Industry will see consolidation as Chime and Huntsworth stalk Next Fifteen

Industry analysts have predicted major consolidation within the PR industry, following repĀ­orts that Chime Communications and Huntsworth are locked in talks to buy Next Fifteen Communications.

Next Fifteen share price over past year
Next Fifteen share price over past year

‘Consolidation is long overdue among the marketing services agencies,’ said Paul Bates, an analyst at broker Charles Stanley. ‘There are a high number of companies competing for the same relatively limited pool of money and many duplicated costs.’

Adrian Kearsey, an analyst at Evolution Securities, agreed that some of the industry’s bigger players may be looking to abs­orb other firms to exp­and their reach: ‘Increasingly companies are looking for global solutions to PR issues; within that context there is scope for big PR firms to add greater global capability and grow their business as a consequence.’

Another analyst, who asked not to be named, predicted: ‘There will be more consolidation and a lot of agencies should be taking a long, hard look at how they should grow.’

Analysts also noted that ind­ustry M&A could be suppressed as low share prices could mean some targets were unwilling to sell. The lack of bank financing also means few industry players have deep pockets at this time.

Agency bosses concurred that there was likely to be a period of M&A activity as the PR industry entered the next economic cycle.

‘It is inevitable that there will be more consolidation,’ said Lord Chadlington, chairman of Huntsworth. ‘People still have an inflated view of the price of agencies, but this will be clearer in the summer.’

Steve Howell, chief executive of Freshwater UK, said: ‘There is a long-term underlying trend towards consolidation. But any consolidation in the industry must be driven by commercial logic, not financial engineering. We also need to ensure there is an element of diversity and no company becomes a monopoly.’

There may also be a trend of integration between firms within the listed comms groups themselves. This month has already seen the merger of Next Fifteen’s Inf­erno into Bite and there has been industry speculation that Publicis Groupe-owned MS&L and Publicis Consultants could merge.

 

Analyst’s opinion

Scale matters and acquisitions are likely, but consolidation for consolidation’s sake is a bad idea

Malcolm Morgan Analyst, KBC Peel Hunt

Low share prices and a lack of cash will spike an awful lot of potential deals

Paul Bates Analyst, Charles Stanley

 

28% Rise in Next Fifteen’s share price after talks announced

£30m Next Fifteen’s current market capitalisation

£57m Chime Communications’ current market capitalisation

£118m Huntsworth’s current market capitalisation

22.5% UK marcoms firms’ share price rise in past month*

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.