Month: December 2024

2024 was bookended by two Omnicom deals – Flywheel in January and Interpublic in December – which got us all excited. Green Square’s Tony Walford explains why he expects a lot more M&A excitement in 2025. It’s been a relatively slow couple of years for M&A globally, with the UK and North America displaying a general trend of decline from the peak levels seen in 2021. That said, there’s lots to be positive about as we enter 2025. First, why the decline? In a nutshell, economic and geopolitical uncertainty. Inflation increased globally from late 2021 and continued to persistently rise and remained high (above 5% in the case of the UK) until recently. Central banks hiked interest rates to bring inflation back under control, leading to increased cost of debt, which the majority of acquirers rely on to finance transactions. Couple this fundamental financing stranglehold with major global conflicts, fears of a global recession, 2024 elections in the UK and the US, and an indication from the new UK chancellor that Capital Gains Tax (CGT) rates would dramatically increase, and you have the perfect storm. Buyers became more selective and offered lower valuations, with sellers reluctant to accept these valuations, particularly given CGT fears at the time. Whilst we saw a flurry of UK transactions closing prior to the budget, and some that missed the deadline completing shortly after, there has still been a significant reduction in deal volumes over the last couple of years.

Falling inflation and interest rates

So, what about M&A in 2025? The consensus view, supported by us at Green Square, is we’re in for a very busy year as we see the factors that drove the reduction in activity start to reverse. Most notably, inflation has reduced and thus interest rates are slowly coming down and this is expected to continue into 2025. Putting aside growth and political issues in France and Germany, the UK and US are seeing some recovery and economic optimism is improving, even though we are yet to see what the second Trump administration will do. Private Equity is sitting on a lot of cash which it needs to either deploy or give back to investors, with spending clearly being their preference. On top of this, PE firms typically hold investments for 3-5 years and, due to the relative lack of activity over the last couple of years, many are holding investments at the latter end of this timeline which they need to offload. Thus, we can expect to see plenty of PE disposals in the coming year. Then there are those agencies that wanted to sell in 2024 but decided to hold off for all the reasons stated above. Time waits for no one and, with the increase in UK CGT being lower than expected (at least for the time being), there’s a lot of pent-up shareholders looking to realize value. Put all this together and you have funding costs coming down, more businesses coming to market and the gap between buyer pricing and seller expectations narrowing. Hence our forward-looking positivity. In terms of our marketing services universe, we saw a diverse crowd of acquirers in 2024 with PE-backed outfits tending to be the most prevalent. The global networks were fairly quiet, focussing on infills where they lacked a specific skillset rather than statement transactions, aside from the just-announced Omnicom IPG, Valtech buying Kin+Carta, Publicis acquiring commerce specialist, Mars United, and LDC-backed MSQ doubling its presence in the US with SPCSHP. Management consultancies were also relatively inactive, with the exception of Accenture buying Unlimited.

Key M&A areas in 2024

Whilst the market was somewhat muted, certain marketing specialisms saw greater M&A activity in 2024, with key areas of interest as follows: PR. This was possibly the most active discipline for acquisitions with a mix of consolidation, disposals, MBO’s and new entrants. We saw WPP merge its Hill & Knowlton and BCW agencies to create Burson, whilst offloading its majority stake in FGS Global in a $1.7bn deal to KKR. Publicis acquired Influential, the world’s largest Influencer agency, whilst Havas also got in on the act buying the somewhat smaller Wilderness. Bully Pulpit (BPI) was a new entrant to the UK market, acquiring Seven Hills and Message House, making the UK BPI’s biggest European market and next largest outside the US and Public Affairs holding company PPHC bought UK government relations firm, Pagefield, another first step for a US firm into the UK. Healthcare marketing transactions didn’t disappoint and, despite some big pharma woes resulting in less marketing spend, transaction activity remained strong. This was primarily across the more scientific areas of market access and regulatory compliance, with PE-backed Clinigen acquiring Ascencian and Kinesys, but momentum remained across the more general medical branding and communications spectrum with some decent-sized transactions, such as IQVIA acquiring Ceuta, together with many smaller agencies including BioStrata and AKT also realizing value. Digital, as always, was another key area, the most notable deal being PE outfit ECI buying Croud from LDC, but we also saw MSQ buy 350-person German CX agency UDG. As expected, AI is fast becoming the hottest area with US digital engineering and AI enabler EPAM acquiring First Derivative, Blackstone-backed HH Global buying Northell Partners and Healthcare specialist Real Chemistry buying Avant for its AI-driven insights and marketing expertise. There were also many transactions across Social, Data analytics, Performance and e-commerce, all areas which continue to be in high demand. Events and Experiential has seen a significant bounceback over the last couple of years post-COVID as the smarter players shifted their proposition to digital alongside physical engagement during that period. There’s been high interest in areas which involve people interaction as brands strive to get ever closer to their consumers, be it B2B, B2C or D2C. 2024 saw PE-backed ImpactXM buy Matrex in the US and reach out to the UK for the first time in acquiring Enigma. This is a buyer to watch in the Experiential space as it looks to build out from its North American heartland. Stagwell continued its acquisition march, augmenting its experiential positioning in buying Sidekick (a Green Square transaction), and UK-based major Experiential independent, DRPG, bought North Carolina’s Special Events. Retail, e-commerce and Shopper has also had a resurgence, as indicated by the Publicis Mars deal mentioned earlier. We saw Acosta buying Dee Set, Product Connections and Crossmark, and Quad entering the In-store retail media market with its acquisition of DART. French Retail Marketing specialist, Altavia, expanded its overseas offering with acquisitions in Casablanca (D-Aim) and Singapore (ielo design). Read more

As the global ad industry adjusts to there now being five global advertising holding companies instead of six, Green Square’s Barry Dudley asks what the absence of words such as ‘advertising,’ ‘creative,’ and ‘strategy’ might tell us about where Omnicom is heading. Although there have been all sorts of rumblings and rumors for some time, Omnicom is actually going to acquire IPG – subject to regulatory approval. It is a ‘stock-for-stock’ transaction, meaning that IPG shareholders will sell their shares in exchange for shares in Omnicom. So, despite lots of heady numbers, no cash is changing hands. As the joint press release states: “Interpublic shareholders will receive 0.344 Omnicom shares for each share of Interpublic common stock they own.” Based on Omnicom’s share price at its last close ($103.43) this equates to $35.58 per share. IPG’s share price at its previous close was $29.26, so there has been a fairly hefty premium offered. The release went on to say: “Following the close of the transaction, Omnicom shareholders will own 60.6% of the combined company and Interpublic shareholders will own 39.4%, on a fully diluted basis.” This shows the relative sizes of the businesses. What did the markets think? Not unsurprisingly, IPG’s share price has jumped – initially to $32.90 and then settling back to $30.30 by the end of the day’s trading. Conversely, Omnicom’s shares closed the day down 10.25% at $92.82, taking around $2bn off its value. Is that because the market thinks Omnicom is overpaying, or it just doesn’t think it is a smart deal? Here’s what the respective CEOs had to say… “This strategic acquisition creates significant value for both sets of shareholders by combining world-class, highly complementary data and technology platforms enabling new offerings to better serve our clients and drive growth,” said Omnicom’s John Wren. “Through this combination, we are poised to accelerate innovation and harness the significant opportunities created by new technologies in this era of exponential change. Now is the perfect time to bring together our technologies, capabilities, talent and geographic footprints to bring clients superior, data-driven outcomes. We are excited to welcome Philippe and the entire Interpublic team to the Omnicom family.” His Interpublic counterpart Philippe Krakowsky put it like this: “This combination represents a tremendous strategic opportunity for our stakeholders, amplifying our investments in platform capabilities and talent as part of a more expansive network. Our two companies have highly complementary offerings, geographic presence and cultures. We also share a foundational belief in the power of ideas, enabled by technology and data. By joining Omnicom, we are creating a uniquely comprehensive portfolio of services that will make us the most powerful marketing and sales partner in a world that’s changing at speed. We look forward to working with John and the entire Omnicom team.” Picking out a few words and phrases – “highly complementary data and technology platforms,” “new technologies, data-driven outcomes,” “platform capabilities,” and “enabled by technology and data” – it’s pretty clear where they are planning to take the combined business, although I was quite surprised not to see a single reference to AI. Without doubt IPG’s Acxiom (Audience Solutions, Data and Decision Sciences) and Omnicom’s Flywheel Digital (Digital Commerce) are going to be central. While Flywheel is a relatively recent acquisition for Omnicom (2023), IPG acquired Acxiom in 2018 so it has been embedded into the group: “IPG’s OPEN architecture approach flexes to what brands need, bringing our wide capabilities across over 74 agencies with Acxiom’s Customer Intelligence Cloud capabilities to help brands and people, win.” And then a few words that are conspicuous by their absence: advertising, creative, strategy. There was mention of “innovation” and the “power of ideas,” but the bedrock brands that have stood front and center of these groups for many years appear to be heading to the back seats –BBDO, FCB, McCann, MullenLowe, TBWA et al. There were a good few mentions of the “talent”. IPG’s website claims ‘approximately 55,000 employees’ and Omnicom has ‘70k+ people’. By my maths that’s 125,000 in total. According to the press release, the ‘new Omnicom will have over 100,000 expert practitioners’. There’s quite a difference between these two numbers, which will be partly explained by non-practitioners, the back office. But the ‘annual cost synergies of $750m’ will undoubtedly involve a significant proportion relating to headcount reduction. That’s a pretty unpleasant thing to have surrounding you at this time of year. And where will the clients end up in all of this? They will undoubtedly have more tools, platforms and data to play with, but I can’t help thinking that client service is going to suffer. So as the mega groups morph towards wannabe Metas and Amazons, the opportunity for smaller players to emerge and capture the ear and the wallet of clients is going to grow, with a wave of people stepping away (or being jettisoned). I also expect to see some exciting startups emerge. My colleague Tony Walford wrote just a few days ago about Publicis becoming the biggest marketing services group by revenue. I wonder what Sadoun and Snoop Dogg have up their sleeves as their next move… WPP maybe? Read more

Publicis ends 2024 on a high as it becomes the largest holding company in the world for the first time in its history. Green Square’s Tony Walford analyzes why 2024 has been fantastique for Arthur Sadoun and his team. Every year Publicis’ inimitable CEO Arthur Sadoun puts out a pre-Christmas short film to all staff thanking them for their global contribution called the “Wishes”. It’s quite something, and 2023 saw each of its 100,000 staff being sent a personal video created in AI with Arthur featuring his digital twin. Yesterday saw the release of the 2024 “Wishes” in which Snoop Dogg, or “Le Snoop” as he rebrands himself in the piece, announces Publicis as global Top Dog. The end of this year is very likely to see Publicis as the largest agency network in the world, with its €13.9bn revenue forecast edging ahead of WPP, which has worn the global revenue crown for the last couple of decades. The film is very amusing. The French love Snoop, so this is a smart choice particularly on the back of the Olympics, and features Sadoun unsuccessfully trying to do the C-Walk, ending with a cameo of former CEO and industry legend, Maurice Levy, on a balcony showing everyone how it should actually be done. Sadoun is a very charismatic leader, as was Levy before him, and his enthusiasm is always a joy to watch (even in boring old investor presentations). But putting that aside, how did Publicis achieve this lofty height historically dominated by WPP for so long? The first thing that sprung to mind was a piece I wrote in a coffee bar in Amsterdam back in 2018 (the morning after giving an evening M&A seminar for The Drum) about how Publicis was leading the charge by simplifying its offer around the “Power of One”. It’s funny how specific moments and places in time trigger a memory and, given where I wrote it (which was after a very late night with The Drum team), I was a bit worried how it would read when I went back to it today! It finishes with the line “Power of One seems to be not just another vacuous corporate restructuring exercise, rather a genuine attempt to create a new model that will see the whole group face its clients in a very different way going forward”. Fast-forward six years (me with a lot less hair, but Arthur only shifting from black to grey), and it’s clear this focus has paid enormous dividends. Don’t get me wrong; all the networks have embraced the need to change how they operate, with Mark Read at WPP being particularly voracious in merging the biggest agencies in that group, but Publicis was at the forefront of this paradigm shift. However, it’s one thing to talk about the Power of One, and another to deliver it. And is this why revenues have grown so much? M&A has actually played a major part, with Publicis making several very large strategic acquisitions to strengthen its position in key areas. A significant moment was the $4.4bn acquisition of Epsilon in 2019, bringing the group valuable consumer data and AI capabilities which have become a fundamental part of Publicis’s offer. This sizable deal followed its bold $3.7bn acquisition of Sapient in 2015, which it merged with Razorfish (remember that?), to create Publicis Sapient and kickstart Levy and Sadoun’s “Power of One” strategy. While this year has been relatively quiet for holding company M&A, with PE-backed outfits and the challenger group Stagwell being more active, 2024 saw Publicis make two further significant moves. The first was its acquisition of Influential, the largest global influencer marketing company by revenue, giving it access to over 3 million creators and 90% of global influencers with more than 1 million followers. Publicis immediately started integrating its own data with Influential’s platform to offer more targeted and effective influencer marketing solutions with its press release stating “By combining our Epsilon data, which allow us to see 2.3 billion people around the world, with connected TV, commerce, and now creators, we can enable our clients to truly know and understand their customers and prospects, and engage with them on a one-to-one basis, wherever they are, both online and offline”. The second was the acquisition of Mars United, the world’s biggest independent commerce marketing agency. Retail media is currently one of the hottest areas in marketing, with Next15 lauding its retail specialist SMG (which I’m proud to say was a Green Square deal), as a bit of a savior in what has otherwise been a very difficult year for that group (but that’s another story). Publicis’s acquisition of Mars in September completed the holy trinity of data, targeting and effective retail media deployment for Publicis, and further cemented the Power of One philosophy. From the press release: “The combined forces of Publicis Groupe and Mars will allow clients to influence the complete commerce journey for billions of global Shoppers, through an offering that begins with the industry’s deepest and richest database of consumer & shopper behavior and ends at the digital and physical shelves of the world’s leading online and offline retailers.” Thus, Publicis’ rise to become the world’s biggest agency group by revenue has not been entirely organic but facilitated by some very substantial acquisitions. That said, Publicis has not engaged in acquisitions simply for the sake of size, it only made a handful in 2024, and they were smart. Sadoun has absolutely stuck to his strategy of bringing a single point of focus for all Publicis’ clients’ needs and, given Influential and Mars only happened in the second half of this year, their further integration in 2025 should bring the group even more global blue-chip client opportunities. This is the first time a French agency group will be the world’s largest. France is currently suffering significant economic and political turmoil, and I wouldn’t be surprised if Emmanuel Macron hasn’t already called Sadoun to thank him for bringing this glimmer of Christmas light! Looking forward to 2025, Publicis’ holistic offering, scale and clear positioning put it alongside the highly acquisitive Stagwell and the soon-to-be-decoupled and separately listed Havas as the most interesting groups to watch next year. Read more