The new breed of independent marketing services groups are building the 21st century agency around one simple concept: to engage customers and consumers at each step along the path to purchase in a cohesive, cost-effective and virtuous loop
What does this mean in practice? It means that strategy, creative, production, distribution and measurement are all executed ‘under one roof’. Silos and competing P&L’s are avoided and collaboration is incentivised and celebrated. No wonder then that they look carefully at culture when evaluating M&A targets.
According to our latest research, independent marketing services groups place more importance on a strong culture when assessing target acquisitions than any other acquirer group. 56% of the independents list a strong culture in the top three qualities they look for in target agencies, compared to a global average of 33% across all buyer types.
The independents have the luxury of a relatively clean slate with which to create the agency that their clients want. They are not weighed down by global networks operating in traditional disciplines and can balance their portfolios towards digital disciplines, where growth and margins are much easier to find.
Independent marketing services groups look to performance marketing for growth
At the heart of all of this is performance marketing. Return on investment has never been more important to clients and for agencies that can prove consistent and measurable success, client revenues can be grown at an astonishing pace.
Not only that, but the holy grail of recurring revenues and retainers – which for many agencies have become things of the past – are key tenets of the performance marketing model. That means faster growth, because agencies can focus on adding rather than replacing client revenues. It also significantly enhances capital value, as the value of an agency is essentially a function of the quantum and certainty of its future profits.
Private equity investment fuelling ambitions, but can the market deliver the right acquisition opportunities for the independents?
The rise of the independents as acquirers in the creative & technology sectors has been accelerated by a huge influx of Private Equity money over the last few years. This fuel is essential to their ambitious M&A plans. But if this group has an Achilles heel, it is a lack of global coverage and a shortage of independent agencies to buy which have the capabilities and scale that they need to fill the gaps. Many of these groups are led by people who have seen the difficulties of integrating lots of small acquisitions firsthand (Sorrell, Jones, Penn, etc) and they don’t want to fall into the same trap.
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.