Research by sector M&A advisor Results International found there were only two deals involving UK PR agencies in the first half of this year, down 80 per cent on the same period last year.
Over the same period, the number of deals in Western Europe rose by 60 per cent, from five in the first half of 2016 to eight in H1 2017. Activity in Asia Pacific rose by a similar amount, from four deals to six.
There were 12 transactions in the PR sector globally in the second quarter of 2017, broadly in line with the previous two quarters. There were 26 in the first half of the year.
Teneo Holdings was the largest repeat buyer in the sector in the second quarter, with three acquisitions in Hong Kong (Ryan Communication), the US (Fitzroy Communications) and Belgium (Cabinet DN), making four deals in total since the first quarter of 2016.
Aside from Teneo, which is backed by BC Partners, private equity investment in the industry remains low, Results International pointed out; the last such deal took place in the first quarter of 2016.
The second biggest PR acquirer since Q1 2016 is WPP with three transactions, the company added.
Results International managing partner Keith Hunt said: "The drop in M&A activity involving UK agencies might be due to fewer deals being initiated in the six months after the Brexit referendum. The growth in regions like Western Europe and APAC suggests that this is where many buyers are looking to expand, and overall the demand for PR companies remains strong. We anticipate the number of deals involving UK PR agencies to grow in the coming months."
He added: "The PR sector is still appealing to buyers, although the focus is shifting towards those agencies able to offer more than just the traditional media relations and public affairs approach. The winners are those that have expanded their services and brought in content, social, data and insight alongside the more traditional PR service suite to deliver a broader brand and business impact.
"This broadening of scope means they might win work on a traditional PR comms brief but the clever ones are expanding those relationships quickly into other areas. A number of PR businesses are now, to all intents and purposes, integrated agencies – and integrated is always a very popular sub-sector for marcoms M&A."
M&A activity in the sector so far in the second half of 2017 has included ad firm MullenLowe Group acquiring UK PR agency Salt and Huntsworth buying WRG owner The Creative Engagement Group.