It was revealed last Thursday that GolinHarris has agreed a deal to acquire the UK's largest independent healthcare consultancy Virgo Health. Virgo will become part of the Interpublic-owned GolinHarris network and will establish a US presence as part of the deal, opening a New York office.
The news continues a pattern that has seen Omnicom Group buy an 80 per cent stake in Portland, with the aim of offering 'a truly global service'.
Blue Rubicon has also contracted M&A specialist Results International to attract investment enabling the agency to grow beyond its UK roots.
The trend reflects an industry where a number of large agency groups have available cash, while specialist brands are increasingly looking outside the UK for growth options. The availability of bank debt remains limited, meaning trade deals or private equity investment have become the dominant way to bring in cash to mid-sized agencies needing to take the next step.
Grayling's UK CEO Alison Clarke said: 'Clients' requirements for an ability to deliver in more than one market are ever-growing. Strong domestic agencies in any market need to reach a point where they can tap into a network, whether that's by being wholly owned or through affiliation.'
Clarke added: 'The industry multipliers that one pays are not as high as they were, so if you find the right business, you won't get it for a song but you will get reasonable multipliers.'
Typical agency valuations are somewhere between six and eight times annual profit earnings, according to industry insiders. One agency boss suggested it was attractive for agencies to sell when they were hovering around the £5m in fees mark, usually when they were at least ten years old.
The Red Consultancy's CEO Mike Morgan said the large marcoms holdings groups were particularly looking to bolster their PR offer: 'Whereas ten years ago the marcoms groups were grabbing an ad firm to bolster themselves, now they want something broader, and PR is now a more top-table discipline.'
He added groups were 'taking the long view' when buying: 'Agencies need to have a good track record.'
HOW I SEE IT
Adam Clyne, Commercial director, TVC (bought by The Economist Group)
The whole industry is in uncharted territory. Social media were a small thing five years ago, but now you don't get a proposal without social media. Firms are not interested in buying agencies that are not performing well. They buy agencies that have good people, clients and culture.
Avril Lee, UK CEO, Ketchum Pleon
The larger agency groups are still able to fund these deals and it is an attractive way for them to bring in new specialisms or get an existing offer to critical mass quickly. The obvious targets are social, content or healthcare, and smaller shops in emerging markets.
£5.5m Virgo Health's 2011 revenues, which grew 17 per cent on previous year
£14.5m Estimated combined Virgo Health/GolinHarris annual fee income
140 Combined Virgo Health/GolinHarris staff numbers
16th Expected placement for combined agency in PRWeek Top 150 table
Three recent M&As that have international expansion at the heart of their operations
VIRGO HEALTH - bought by GolinHarris
Announced July 2012
Agency size 60 employees
Details Virgo Health is the largest independent healthcare consultancy in the UK. As part of the deal, Virgo Health will also establish a US presence, opening a New York office and operating as a separate brand alongside GolinHarris' existing North American healthcare business. The combined agency will have a fee income of around £14.5m (based on 2011 figures).
PORTLAND - bought by Omnicom Group
Announced April 2012
Value One estimate puts it at £20m
Agency size 90 employees
Details Omnicom Group bought an 80 per cent stake in Portland, with the remaining shares retained by Portland's eight-strong senior management team. As part of the acquisition, Portland will enter into a closer working partnership with G+ Europe, the Omnicom-owned Brussels-based public affairs agency, with the aim of offering 'a truly global service'.
COLLEGE GROUP - bought by private equity firm Vitruvian Partners
Announced October 2011
Agency size 300 employees
Details Vitruvian took a majority stake in the group, with existing management and staff retaining a substantial equity investment in the business. As a result of the deal, College Hill founder Alex Sandberg stepped down as group chairman. The deal is designed to enable the group to build a stronger presence in the US, Europe and emerging markets.