle’s acquisition of Sunopsis, in data
integration software
The shift in advertising and marketing dollars fromoffline to online has led to a convergence betweenthe marcoms, technology and digital media sectors,and a dramatic upturn in M&A activity across thethree sectors. As a result, technology and digitalmedia has become an increasingly importantelement of our business. Julie’s experience acrossthe technology and digital media spectrum, combinedwith our long track record advising some of the mostinnovative players in the marketing and
communications sector, gives us a uniqueperspective on the sector for our clients.
AdTech Market OverviewThe AdTech market can be defined in numerousways but, for us, it covers all technologies whichfacilitate and improve the advertising, marketing andsales process, including social media tools, adplatforms, business intelligence and analytics, mobileand video creation and distribution technologies andmarketing automation. M&A activity in the AdTechsector has increased steadily over the last 12 – 18months, driven in part by three key trends:
Social Media. One of the key drivers of convergencebetween advertising and technology has been thehuge growth in the use of social media - initially byconsumers and now by corporations as a criticalchannel for reaching their customers. As a result,traditional enterprise software players such as Oracle,Salesforce.com and IBM have all added social mediamarketing capabilities to their core customerrelationship and marketing product suites (seeOracle’s $300 million acquisition of Vitrue,Salesforce.com’s $689 million acquisition ofBuddyMedia, and Microsoft’s $1.2 billion acquisitionof Yammer).
There remains a huge gap between whereconsumers spend their time and advertisers arespending their dollars. Consumers spend nearly 20%of their time online on social networks and yet today,social networks account for only 5% of online adbudgets. More importantly, consumers are not onlyspending a lot of time on social media sites, they areincreasingly using those sites to inform theirpurchasing decisions – some forecasts suggest thatwithin two years over 50% of all retail sales will beinfluenced by user-generated content, such asratings, reviews and Q&As. This potential is certainlyreflected in the trading valuation of key marketplayers - the most high profile player, BazaarVoice,
trades at over 6x current year’s revenue. Google hasalready seen the value in user generated contenthaving acquired Zagats and Frommers.
Mobile Internet. Mobile internet use now accountsfor just over 10% of media use but still only attractsabout 1% of the total money spent on advertising.The dawn of mobile has been long promised but hasbeen held back by small screens, limited userattention and lack of cookies – and the insistence ofadvertisers of applying traditional advertising modelsto the mobile format. But as the smartphonebecomes the perfect direct response unit and thetablet becomes the second screen in the living room,ad spend (and viable business models) will follow.M&A activity to date has been sporadic butFacebook’s $1 billion acquisition of Instagramdemonstrates the pressure on the large desktopfocussed companies (and their advertisers) to movetheir models onto mobile.
Big Data Analytics. The growth in the internet hascreated a huge source of real-time data aboutconsumer behaviour – and has led to a raft of fund-raisings in the sector of companies which aim to tapinto that data and create actionable insight foradvertisers. To date, M&A has been largely driven bythe large infrastructure software vendors (IBM with itsacquisitions of Coremetrics, Varicent and Vivismoand VM Ware with its acquisitions of Cetas Software,Nicira and Log Insight) taking them both clearly intocustomer behaviour analytics. Expect the largeenterprise software vendors and internet groups tofollow.
These are just some of the factors driving AdTechM&A activity. A whole host of other factors are atwork.
If you would like to discuss this article, please contactJulie Langley at [email protected]
Results builds its AdTechand digital media practice
an important part in making the business profitableand that includes being ruthless about scope creepand level of fees.
Hard financial conversations can certainly riskdamaging the client relationship. Being confident,looking the client in the eye and truly believing thatthe agency is best in class and is worth every penny,is key.
“Agencies must learn to say no”
Managing fee expectations with clients can be atricky matter. Be it raising the fees for legacy clients to
a more realistic rate, or conversely setting rates fornew clients and not knowing what to charge. Giventhe competitive agency world, everyonefundamentally agreed that it can be hard to say no toclients, no matter how much risk assessment isundertaken (a widely recommended practice) beforetaking on certain client projects.
But had anyone actually said ‘no’ and resigned a‘bad’ client? Protecting their identity, one guest haddecided to terminate a contract with a client whowanted to be treated like a rock star and made lifeintolerable for those working on his account. In a
move of unanimous bravery, the client was told thatthe agency ‘didn’t work like that’ and was asked totake his business elsewhere. Whilst saying no isdifficult, agencies must learn to do so!
Energetic discussion continued apace around theseand other topics including global expansion,succession management and share option schemes.Excellent food and wine accompanied probing andinsightful conversation.
If you would like to discuss this article, please contactKeith Hunt at [email protected]
Continued from page six
EIGHT www.resultsig.com
Healthcare has always been animportant business sector for ResultsInternational, having completed over 50healthcare deals in the last 10 years.Now in order to give healthcare clients abetter business solution in the highlytechnical and regulated industry, ResultsInternational announces the formation ofa new division: Results Healthcare, to beled by Kevin Bottomley.
All industries are unique and have their
idiosyncrasies but the healthcare sector is arguably
more idiosyncratic than most. Healthcare has been a
significant contributor to the improved lifespan and
quality of life achieved over the last 150 years. There
are many significant milestones, both social, such as
national healthcare systems (e.g. NHS), and
technological, such as vaccines, antibacterial drugs,
effective treatments for new diseases such as AIDS.
Advances in surgical techniques and medical devices
were showcased in the achievements of the athletics
participating in the Paralympics.
Currently the US dedicates approximately 15% of
GDP to healthcare and this absolute commitment
has traditionally been relatively insensitive to the
normal financial cycles. The global market currently
exceeds one trillion dollars and analysts projection
double digit growth over the next four or five years.
Much of this growth is in the emerging markets as
healthcare becomes more accessible to growing,
aging and more affluent populations in these
territories, although traditional markets such as
Europe, the US and Japan have seen robust
revenues since 2007.
A key value driver for this industry has been its
traditional commitment to innovation and such
innovation in both the nature and delivery of
healthcare will remain key, be it in the latest treatment
for a cancer or the provision of NHS services outside
the UK in developing markets.
Some of the biggest and most profitable companies
in this sector are the major pharmaceutical
companies responsible for the global marketing of
high value, high margin innovative treatments for
unmet medical needs. The search for innovation is a
key factor in many of the transactions contemplated
and executed in the industry.
Many transactions in this instance are licensing deals
where pharmaceutical companies collaborate with an
innovator to jointly develop the intellectual property
(IP) and share the benefits arising from the marketed
products. These licensing agreements are very
sophisticated, affording a fair sharing of the costs,
risks and rewards over the lifetime of the product. Of
course, the parties to these licensing deals should
always have expert advice from transactional experts
to ensure that value of the IP is fairly assigned
between the licensee and licensor (the parties).
Another way to acquire innovation is by company or
asset acquisition and 2012 has seen a number of
high profile examples, including BMS’s acquisition of
Amylin for its portfolio of novel diabetes treatments.
Understanding the value of innovation in this context
is important in achieving a fair price in any sale.
One final important characteristic of the healthcare
market is the nature of the service buyer, which
generally is essentially monopolistic (e.g. the NHS in
the UK, or US medical insurance companies). That
gives these national healthcare buyers significant
leverage in determining what healthcare services will
be provided in a given country, through strict
regulatory approval requirements and increasingly,
the price to be paid for treatments and services
Healthcare
through reimbursement hurdles (e.g. NICE in the
UK).
These regulatory and pricing restrictions to the
market have to be addressed almost on a country by
country basis, with each territory having its individual
requirements and issues. Market access expertise is
critically important and there has been a growth in
consultancies providing this important support both
for effective regulatory approval and reimbursement.
The consultancies containing this expertise have also
been the subject of M&A transactions, and again the
value is based on the knowledge and expertise of the
partners and employees.
Finally, manufacturing and marketing products for the
healthcare industry are highly regulated activities, so
divesting or acquiring a manufacturer or marketer of
healthcare treatments such as pharmaceuticals will
require transaction advisers who understand and can
articulate the value of compliance and quality in the
context of any sale or acquisition.
The healthcare sector is an important global industry
which has always been at the forefront of innovation
and regulatory compliance. It has a rich history in
M&A deal making but to be effective in deal making
in this sector you need the support of industry specific
experts.
Kevin BottomleyManaging Director, Results [email protected]
Delivering Transactions and Business SolutionsDelivering Transactions and Business Solutions
www.resultsig.com NINE
Selling your business is probably themost important transaction you will everundertake. You wouldn’t leave sellingyour house to chance, so you certainlyshouldn’t do so when selling thebusiness which has consumed so muchof your time, energy and passion.
In the same way that you wouldn’t put a house on themarket that requires lots of remedial work, you’ll wantto make sure that your business is in great shapebefore you contemplate a sale. So first and foremostthat means planning in advance. Selling a businessshouldn’t be done on a whim. Give yourself at leastsix months, ideally more, to really scrutinise what youneed to be thinking about to add real value in the eyesof a prospective acquirer.
Ensuring that your business is fit for sale means youwill command a higher price when the time comes foran exit. It also means that if your house is in order,management won’t be distracted running around in“fixing mode” during the time-consuming salenegotiations and can focus on what’s most important,i.e. steering the business and keeping an eye onprofitability.
Be clear on what potential acquirer’s value in abusiness and ensure that yours is up to scratch.Without this sort of insight you won’t know where tofocus your attention and could easily end up spendingtime on aspects of the business which are of nointerest to a buyer. What we call ‘premium factors’ willvary by company and sector.
Start by conducting a review of your business.Understand its strengths and weaknesses,benchmark it against your competitors and use theoutputs to reflect on how a buyer will view it. There area whole range of tools available to do this, includingclient reviews/surveys, the net promoter scoreapproach or specialists such as ourselves at Resultswho can provide tailored support.
Potential acquirers have a clear list of what theyexpect to see in a successful business. Highsustainable margins are absolutely fundamental andit’s an area where you should have the tightestpossible control. Closely connected with this is thesubject of profits. If you are thinking of an exit, mostbuyers will require a minimum of £0.5m and ideallyanything in excess of £1m.
Look also at how your financial performancecompares to other businesses in your sector and whatgrowth your business can support based on historicperformance. Is your business model scalable? Doesit have a robust growth strategy? Have you done thenecessary tax planning? Is your growth ahead andnot behind the business? These and other financialperformance indicators will come to the fore when theselling process kicks in.
A clear succession strategy is pretty high on the listtoo. Here at Results we have seen transactions lurchdangerously close to disaster as the main shareholderprepares to exit the business having paid little or nothought to succession management planning. Placingequity principally in the hands of key management is agood way of overcoming any potential issues of thiskind. In the same vein, you also need to be sure thatkey client relationships are spread throughout seniormanagement so that the departure of any one persondoes not have an inordinately negative impact on thebusiness as a whole. We’ve all heard those stories ofkey clients who follow a senior agency contact whenthey jump ship.
Intelligent succession planning is closely connectedwith the broader issue of talent and retention andagency capabilities. Have you assessed the strengthof your second tier management? Is managementaligned and performing as a team? Do you have theright incentive scheme in place?
Agencies operating in younger, fast-growing marcomsdisciplines such as digital, social media and mobilemarketing need in particular to ensure that theirmanagement skills and capabilities are up to par andthat they can scale in line with growth. Any agencyneeds to ensure that its own business operations runto the same standard as client delivery.
Any potential acquirer will need to see that good solidoperational processes are in place. Do you have anorganisational structure that you can scale? Do youhave the right client engagement model? Do youhave a relevant team of specialist third parties in placeto advise on M&A, tax and legals? Falling down onclient delivery or disaffected staff are warning signsthat your agency might not be fit for its next stage ofgrowth - and that you need to undertake an organicredesign to match your ambitions.
Culture is an important way for agencies todifferentiate themselves in a crowded marketplace.Ask yourself some straight questions. Are you clear
on what your culture is? Can you and your staffarticulate it? Do you and your team use it and does itdrive and support your vision? Do you measure itthrough engagement surveys? Culture will impactyour ability to attract and retain talent and it’s oftensaid that clients buy people. Culture will often be whatwins you a piece of new business.
This leads us to the broader issue of clientrelationships. Every agency aspires to a good mix ofsticky blue chip clients, businesses that are deeplyembedded into the fabric of the agency and wherethere is a real partnership-style relationship. Thestrength, nature and longevity of client relationshipsare vital considerations for buyers. Moreover, over-reliance on any one client will set alarm bells ringing.Agencies should in any case have a process formonitoring client satisfaction, but this becomes evenmore vital when preparing to sell the business.
Any agency that can develop proprietary processesand methodologies that are unique and highly tailoredto a client’s needs will attract a higher sale value. Inthe nicest possible sense, developing the right kind ofIP can lock clients in, build better margins andtherefore create a virtuous circle for both parties. Italso contributes to having a proposition that is clearand differentiated and ensures that you are best inclass.
Armed with knowledge of what adds value to yourbusiness in the eyes of potential buyers, it’s vital thatyou draw up a clear plan of objectives with timescales.This allows you to place a stake in the ground andensure that plans don’t drift. The plan should alsoinclude a compelling vision for the business. Identifythe main areas of focus, or what we call the ‘strategicpillars’ to achieve your vision. International expansionmight be one, building your creative offer another.Ensure accountability by assigning a senior person toown each strategic pillar and report back on progressto the rest of the management team.
Like anything, when it comes to selling your business,the devil is in the detail. A careful plan, formulated wellin advance, with ownership of key aspects clearlyoutlined, will stand you in excellent stead. That way,when it comes to the nitty-gritty of the actual saleprocess you can be confident that you have preparedyourself and your team in the best possible way.
If you would like to discuss this article, please contactMiles Welch at [email protected]
Preparing for exit
TEN www.resultsig.com
Results tracked 200 deals in theMarcoms, AdTech and Digital Mediasectors in Q3 of 2012.
We witnessed some mega deals in the space with
Microsoft’s USD$1.2 billion acquisition of Yammer,
the enterprise social network that operates a
Twitter-like service for office workers; and not
forgetting Dentsu’s acquisition of Aegis.
Reinforcing the growth of interest in emerging
markets, the number of deals in APAC surpassed
those in continental Europe. The high number of
cross-border transactions also supports the trend of
large networks seeking strategic acquisitions
outside of their domestic markets.
The infographic below provides a breakdown of
acquirers, geographies and respective deal volumes
in the marcoms and adtech space. Deal activity
remained constantly high throughout each month of
Q3, higher than previous months in 2012,
reinforcing our position that the M&A market in this
space is at its strongest in recent years.
If you would like to discuss this article, pleasecontact Afsor Miah at [email protected]
Q3 2012 M&A:Summary Highlights
2012 Q3Deal Statistics
geographical split
by month3most active sectors
deal type
PE/VC backed deals17
Cross border deals62
50
by disclosed value
US$16.1bn
$ active mid-market players
volume of deals
200
adtech buyers
North America
AfricaSouthAmerica
UK
86
3 1
MiddleEast
3
Europe
26
APAC
28
Canada
7
Social
PR Search
Advertising
Mobile
Data
Integrated
AdTech 67
67
66
Jul
Aug
Sep
most active acquirers
Gannett
WPP
Publicis
IPG
AegisIAC
Dentsu
Salesforce.com
Chime
Cheil
Merkle
ProphetOracle
Media Post InMobi
10
5
5
543
3
22
2 2 2
2
22
46
www.resultsig.com ELEVEN
A year with Results
Bridgehead International
St Ives Plc
a leading Singapore based digital
communications company
Results International acted for Crayon
Results International acted for CIC
Results International acted for The Upper Storey
Results International acted for Flip
has been acquired by
Karma Communications
has been acquired by has been acquired by
This current year has been a recordyear for Results, completing 16transactions globally including fourcompletions in November!
We continue to both cement and grow our expertiseacross a wide range of marcoms sub-sectorsincluding digital, data, design, logistics and PR andhave significantly strengthened our position intechnology and healthcare.
Digital has been a core sector this year across all ourglobal offices - we are very much contributing to therace for digital dominance by the networks.Internationally, we have sold three digital agencies intoPublicis including Flip Media, the largest digital agencyin the Middle East, we advised Lakestar on its sale toMcCann Worldwide (owned by IPG), sold Upper Storyto Aegis and advised CiC on its acquisition by KantarMedia (part of WPP). We continue to be attuned to theacquisition strategies of the major networks and otherleading acquirers and are recognised as trustedadvisors to high quality independent agencies.
We remain highly active in all the hot sectors withinmarcoms. As the importance of data and analyticalinsight grows, we successfully advisedData2Decisions, a leading marketing analytics andeconometrics modelling provider on the sale to Aegispositioning ourselves strongly as the industry continuesto consolidate.
As both networks and mid-cap groups continue todevelop their Healthcare offering, we launched ResultsHealthcare, advising on the sale of AbacusInternational, an international market accessconsultancy, to Decision Resources a subsidiary ofglobal pharmaceutical and manufacturing holdingcompany, Piramal Enterprises. In addition to oursuccessful sale of Virgo Health to IPG, and the sale ofBridgehead to global research provider GfK, ourexpertise in Healthcare marcoms has significantlygrown in 2012 and the pipeline for Results Healthcareis looking extremely exciting for the year to come.
2012 has also been a truly international year forResults – our Asia Pacific and Middle East operationshave also had a busy year, contributing 6 of our deals.Indeed, 11 of our 16 deals this year have been cross-border transactions, demonstrating our growing globalreach. Being able to access buyers on every continentand providing our clients with deep local marketknowledge underpins our reputation as a truly globaladviser to our chosen sectors.
Whilst the majority of the deals on which we advise aretrade sales, this isn’t always the right answer for ourclients. Many seek to remain independent but backedby private equity money. This year we have sold digitalagency Crayon to Karma backed by Pheonix EquityPartners and we will shortly announce a sizeableprivate equity investment into one of the UK’s bestknown agencies. We continue to nurture our
relationships with the UK’s best private equityinstitutions who view us as sector experts with adoorway to some of the best, fastest growing andhighest quality businesses.
This year, our team has grown in strength and number.We have been joined by two Managing Directors: JulieLangley pioneering our advance into technology anddigital media and Kevin Bottomley an experiencedadviser to Healthcare clients. In addition, we welcomeDavid Feldgajer and Mark Williams who have joinedas Managers and Harriet Rosethorn and SherifHegazy have joined forces providing much neededanalyst support to our growing team.
It wouldn’t be Results unless we raised a significantamount for charity either. This year members of ourteam have undertaken the Iron Man (and half IronMan) Challenge, run half marathons and grownmoustaches in the name of raising money for goodcauses. Results also joined the spirit of London 2012and got involved in the London Olympics with three ofour team in the UK taking roles in the OpeningCeremony.
It has been a record year for Results and we havecontinued to grow in both team size and globalreputation. We have an incredibly strong pipeline aswe approach 2013 working with a number of clientsacross all sub-sectors of the global marcoms,technology and healthcare sectors – a busy 2012 buta sure to be even busier 2013!
a leading social mediaresearch and consulting
agency in China
part of WPP
has been acquired by
a media communicationsand market research group an international marketing
communications group
a Middle East basedadvertising agency
Results International acted for Bridgehead
has been acquired by
one of the world’s largestresearch companies
a health economics andmarket access consultancy
Results International acted for Incite
has been acquired by
a UK marketing services group
a UK market leadingresearch and
insight agency
the largest marketingeffectiveness analyticsconsultancy in Europe
Results International acted for Lakestar
Results International acted for Virgo
Results International acted for Data2Decisions
Results International acted for Orbital
has been acquired byhas been acquired by
one of the UK’s leadinghealthcare communications
consultancies
part of Interpublic Group
has been acquired by
a media communicationsand market research group
a leading global marketingcommunications agency group
Results International acted for Bridgehead
has been acquired by
Results International acted for Abacus
has been acquired byhas been acquired by
a London and Manchesterbased search
marketing company
www.resultsig.com
27 Soho Square, London W1D 3AYTel: +44 (0)20 7629 7575
Authorised and approved by the Financial Services Authority (FSA)
Andrew KeffordRegional Director,Asia Pacific & MENA
David BloisRegional Director,Eastern and CentralEurope
Dan EgertonConsultant
David CoppManager
Hemavli BaliDirector
Keith HuntManaging Partner
Andy CollinsSenior Partner
Julia Crawley-BoeveyManager
Eduardo SteinerRegional Director, Latin America & Managing Partner,Brazil
Arne TödtManaging Partner,Germany
Richard EyreNon-ExecutiveDirector
Chris JonesNon-ExecutiveChairman
Angela LurssenBusinessDevelopmentDirector
Imad Kublawi Partner, MENA
Chris BeaumontRegional Director, North Asia
Sunil GuptaManaging Partner,South Asia
Pierre-Georges RoyPartner,GroupArgentUSA
Graham BeckettFounding Partner & Non-ExecutiveDirector
Jim HoughtonPartner
UK
Sarah LeesMarketing Co-Ordinator
International
Miles WelchPartner
Jamie KeffordManager,South East Asia
Afsor MiahKnowledge Manager
Alison AustenHR Manager
Sheungyu ChoAnalyst
Maurice WatkinsPartner,GroupArgentUSA
Andrew DyschHead of Finance
Drew MeyersPartner,GroupArgentUSA
The team
David FeldgajerManager
Sherif HegazyAnalyst
HarrietRosethornAnalyst
Kevin BottomleyManaging Director
Julie LangleyManaging Director
Jo CrawfordOffice Manager / PA
Mark WilliamsManager
Vikky GrayTeam Assistant / PA