April 2019: Knowledge Economy M&A and Equity Market Update

By Ramone Param, Director, Equiteq

  • Industry deals profiled include Accenture’s acquisition of Droga5, S4 Capital’s acquisition of Caramel Pictures and ProgMedia, and Publicis’ purchase of Epsilon.
  • The Equiteq Knowledge Economy Share Price Index rose with broader equity market indices over the month.

Accenture’s purchase of Droga5 exemplifies the rapid transformation of the digital media competitive landscape

Target: Droga5 is a US-headquartered advertising agency with over 500 employees that has worked with a variety of blue-chip clients including Amazon and The New York Times.

Buyer: Accenture is an Ireland-headquartered global technology services firm.

Deal insight: Droga5 is the largest agency acquisition that Accenture has made to date. The deal further entrenches Accenture Interactive as a major player in the digital media space, putting pressure on the “Big Six” traditional media networks – WPP, Omnicom, Publicis, Havas, IPG and Dentsu. It will also put pressure on acquisitive growing consulting and technology firms that have already entered the space, including Capgemini, Cognizant and Deloitte Digital.

The deal forms part of another active year of deal flow for Accenture. Last year, Accenture Interactive was named the largest digital network worldwide by Advertising Age in its annual agency report for the third year running. Accenture Interactive’s major deals through 2018 included Adaptly in the US, Mackevision in Germany, Meredith Xcelerated Marketing (MXM) in the US, HO Communication in China and Altima in France.

S4 Capital continues to grow via acquisition with recent purchases of Caramel Pictures and ProgMedia by its subsidiaries

Targets: Caramel Pictures is a Dutch provider of film production services. ProgMedia is a Brazilian online marketing business focused on programmatic media.

Buyer: S4 Capital is a recently founded vehicle, which is being used to develop technology, data and content. Its subsidiaries include MediaMonks, a Dutch digital media agency and MightyHive, a US-based programmatic digital media buyer.

Deal insight: S4 Capital was founded by Sir Martin Sorrell after he resigned as CEO of WPP in 2018. The business then acquired MightyHive for $150m and MediaMonks for $352m. MediaMonks has expanded its content studio capabilities with the acquisition of Caramel Pictures, which works with a variety of high-profile brands including Heineken and Coca-Cola. MightyHive’s acquisition of ProgMedia expands the business into Latin America and adds notable regional clients like Serasa Consumidor – Experian’s Brazilian credit research business

Sorrell has stated that he expects to build S4 Capital into a multi-national communication services business focused on growth potentially akin to a consultancy like Accenture or Deloitte. He has also highlighted a desire to grow the business via M&A and recently expressed an interest in acquiring a significant first-party data asset.

Publicis acquires Alliance Data’s Epsilon business as it looks to move up the value chain with first-party data

Target: Epsilon is a US-headquartered technology and platform company focused on email and data marketing.

Buyer: Publicis Groupe is one of the major global media agency networks.

Cash Consideration: $4.4bn (2.3x FY18 revenue)

Deal insight: Publicis’ acquisition of Epsilon is the second largest media agency deal after Dentsu’s purchase of Aegis in 2013. The deal comes as the leading marketing agencies are under increasing pressure from consultancies and technology firms entering the digital media space. These more recent entrants are utilizing strong data analytics solutions to build effective advertising campaigns. Epsilon employs c.9,000 people, including 3,700 data scientists and will enable Publicis to move up the value chain with Epsilon’s clients’ first-party data.

Last year the Wall Street Journal reported that Dentsu and Interpublic Group (IPG) were both expected to submit offers to acquire part of Acxiom. IPG followed this report with its acquisition of Acxiom Marketing Solutions (AMS), Acxiom’s legacy data management business, which gave it access to customer data to drive more targeted marketing campaigns for its clients. The recent demand for similar capabilities from S4 Capital and pressure on other media competitors to respond to the recent activity in the space could result in further deal flow.

Selected Knowledge Economy M&A announced in April:

Source: PitchBook, S&P Capital IQ and Company Press Releases

Economy Knowledge Economy Share Price Index

Source: S&P Capital IQ

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