Who are the major acquirer groups in creative and technology M&A?

Published

19 February 2020

Author

Rosie McKeith

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SI Partners latest research, exploring the M&A aspirations of creative and technology acquirers across the globe identifies seven major buyer groups active in the space. Find out who they are, their planned level of activity, what they are looking to acquire and where.

 

Download Global Acquirer Report

 

The seven key buyer groups acquiring creative and technology businesses, identified following interviews with 300 acquirers, market activity 2019-20, as well as conversations with our network of over 1,500 global strategic and financial investors, are:

  • Technology consulting companies
  • Management consultancies
  • Enterprise technology companies
  • Marketing technology providers
  • Global marketing services groups
  • Independent marketing services companies
  • Private equity investors (read more about PE buyers here)

Although this is by no means an exhaustive list of buyers operating in the creative and technology sectors given the changes to the M&A landscape in recent years - and there is (often considerable) overlap between these groups – these broad categories outline the most active acquirers and those worth understanding as a potential growth partner for global agency leaders considering a future transaction event.

The strategic objectives driving these companies M&A strategies varies widely. However, the global results show that activity across the board remains strong for the short to mid-term, with 72% of respondents looking to make at least two acquisitions in the next 18-24 months.

 

So, who are these buyers, and what’s driving them?

 

Technology consulting companies

This category includes IT & software developers, technology outsourcers and digital transformation businesses. Scale, global organisations and modernising in an agile way is acutely difficult to do; but also requires investment in non-core talent-based consulting skills (thinking, not doing) to move further up the value chain.

While consultancies like Accenture have invested heavily in creative skills (Droga5, Karamrama) and innovation (?What If! [link], Happen, Bow & Arrow) – most buyers in this sector are focusing on digital build, experience, platform enablement, data and automation.

 

Management consultancies

Consultancies with quality talent rather than technology at their core, the likes of McKinsey and BCG are looking to acquire assets which will expand on their current product offering. Typically risk-averse, their acquisitions tend to be highly targeted, and often with a relationship already in place.

Investment in design, build and innovation has slowed, as we begin to see these consultancies absorb their acquired entities into the main business. Culture, as well as skillset, drives many acquisitions in this space – how will these businesses maintain these cultures post-acquisition?

 

Enterprise technology companies

Enterprise technology is increasingly big business, with well-funded start ups in a range of sectors and verticals – and increasingly technology consultancies investing in cloud-based software. They are largely looking to acquire technology IP, and scalable bolt-on services.

Microsoft’s acquisition of GitHub, and cloud hosting service for software development version control, is a good example of investment in scalable technology IP.

 

Marketing technology providers

The least active of our seven groups, the marketing technology providers put most stock in high growth, high profit businesses. Only 6% of this group intend on making 3-5 acquisitions in the next two years, compared to a 24% average across other groups. 

As they look for further (and global) market share, platforms like Adobe Marketing Cloud are adding capabilities to reach both business and consumer users. Acquisitions from this sector can be niche; Adobe acquired French company Allegorithmic (Substance Tools) last month, which provides textures for games – driven by demand for 3D tools alongside Adobe Dimension.

 

Global marketing services groups

Having dominated the marketing sphere for decades, the global marketing services groups (WPP, IPG, Omnicom etc) are struggling to retain market share – needing to shrink their core business to enable them to modernise.

Acquiring digital skills is key for these groups – in particular adtech/martech expertise (86%), content (76%) and performance marketing (67%). Geographically, the global marketing services groups are looking at South East Asia and China to expand their businesses, both of which are markets that other entrants have struggled to crack. 

There has been much discussion about the impact of management consultancies and technology consultancies on the fortunes of these industry giants, yet the global marketing groups still have the ability to make transformational deals (such as the scale data acquisitions we saw in 2019 – Epsilon, Merkle, Acxiom).

 

Independent marketing services companies

The scale-ups of the creative and technology space, independent marketing services companies (typically PE-backed) are often highlighted as the most interesting buyers by sellers. Capability-focus varies, but all are seeking to build specialist groups without the baggage of a decades-old marketing services company.  

84% of buyers in this group are looking for business growth – but with less resource to complete deals, the success of each is paramount. 42% of this group want to access new markets, ambitious M&A initiatives to provide global coverage.

There is an element of ‘buyer beware’ in this space – while some groups are backed by focused management teams with access to cash and the skills to grow, there are some that potentially lack vision, direction and may not necessarily prove the best long-term partner from a seller’s perspective.  Alignment of objectives and integration is key to long term value creation.

 

Private equity investors

Both global and UK-based PE firms are beginning to explore talent-based technology-focused businesses – as detailed in our Global Acquirer Report they expressed particular interest in sector/client specialists (65%), as well as data capabilities (40%).

Firms in the UK including Livingbridge, BGF and LDC have made numerous investments in the creative and technology space, and with plenty of dry powder across Europe, they are looking to invest in high-growth businesses with a clear future exit. (Read more on PE investment in the media, marketing and technology space from my colleague Jack Mehigan here).

Ambitious entrepreneurs may look to explore the private equity route to pursue their own roll-ups - as we have seen with BrainLabs (Livingbridge) and Four (BGF).

 

The creative and technology landscape has changed dramatically over recent years, with a proliferation of buyers entering the space looking to acquire skills to future proof their businesses. There’s an abundance of opportunity for sellers whose capabilities align to acquirer priorities.

 

Download Global Acquirer Report

 

SI Partners Global Acquirer Report discusses the findings from interviews with 300 senior decision makers worldwide, detailing acquirer aspirations for 2020, what capabilities they are seeking, which regions they are targeting acquisitions, and expected levels of M&A activity.  Download the report for the full findings of each of the seven buyer groups active in the creative and technology M&A landscape.