Agency M&A activity is off to a slower start versus a year ago, according to consulting firm R3.
Through the first four months of the year, the value of acquisitions (based on sales volume of acquired firms) is down roughly 24%. During that period, there were 127 agency-related deals worth $2.7 billion, compared to 124 deals valued at $3.6 billion for the same period in 2016.
R3 calculates that to a great extent, the smaller acquisition values this year have been driven by declines in China (-78%). “China’s local companies are playing a 'wait and see' game through the first part of this year,” says R3 Principal Greg Paull, “but will likely be more active as the year goes on.”
R3 also notes the continued rise of new buyers -- just 18% of all deals were done by holding companies.
So far this year, the most acquisitive holding companies are Dentsu and WPP, which also led last year’s M&A activity in the marketing space.
Together those firms have acquired 95 agencies over the last 16 months. Most recently, Dentsu firms have made two of the larger acquisitions, including Merkle’s investment in Spanish agency Divisadero and iProspect’s purchase of performance agency Leapfrog in the US.
That said, big IT and consulting firms also continue to make big bets in the agency sector. Accenture picked up Belgium-based full-service agency Kuntsmaan in April, which followed its investment earlier this year in German agency SinnerSchrader. Since 2015, Accenture has made ten agency acquisitions globally, investing more than $488 million.
Salesforce also made an agency investment this year, snapping up San Francisco-based Sequence, which followed its $700 million acquisition of digital agency Krux in 2016. “Salesforce has made twelve acquisitions in the last twelve months, across the spectrum, from Demandware for $2.8 billion down to smaller agencies such as Sequence” added Paull. “It’s clear their mission is to play a more dominant role in CMO discussions in the years to come,” he added.
The R3 report also covers some acquisitions not made by holding companies or IT/Consulting firms, such as China-based CMC Capital Partners’ minority stake in CAA (Creative Artists Agency). And both Shiseido (in the U.S.) and Domino’s Pizza (in Australia) invested in their own agencies to bring creative talent in house.