SI Partners’ Tristan Rice, speaking from Cannes Lions Festival 2018, discusses the current marcoms M&A environment, including his insight on media buying, consultancies and more.
Cannes as an opportunity for M&A discussions
The climate at Cannes provides ample opportunity for buyers and potential targets to measure their compatibility. The nature of the festival is ideal for networking and as Tristan explains, it is perfect for "buyers to meet with multiple targets and test chemistry". Cannes accurately reflects the changes in the agency environment, embodying traits that are prominent in the marcoms area. Consultancies such as IBM, Deloitte Digital and Accenture are metaphorically “kicking sand all over the holding companies’ beach towels”. As the consultancies continue to grow and expand their offerings, they are contributing to the increasing air of apathy in marcoms towards agencies. It is too soon to render agencies obsolete, however, the consultancies and tech companies are becoming increasingly prominent players in the creative sector.
Consultancies the most talked about buyer type
As always, there were numerous topics of discussion for those in attendance at Cannes, not least the future prospects of Sir Martin Sorrell (who made his first acquisition play for new S4 venture with the acquisition of MediaMonks). However, at the centre of conversation for many attendees was the consultancies. A number of consultancies view the expansion of their service offerings as the most secure path to growth and aim to achieve this goal through the acquisition of smaller agencies. Firms such as Accenture Digital and Deloitte have been notably active acquirers in recent years (as discussed in our last M&A update). The networking element of Cannes again provides an ideal opportunity for consultants to mix with clients and people from agencies to establish ways to add value.
Media buying hotly debated
Another hot topic of discussion amongst Cannes attendees was media buying. Following a short phase of sustained consolidation at the turn of the century, there has been a distinct lack of M&A activity in this area. This is partially as a result of smaller firms struggling to match the spending power of larger groups such as WPP’s Group M. The ability of these groups to invest heavily in technology and people means they are able to extract the maximum from media opportunities in the market.
Data and technology a major force in the market
The implementation of data and technology and how to utilise them have had a major impact on marketing. Previously, the quality of the creative and volume of media spend were the most scrutinised aspect of marketing however, as a result of the development of analytics, it is now about establishing what works best. Today, as discussed in our global analysis of the challenges faced by creative businesses, the major barrier for creative agencies is sourcing the appropriate talent to execute their ambitions.
It is clear to see that smart, scalable strategy-led agencies are most sought after by acquirers in marcoms currently. These are the most desirable firms for acquisition amongst larger businesses looking to expand. Those who can use the systems, platforms and software to engage consumers and brands are the most attractive prospects to acquirers. Given all of this, it appears that a decrease in marcoms M&A activity is not on the horizon.