Mergers and acquisitions in the marketing and media sectors in Q3 2016
The fear that post Brexit media M&A would grind to a halt has so far proved to be unfounded with activity in the sector remaining relatively strong. Kingston Smith’s marketing and media deal tracker analysed 74 deals in the quarter. Here are our highlights of the quarter:
Equal volumes of inbound and outbound activity
50% of the transactions in the quarter were cross border transactions. The infographic below shows the origin of buyers (left segments) and sellers (right segments) for cross-border transactions involving the UK:
The most tangible impact of the Brexit vote was the depreciation of the sterling against a basket of currencies, which makes British companies a bargain. Conversely, it is relatively more expensive for British companies to acquire overseas. However, we saw no significant impact of this in the quarter, with the proportion of outbound transactions increasing from Q2. In previous quarters the USA dominated cross-border transactions but this quarter we report similar volumes of transactions with Europe and the Rest of the World.
Israel, famous for its Tel Aviv tech hub, commonly referred to as ‘Silicon Wadi’, provided two online marketing acquisitions for UK companies. Stride Gaming acquired Netboost Media and Nielsen owned Toluna Group acquired digital tracking platform Crossence.
The Marketing Group builds rapidly
Following its IPO in May 2016 and initial three acquisitions in June 2016, the full service digital specialists The Marketing Group Plc continued to build its portfolio at a rapid pace with six further acquisitions. This took the number of businesses within the group to 19 across eight countries serving the USA, EMEA and APAC regions. It will be interesting to watch the fortunes of the group over the coming months and years to see if it can become a genuine challenger to the global groups.
Elsewhere, two groups that have recently received funding continued to make acquisitions. Listed Next 15 underwent a share placement to raise funds in 2015 and subsequently acquired tech content agency Pinnacle. Four Communications, backed by the Business Growth Fund, acquired healthcare communications specialist Packer Forbes as well as retail specialist Rain Communications.
The global networks also continued to be acquisitive. Dentsu made seven acquisitions, WPP three and IPG two, including mobile and content specialist Flipside.
Full service digital again in highest demand
As expected, digital was once again in highest demand this quarter, accounting for 58% of all marketing services deals, which is comparable to previous quarters. As was the case in Q2, full service digital was also the digital sub sector in highest demand as acquirers sought to bulk out their digital capabilities. The charts below show the breakdown of the various sectors in full.
Outlook for Q4
The fallout from Brexit surely must affect the M&A landscape for the foreseeable future. In the short term with the significantly depreciated sterling we expect to see increased inbound activity particularly from the US depending, in part on the result of the US Presidential Election. To date, post the Brexit vote the market appears to have remained strong but Q4 will give a clearer picture as to whether there has been any significant impact.
If you are interested in selling your company, setting up or acquiring overseas or raising funds to acquire, Kingston Smith Corporate Finance and our contacts in Moore Stephens International network can assist.