NEW YORK – According to an independent marketing consulting firm, a new group of Private Equity, Consulting Firms, and agricultural companies from China emerged as unlikely players in a complicated competitive space for investing in the communications industry.
According to research from marketing consulting firm R3, British multinational advertising and public relations company WPP led all firms with 42 acquisitions (35% of total) with a total sales value of US$1.56b (29%), covering six continents, with the Chime UL and STW Australia standouts. “WPP has been very shrewd in capitalizing when the time is right” said Greg Paull, Principal of R3. “The increased investment in Australia came with their dollar in decline and the STW stock down from its March 2015 peak” he added. Chime’s stock was also down from 2014 highs.
Five of the top eleven based holding groups in R3’s report are based in Asia, and four of the top ten deals came from these firms. Chinese agricultural companies Leo Group and Lecron created the most unlikely of deals by investing in digital agencies. After its 2014 investments in digital agencies, pumps for water irrigation manufacturer Leo Group entered into four more deals valued at more than $500 million. For its part, Chinese chemical company Shandong Lecron Group, announced three large deals of similar digital firms valued at $494 million.
The ten largest deals for 2015 reflect the diversity of the leading M&A players as well as the rise of China based investors. Meanwhile, Dentsu completed more than twenty five deals and Hakuhodo invested in Canada’s most famous global agency , Sid Lee.
Havas announced nine deals in 2015, up 383% in terms of investment from the previous year. Havas’ acquisition of FullSix and CSA gave them more scale in Europe and other deals ranged from the US, UK, Canada, and Vietnam. According to R3’s analysis, Publicis Groupe did half as many deals, with 93% less investment in M&A in 2015. “Based on their November announcement, this was an important year for internal alignment and consolidation” said R3’s Paull.
In 2015, two big consulting firms became active players in this space as both Accenture and PwC flexing their muscles. Accenture’s investments in six digital agencies covered five different continents, while PwC staked an investment in Hong Kong’s Fluid Group. “The definition of a digital agency is still to settle down – a number of consulting firms, including McKinsey and Accenture are exploring opportunities to diversify – this is going to add pressure to agency relationships” said Mr Paull.
Paull and R3 anticipate that this wave of acquisitions will continue through the coming year. “We foresee a continued interest in Asia Pacific, which represented 38% of all investments in 2015 – new agencies are continuing to grow fast, particularly in China, where there is a totally different eco-system,” said Paull.
“We also expect more Asia based firms to spread westward – we have already seen this with Dentsu, Bluefocus, and Cheil in past years, and we expect more to follow suit,” he added. “Finally, we would look to more of the consulting firms – from Accenture, to BCG to McKinsey, to continue to build their offering in this space. They already have strong relationships with the CEOs and CFOs on their clients – it’s only a matter of time for them to extend this to the CMO,” he said.
With information from: http://www.rthree.com/en/insight/detail/933J2AN.html.
